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HSBC Holdings plc
Annual Report and Accounts 2022
Opening up a world of opportunity
Our ambition is to be the preferred international financial partner for our clients.
Our purpose, ambition and values reflect our strategy and support our focus on execution.
> Read more on our values and strategy on pages 4 and 11.
Contents
Strategic report
2 Highlights
4 Who we are
6 Group Chairman’s statement
8 Group Chief Executive’s review
11 Our strategy
14 ESG overview
20 Board decision making and engagement with stakeholders (Section 172 (1) statement)
24 Remuneration
26 Financial overview
31 Global businesses
38 Risk overview
42 Long-term viability and going concern statement
Environmental, social and
governance (‘ESG’) review
44 Our approach to ESG
46 Environmental
73 Social
85 Governance
Financial review
98 Financial summary
109 Global businesses and geographical regions
128 Reconciliation of alternative performance measures
Risk review
132 Our approach to risk
135 Top and emerging risks
142 Areas of special interest
142 Our material banking risks
Corporate governance report
240 Biographies of Directors and senior management
259 Board committees
276 Directors’ remuneration report
Financial statements
313 Independent auditors’ report
324 Financial statements
335 Notes on the financial statements
Additional information
418 Shareholder information
427 Abbreviations
Our approach to ESG reporting
We embed our ESG reporting and Task Force on Climate-related Financial Disclosures (‘TCFD’) within our Annual Report and Accounts. Our TCFD
disclosures are highlighted with the following symbol: TCFD
This Strategic Report was approved by the Board on 21 February 2023.
Mark E Tucker
Group Chairman
A reminder
The currency we report in is US dollars.
Adjusted measures
We supplement our IFRSs figures with non-IFRSs measures used by management internally that constitute alternative performance measures under
European Securities and Markets Authority guidance and non-GAAP financial measures defined in and presented in accordance with US Securities
and Exchange Commission rules and regulations. These measures are highlighted with the following symbol: <>
> Further explanation may be found on page 29.
None of the websites referred to in this Annual Report and Accounts 2022 for the year ended 31 December 2022 (including where a link is provided),
and none of the information contained on such websites, are incorporated by reference in this report.
Twitter: @HSBC
LinkedIn: linkedin.com/company/hsbc
Facebook: facebook.com/HSBC
Cover image: Opening up a world of opportunity
Our cover features Stitt, one of HSBC's two bronze lions. Touching the lion's paw was said to bring good luck, and that tradition continues today. The
lions, Stephen and Stitt, designed by British sculptor Henry Poole, were commissioned to celebrate the opening of the newly-rebuilt HSBC building
on the Bund in Shanghai in 1923. Stephen and Stitt represent the strength and endurance that is part of our heritage. Loyal and proud, they stand
guard outside our offices in Hong Kong, London and Shanghai, and symbolise good fortune and stability.

HSBC Holdings plc Annual Report and Accounts 2022 |

Performance in 2022
HSBC is one of the world’s leading international banks.
We have a clear strategy to deliver revenue and profit growth, enhance customer service and
improve returns to shareholders.
Delivery against our financial targets
In assessing the Group’s financial performance, we use a range of financial measures that focus on the delivery of sustainable returns for our
shareholders and maintaining our financial strength.
> For our financial targets, we define medium term as three to four years and long term as five to six years, commencing 1 January 2020.
> Further explanation of performance against Group financial targets can be found on page 26.
Return on average tangible equity <>
9.9%
Target: ≥12% from 2023 onwards.
(2021: 8.3%)
Adjusted operating expenses <>
$30.5bn
Target: 2022 adjusted operating expenses broadly stable compared with 2021.
(2021: $30.1bn)
Gross risk-weighted asset reduction
$128bn
Since the start of the programme. Target: >$110bn by the end of 2022.
Common equity tier 1 capital ratio
14.2%
Target: >14%, managing in the range of 14% to 14.5% in the medium term; and manage the range down further long term.
(2021: 15.8%)
Dividend per share
$0.32
2022 payout ratio 44%
Updated target: dividend payout ratio of 50% for 2023 and 2024, excluding material significant items.
Previous target: sustainable cash dividends with a payout ratio of 40% to 55% from 2022 onwards.
Strategic performance indicators
Our strategy supports our ambition of being the preferred international financial partner for our clients.
We are committed to building a business for the long term, developing relationships that last.
> Read more on our strategic progress on page 11.
> Read more on how we set and define our environmental, social and governance metrics on page 16.
> Read more on our financed emissions scope, methodology and terminology on page 50, and our definition of sustainable finance and investment on page 57.
Capital allocation to Asia
47%
Tangible equity as a percentage of the Group’s (excluding associates, holding companies, and consolidation adjustments).
(2021: 42%)
Net new invested assets
$80bn
Generated in 2022, of which $59bn were in Asia.
Gross cost saves
$5.6bn
Delivered from our cost-reduction programme, with an expected additional $1bn in 2023, and a total programme cost of $6.5bn.
Gender diversity
33.3%
Women in senior leadership roles.
(2021: 31.7%)
Sustainable finance and investment
$210.7 bn
Cumulative total provided and facilitated since January 2020.
(2021: $126.7 bn)
Net zero in our own operations
58.5%
Cumulative reduction in absolute greenhouse gas emissions from 2019 baseline. (2021: 50.3%)
Financed emissions targets
8 sectors
Number of sectors where we have set on-balance sheet financed emissions targets.

HSBC Holdings plc Annual Report and Accounts 2022 | 1

Highlights
Financial performance reflected net interest income growth and cost discipline, and we continued
to make progress against our four strategic pillars.
Financial performance (vs 2021)
•Reported profit before tax fell by $1.4bn to $17.5bn, including an impairment on the planned sale of our retail banking operations in France of
$2.4bn. Adjusted profit before tax increased by $3.4bn to $24.0bn. Reported profit after tax increased by $2.0bn to $16.7bn, including a
$2.2bn credit arising from the recognition of a deferred tax asset.
•Reported revenue increased by 4% to $51.7bn, driven by strong growth in net interest income, with increases in all of our global businesses,
and higher revenue from Global Foreign Exchange in Global Banking and Markets (‘GBM’). This was in part offset by a $3.1bn adverse impact of
foreign currency translation differences, the impairment on the planned sale of our retail banking operations in France and adverse movements
in market impacts in insurance manufacturing in Wealth and Personal Banking (‘WPB‘). In addition, fee income fell in both WPB and GBM.
Adjusted revenue increased by 18% to $55.3bn.
•Net interest margin (‘NIM’) of 1.48% increased by 28 basis points (‘bps’), reflecting interest rate rises.
•Reported expected credit losses and other credit impairment charges (‘ECL’) were $3.6bn, including allowances to reflect increased
economic uncertainty, inflation, rising interest rates and supply chain risks, as well as the ongoing developments in mainland China‘s
commercial real estate sector. These factors were in part offset by the release of most of our remaining Covid-19-related reserves. This
compared with releases of $0.9bn in 2021. ECL charges were 36 bps of average gross loans and advances to customers.
•Reported operating expenses decreased by $1.3bn or 4% to $33.3bn, reflecting the favourable impact of foreign currency translation
differences of $2.2bn and ongoing cost discipline, which were in part offset by higher restructuring and other related costs, increased
investment in technology and inflation. Adjusted operating expenses increased by $0.4bn or 1.2% to $30.5bn, including a $0.2bn adverse
impact from retranslating the 2022 results of hyperinflationary economies at constant currency.
•Customer lending balances fell by $121bn on a reported basis. On an adjusted basis, lending balances fell by $66bn, reflecting an $81bn
reclassification of loans, primarily relating to the planned sale of our retail banking operations in France and the planned sale of our banking
business in Canada, to assets held for sale. Growth in mortgage balances in the UK and Hong Kong mitigated a reduction in term lending in
Commercial Banking (‘CMB’) in Hong Kong.
•Common equity tier 1 (‘CET1’) capital ratio of 14.2% reduced by 1.6 percentage points, primarily driven by a decrease of a 0.8 percentage
point from new regulatory requirements, a reduction of a 0.7 percentage point from the fall in the fair value through other comprehensive
income (‘FVOCI’) and a 0.3 percentage point fall from the impairment following the reclassification of our retail banking operations in France to
held for sale. Capital generation was mostly offset by an increase in risk-weighted assets (‘RWAs’) net of foreign exchange translation
movements.
•The Board has approved a second interim dividend of $0.23 per share, making a total for 2022 of $0.32 per share.
Outlook
•The impact of our growth and transformation programmes, as well as higher global interest rates, give us confidence in achieving our return
on average tangible equity (‘RoTE‘) target of at least 12% for 2023 onwards.
•Our revenue outlook remains positive. Based on the current market consensus for global central bank rates, we expect net interest income of
at least $36bn in 2023 (on an IFRS 4 basis and retranslated for foreign exchange movements). We intend to update our net interest income
guidance at or before our first quarter results to incorporate the expected impact of IFRS 17 ‘Insurance Contracts’.
•While we continue to use a range of 30bps to 40bps of average loans for planning our ECL charge over the medium to long term, given current
macroeconomic headwinds, we expect ECL charges to be around 40bps in 2023 (including lending balances transferred to held for sale). We
note recent favourable policy developments in mainland China’s commercial real estate sector and continue to monitor events closely.
•We retain our focus on cost discipline and will target 2023 adjusted cost growth of approximately 3% on an IFRS 4 basis. This includes up
to $300m of severance costs in 2023, which we expect to generate further efficiencies into 2024. There may also be an incremental adverse
impact from retranslating the 2022 results of hyperinflationary economies at constant currency.
•We expect to manage the CET1 ratio within our medium-term target range of 14% to 14.5%. We intend to continue to manage capital
efficiently, returning excess capital to shareholders where appropriate.
•Given our current returns trajectory, we are establishing a dividend payout ratio of 50% for 2023 and 2024, excluding material significant
items, with consideration of buy-backs brought forward to our first quarter results in May 2023, subject to appropriate capital levels. We also
intend to revert to paying quarterly dividends from the first quarter of 2023.
•Subject to the completion of the sale of our banking business in Canada, the Board’s intention is to consider the payment of a special
dividend of $0.21 per share as a priority use of the proceeds generated by completion of the transaction. A decision in relation to any
potential dividend would be made following the completion of the transaction, currently expected in late 2023, with payment following in early
2024. Further details in relation to record date and other relevant information will be published at that time. Any remaining additional surplus
capital is expected to be allocated towards opportunities for organic growth and investment alongside potential share buy-backs, which would
be in addition to any existing share buy-back programme.

HSBC Holdings plc Annual Report and Accounts 2022 | 2

Strategic progress
•We have made progress in implementing our transformation programme, establishing a platform for future growth.
•During 2022, we took further actions to reshape the Group. In November 2022, we announced the planned sale of our banking business in
Canada, which is expected to be completed in late 2023, subject to regulatory and governmental approvals. In addition, we are in the
process of disposing of our retail banking operations in France, as well as exiting our businesses in Greece and Russia, subject to regulatory and
governmental approvals.
•As part of our efforts to improve the returns profile of the Group, we surpassed our gross RWA reduction target, generating cumulative
gross RWA reductions of $128bn since the start of the programme in 2020.
•Our cost-reduction programme continued to make progress, with a further $2.3bn of gross cost savings recognised in 2022. Since the start of
the programme in 2020, we have realised gross savings of $5.6bn, with cost to achieve spend of $6.5bn. While our three-year cost to
achieve programme has now concluded, the Group-wide focus on cost discipline remains resolute.
•We have continued to invest and grow in the areas in which we are strongest. In our Wealth business in Asia, we attracted net new
invested assets of $59bn in 2022.
ESG highlights
Transition to net zero
•We have set interim 2030 targets for on-balance sheet financed emissions for eight sectors. These include six sectors for which we have
reported 2019 and 2020 emissions: oil and gas; power and utilities; cement; iron, steel and aluminium; aviation; and automotive. We have also
set targets for thermal coal power and thermal coal mining. We recognise that methodologies and data for measuring emissions will continue to
evolve.
•We published an updated energy policy, which is an important mechanism to help phase down the financed emissions of our energy
portfolio in line with a 1.5ºC pathway. We also updated our thermal coal phase-out policy with new targets to reduce absolute on-balance
sheet financed emissions from thermal coal mining and coal-fired power, and extended the policy to exclude finance for the specific
purposes of new metallurgical coal mines.
•Since 2020, we have provided and facilitated $210.7 bn of sustainable finance and investment, an increase of $84.2 bn in the past year.
•Within our own operations, we have made a 58.5% cumulative reduction in our absolute greenhouse gas emissions from a 2019
baseline. We also published supply chain emissions as part of our scope 3 disclosures for the first time.
Build inclusion and resilience
•Having surpassed our 2020 target to reach 30% women in senior leadership roles, we have made progress towards our goal to achieve
35% by 2025, with 33.3% achieved in 2022. We continue to make progress towards the target we set in 2020 to at least double the number
of Black senior leaders within five years.
•We have stepped up efforts to support customers in the face of inflation and the rising cost of living, particularly in the UK. We have
focused on early intervention, using data analysis to identify potentially impacted customers in our WPB and CMB businesses, signpost to
relevant resources, and provide tailored support.
•We are working to make the banking experience more accessible in both physical and digital spaces. We are committed to ensuring that our
digital channels are usable by everyone, regardless of ability. The introduction of features such as safe spaces, quiet hours and talking
ATMs are helping to make our physical spaces more accessible as well.
Act responsibly
•We conducted a review of our salient human rights issues, including stakeholder consultation with non-governmental organisations (‘NGOs’)
and potentially affected groups.
•We aim to be a top-three bank for customer satisfaction. While our net promoter scores have improved in many of our key markets, we have
more work to do to improve our position relative to peers, as some have improved their performance more quickly.
•We have launched a sustainable procurement mandatory procedure for our employees and a new supplier code of conduct to help ensure
our sustainability objectives are embedded in the way we operate and do business with suppliers.

3 | HSBC Holdings plc Annual Report and Accounts 2022

Who we are
HSBC is one of the largest banking and financial services organisations in the world. We aim to
create long-term value for our shareholders and capture opportunity.
Our values
Our 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
Our strategy
Our strategy supports our ambition of being the preferred international financial partner for our clients, centred around
four key areas.
Focus on our strengths
In each of our global businesses, we continue to focus on areas where we are strongest and have opportunities to grow.
Digitise at scale
We continue to invest in our technology and operational capabilities to drive operating productivity across businesses and geographies and to offer
better client experience.
Energise for growth
We are building a dynamic and inclusive culture, and empowering our people by helping them develop future skills.
Transition to net zero
We are helping the transition to a net zero economy by transforming ourselves, and supporting our customers to make their own transitions.
> For further details on our strategy, see pages 11 to 13.
Our global reach
Our global businesses serve around 39 million customers worldwide through a network that covers 62 countries and
territories.
Our customers range from individual savers and investors to some of the world’s biggest companies, governments and international organisations.
We aim to connect them to opportunities and help them to achieve their ambitions.
Assets of
$3.0 tn
Approximately
39m
Customers bank with us 1
1 Our customer numbers exclude those acquired through our purchase of L&T Investment Management.
Operations in
62
Countries and territories
We employ approximately
219,000
Full-time equivalent staff
For further details of our customers and approach to geographical information, see page 108.

4 | HSBC Holdings plc Annual Report and Accounts 2022

Our global businesses
We serve our customers through three global businesses.
On pages 31 to 37 we provide an overview of our performance in 2022 for each of our global businesses, as well as our Corporate Centre.
In each of our global businesses, we focus on delivering growth in areas where we have distinctive capabilities and have significant opportunities.
Each of the chief executive officers of our global businesses reports to our Group Chief Executive, who in turn reports to the Board of HSBC
Holdings plc.
Wealth and Personal Banking (’WPB’)
We help millions of our customers look after their day-to-day finances and manage, protect and grow their wealth.
> For further details, see page 31.
Commercial Banking (‘CMB’)
Our global reach and expertise help domestic and international businesses around the world unlock their potential.
> For further details, see page 33.
Global Banking and Markets (’GBM’)
We provide a comprehensive range of financial services and products to corporates, governments and institutions.
> For further details, see page 35.
Adjusted revenue by global business 1
Wealth and Personal Banking Commercial Banking Global Banking and Markets
1 Calculation is based on adjusted revenue of our global businesses excluding Corporate Centre, which is also excluded from the total adjusted revenue number.
Corporate Centre had negative adjusted revenue of $596m in 2022.
Our stakeholders
Building strong relationships with our stakeholders helps enable us to deliver our strategy in line
with our long-term values, and operate the business in a sustainable way.
Our stakeholders are the people who work for us, bank with us, own us, regulate us, and live in the societies we serve and the planet we all inhabit.
These human connections are complex and overlap.
Many of our employees are customers and shareholders, while our business customers are often suppliers. We aim to serve, creating value for our
customers and shareholders.
Our size and global reach mean our actions can have a significant impact. We are committed to doing business responsibly, and thinking for the long
term. This is key to delivering our strategy.
> For further details of how we are engaging with our stakeholders, see page 15.
> Our section 172 statement, detailing our Directors’ responsibility to stakeholders, can be found on page 20.

Customers |  | Employees |  | Investors |  | Communities |  | Regulators and governments |  | Suppliers

5 | HSBC Holdings plc Annual Report and Accounts 2022

Group Chairman’s statement
The global economy remains volatile, but our strategy is delivering improved returns for
shareholders and HSBC is well placed to compete as the economy recovers.
At the start of 2022, the ongoing impact of Covid-19 was the most dominant factor within the external environment. While further
outbreaks in Hong Kong and mainland China significantly impacted economic growth, the Russia-Ukraine war and rising inflation and
interest rates had an even greater impact on the global economy in 2022. They are also likely to continue to have a greater economic
impact than the pandemic in 2023, as we are already seeing with a cost of living crisis affecting many of our customers and colleagues.
Strong financial performance and higher capital distributions
We supported our customers through the challenges that they faced at the same time as executing our strategic plan. The first phase of our
transformation is now complete. The work that we have done has enabled us to emerge from the pandemic a stronger bank, better aligned to the
international needs of our customers.
The reshaping of our portfolio continued with the announcement of the planned sale of our banking business in Canada. We continued to develop our
Wealth capabilities, especially in Asia, and this strategy gained traction in 2022. Our increased investment in technology has improved the customer
experience and made our processes more efficient. Meanwhile, we continued to support our clients to transition to net zero, and also took further
important steps towards our ambition of aligning our financed emissions to net zero by 2050. Given the urgency of today’s global energy crisis, it is
now even more important that we continue to actively engage our clients on how they intend to prepare their businesses for a low-carbon future.
In 2022, reported profit before tax was $17.5bn, a decrease of $1.4bn compared with 2021 due to the $2.4bn impairment on the planned sale of our
French retail banking operations. Adjusted profit before tax was $24.0bn, an increase of $3.4bn on last year. All of our businesses grew profits in
2022, and we maintained our strong capital, funding and liquidity positions.
As we signalled at our interim results, we are committed to ensuring our shareholders share the benefits of our improved performance. The Board
approved a second interim dividend for 2022 of $0.23 per share, bringing the full year dividend for 2022 to $0.32 per share. We are establishing a
dividend payout ratio of 50% of reported earnings per share for 2023 and 2024, excluding material significant items, and we aim to restore the
dividend to pre-Covid-19 levels as soon as possible. We also intend to return to paying quarterly dividends from the start of 2023.
Subject to completion of the planned sale of our banking business in Canada, the Board’s intention is to consider the payment of a special dividend of
$0.21 per share as a priority use of the proceeds generated. A decision in relation to any potential dividend would be made following the completion
of the transaction, currently expected in late 2023, with payment following in early 2024. Any remaining additional surplus capital is expected to be
allocated towards opportunities for organic growth and investment alongside share buy-backs, which would be in addition to any existing share buy-
back programme.
Board operations
In 2022, the Board met in person in London, Hong Kong, New York and Riyadh – on each occasion also undertaking a wide range of engagements
with clients, colleagues, government officials and regulators. The importance of engaging with our teams was also underlined by the appointment of
José (Pepe) Meade as Board member with specific responsibility for employee liaison. At the same time as holding some in-person meetings, the
continued use of virtual meetings enabled us to retain the benefits of greater efficiency and reduced costs.
At the 2022 Annual General Meeting, Irene Lee and Pauline van der Meer Mohr stepped down from the Board. I am enormously grateful to them for
their important and valuable contributions to the Board, the committees and the subsidiary entities on which they have served. Irene remains an
independent non-executive Director of The Hongkong and Shanghai Banking Corporation Limited and independent non-executive chair of Hang Seng
Bank Limited. Geraldine Buckingham joined the Board as an independent non-executive Director on 1 May.

6 | HSBC Holdings plc Annual Report and Accounts 2022

Following Ewen Stevenson’s departure, Georges Elhedery became Group Chief Financial Officer and joined the Board on 1 January 2023. On behalf
of the Board, I would like to again thank Ewen for all that he has done for the bank. His leadership, financial expertise and operational rigour have
been invaluable to HSBC, and he leaves with our very best wishes.
We also recently announced some changes to the Board. Kalpana Morparia will join the Board as an independent non-executive Director on 1 March.
Jack Tai will retire from the Board at the conclusion of the 2023 AGM, and will be succeeded as Chair of the Group Risk Committee by Jamie Forese.
Jack has made a significant and important contribution during his time on the Board, particularly in the strengthening of risk and conduct governance
and oversight through a period of major change. We wish him very well in his future endeavours.
Noel and I were delighted to meet face-to-face with our loyal Hong Kong shareholders at our Informal Shareholders Meeting in August. We have
always greatly valued their feedback and engagement, and this meeting was as well attended as ever. We were pleased to discuss how our
business has performed, our continued support of Hong Kong, and our commitment to growing shareholder value. We look forward to continuing
these discussions in person in 2023.
“Given the urgency of today’s global energy crisis, it is now even
more important that we continue to actively engage our clients on
how they intend to prepare their businesses for a low-carbon
future.”
Our strategy is working
There were reports over the course of last year about ideas for alternative structures for HSBC. The Board has been fully engaged in examining these
alternatives in depth, with the benefit of independent third-party financial and legal advice. It has been, and remains, our judgement that alternative
structural options would not deliver increased value for shareholders. Rather, they would have a material negative impact on value.
For 157 years, we have followed trade and investment flows to support our customers as they fulfil their financial ambitions. We have used our
experience, expertise and relationships to help our customers to navigate the world.
Today, we remain steadfastly focused on our core purpose of ‘opening up a world of opportunity’. Our model is particularly relevant to individuals and
companies of all sizes whose financial ambitions span multiple countries and regions. Very few, if any, other banks can rival our ability to connect
capital, ideas and people through a global network that facilitates the international access and collaboration required to succeed in today’s world.
Our performance in 2022 demonstrates that our current strategy is working and improving returns. We are also confident that it will deliver good
returns for our shareholders over the coming years. The Board and management team are fully focused on delivering it.
An uneven macroeconomic outlook
We will need to maintain this focus against an uneven macroeconomic outlook. The pandemic, high inflation and interest rates, and the Russia-
Ukraine war all have implications for the global economy, including volatility in markets, supply chain disruption, pressure on small and medium-sized
business and squeezes on the cost of living. Different economies also now face different challenges and have different opportunities in 2023.
China’s reopening and package of measures to stabilise the property market should provide a significant boost for its economy and the global
economy, albeit with some near-term volatility. Our economists forecast China’s GDP will grow 5% in 2023. The reopening of the border means that
Hong Kong, and the entire Greater Bay Area, are likely to be major beneficiaries, and I expect to see a strong recovery.
More broadly, Asia as a whole has proven resilient and there is the prospect of a strong rebound later in the year. Virtually all economies in the region
have now recovered the output losses incurred during the pandemic and are above 2019 levels.
The Middle East economies enjoyed a strong 2022, and we expect this momentum to continue in 2023 on the back of the important reforms
underway to transform, diversify and grow the region’s economies. We see strong and growing demand to connect clients in the Middle East with
Asia’s economies, and vice versa.
In contrast, Europe, including the UK, face challenges from higher energy prices fuelling inflation and necessitating higher interest rates, driven in part
by the Russia-Ukraine war. All of these factors are contributing to a cost of living crisis and more economic uncertainty. We expect that any
recession, if there is one at all, will be relatively shallow.
The US economy is proving resilient and a hard landing appears unlikely. Some economists believe that inflation may now have peaked in the US,
and there is consensus that the US will avoid recession. I expect the US to make an important contribution to global GDP growth in 2023.
Overall, I am optimistic about the global economy in the second half of 2023, but there is still a high level of uncertainty due to the Russia-Ukraine
war and recessionary fears may yet dominate much of the year ahead.
Navigating geopolitics remains challenging
The geopolitical environment remains challenging for our clients to navigate. There is sadly no end in sight to the Russia-Ukraine war. However, the
West’s relationship with China appears to be relatively stable. The renewed, constructive dialogue between President Xi and President Biden at the
G20 in November was clearly important. While further US sanctions are expected this year, capital flows between China and the West increased
during the pandemic, even with reciprocal tariffs in place. China is also taking an active approach to diplomatic engagement with European nations,
including the UK. China’s reopening will also allow for the resumption of face-to-face visits, which will support greater dialogue between China and
important partners such as Germany, France and the UK. We also naturally continue to engage with governments around the world.
One of the key trends of the past three years has been supply chain disruption, due largely to a combination of geopolitics, pandemic and war-related
factors. Businesses are seeking to build greater resilience into their supply chains, reduce their dependence on sole suppliers or regions, and take the
opportunity to digitise. I expect these trends all to continue throughout 2023. HSBC’s global network means we are well placed to adapt to regional
diversification that takes place within supply chains.
Thank you to my colleagues
Finally, my colleagues have once again shown great dedication, energy and care in serving our customers and working together over the past year.
They have exemplified our purpose of ‘opening up a world of opportunity’ and our core values. While we want to achieve even more in 2023 and
beyond, I am very proud of what they achieved in 2022 – and I am extremely grateful to each of them.
Mark E Tucker
Group Chairman
21 February 2023

HSBC Holdings plc Annual Report and Accounts 2022 | 7

Group Chief Executive’s review
The progress that we have made over the past three years means that HSBC is well
positioned to deliver higher returns and has a good platform for future growth.
We have completed the first phase of our transformation. Our international connectivity is now underpinned by good, broad-based profit
generation around the world. Our focus is now on continuing to grow our core business, while also capitalising on the new sources of
value creation that we have built.
When we embarked on our transformation programme in February 2020, our aim was to address the fundamental issues that had contributed to a
decade of low returns. It was clear to me that too much of our capital was being used inefficiently, too many of our businesses were loss-making
and sub-scale, and too many of our clients were low returning and purely domestic in nature. Over the last three years, while responding to the
challenges of the pandemic, we have structurally repositioned our businesses and operating model to achieve higher returns.
The most significant changes to our portfolio have been the exit and wind-down of non-strategic assets and clients in the Americas and Europe, and
the investment in technology and in organic and inorganic growth in Asia, especially in Wealth and Personal Banking. We have completed the sale of
our US mass market retail business, and announced the planned exit of our French retail banking operations and the planned sale of our banking
business in Canada. We have also announced exits in other smaller businesses, including Greece and Russia. A key factor in assessing the strategic
value of our businesses has been whether they capitalise on the distinct advantages that we have, especially those derived from our global network.
Our work to increase capital efficiency resulted in cumulative risk-weighted asset savings of $128bn by the end of 2022, in excess of our original
target as we accelerated restructuring in the US and Europe. This enabled us to reallocate capital towards Asia and the Middle East.
Finally, we have transformed our cost base and restored tight cost discipline across the organisation. Our cost to achieve programme concluded at
the end of 2022, but it enabled us to take multiple layers of inefficiency out of the business and embed changes that we expect to provide flow-
through benefits for years to come.
Return on average tangible equity <>
9.9%
(2021: 8.3%)
Adjusted revenue <>
$55.3bn
(2021: $47.0bn)

8 | HSBC Holdings plc Annual Report and Accounts 2022

“The difference compared with three
years ago is that our international
connectivity is now underpinned by good
broad-based profit generation around the
world.“
Building a good platform for future growth
At the same time, we have invested in new sources of value creation that provide a good platform for future growth. Developing our capabilities in
Wealth, particularly in Asia, has been a strategic priority as we have sought to diversify our revenues. We have done this organically through the
build-out of our Pinnacle business in mainland China, and inorganically through the purchases of AXA Singapore and L&T Investment Management in
India, by increasing our stake to 90% in HSBC Qianhai Securities, and by taking full ownership of our HSBC Life China insurance business. The
traction that we are gaining in Wealth is reflected by the $80bn of net new invested assets that we attracted in 2022, $59bn of which were in Asia.
Our core purpose is ‘opening up a world of opportunity’ and that, in essence, is what we do by helping our personal and corporate customers to
move money between countries and do business across borders. This is still the best way for us to create value, and what makes us a world leading
bank for international and mid-market customers. We are the number one trade finance bank, and trade revenue was up 13% in 2022, surpassing the
good level of growth in the previous year. Trade also increased in all regions.
We are also one of the leading global foreign exchange houses and a leading payments company globally, with over $600tn of payments processed
in 2022. Our global connectivity has made international our fastest-growing revenue segment in Wealth and Personal Banking. Products like Global
Money and our Wealth platforms are specifically designed to meet the international needs of our retail and wealth customers. These customers also
provide around double the average revenue of domestic-only customers.
The difference compared with three years ago is that our international connectivity is now underpinned by good broad-based profit generation around
the world. Already the leading bank in Hong Kong, we gained market share last year in key products including customer deposits, insurance and
trade finance. We are also the leading foreign bank in mainland China by revenue and are pleased to have received seven main licence approvals
since 2020. Our business in India delivered $0.9bn of profit before tax last year and facilitated the equivalent of around 9% of India’s exports. In the
Middle East, we delivered $1.8bn of profits and were the number one bank in capital markets league tables. HSBC UK delivered $5bn of profits and
was the number one bank for trade finance, while our non-ring-fenced bank in Europe delivered $2.1bn of profits and around 35% of its client
business was booked outside the region. Our US business has now had nine consecutive quarters of profitability after its turnaround, while our
business in Mexico delivered a return on tangible equity of 18%.
The cost savings that we have made have been reinvested in technology, which has in turn enabled us to change the way we operate as a business.
Technology spending was 19% higher in 2022 than in 2019. Much of this investment has been used to rebuild and upgrade platforms, which we
have then rolled out globally. Our upgraded mobile banking app is available in 24 markets and has around 13 million active users, while our upgraded
digital trade finance platform has been rolled out in the UK and Hong Kong, ensuring that market-leading businesses are well positioned for the next
10 years. In 2022, we launched HSBC Orion, our new proprietary tokenisation platform using blockchain technology for bond issuances. We’re also
partnering with fintechs around the world to use their capabilities in our products. Finally, we are investing in greater automation, which we expect to
reap the benefits from for years to come.
Empowering our people has underpinned everything that we have achieved over the past three years – and it will underpin the next phase of our
strategy too. Reducing management layers has helped to increase our speed and agility. In our last staff survey, the number of colleagues who
report that work processes allow them to work efficiently was 6 percentage points above the sector benchmark. Confidence within the organisation
has also increased. 77% of colleagues told us they are confident about our future, which is 3 percentage points up on 2021. We have continued to
make steady progress against our medium-term targets on gender and ethnicity representation, while the number of hours that colleagues spent
learning about digital and data, and sustainability also increased by 13% last year, underlining the importance of these critical future skills.
The transition to net zero will offer increasingly significant commercial opportunities in the future. We have continued to make good progress
towards our ambition of providing and facilitating $750bn to $1tn of sustainable financing and investment by 2030. At the end of 2022, the
cumulative total for sustainable financing and investment since 2020 had reached more than $210bn. We published an updated energy policy, which
commits us to no longer provide new finance or advisory services for the specific purpose of projects pertaining to new oil and gas fields and related
infrastructure whose primary use is in conjunction with new fields. As per our policy, we will continue to provide finance to maintain supplies of oil
and gas in line with declining current and future global demand, while accelerating our activities in support of clean energy. We have also set interim
2030 targets for on-balance sheet financed emissions for eight sectors. These include six sectors for which we have reported 2019 and 2020
emissions. We recognise that methodologies and data for measuring emissions will continue to evolve, and our own disclosures will therefore
continue to develop as a result. In 2023, we will publish our first bank-wide climate transition plan.

HSBC Holdings plc Annual Report and Accounts 2022 | 9

Future growth levers
In 2022, we continued to build new sources of value creation.
We brought in
$80bn
of net new invested assets in Wealth.
We provided and facilitated cumulatively
$210.7bn
of sustainable finance and investment since January 2020.
Strong overall financial performance in 2022
The progress that we have made transforming HSBC and investing in growth has helped to drive an improved financial performance in 2022. A
strong net interest income performance reflected higher global interest rates, but there was also good underlying growth across the business in key
areas, particularly those linked to our international network.
Overall, the Group delivered $17.5bn of reported profit before tax, which was $1.4bn lower than in 2021. This was due to a net expected credit loss
charge of $3.6bn compared with a net release of $0.9bn last year, as well as the impairment of $2.4bn relating to the planned sale of our retail
banking operations in France. Adjusted profit before tax was $24bn, up $3.4bn.
Adjusted revenue was 18% higher than the same period last year, as net interest income grew strongly in all of our global businesses. There was
also a strong performance in Global Foreign Exchange. Our reported return on tangible equity for 2022 was 9.9%. Excluding significant items, we
delivered a return on tangible equity of 11.6%.
There was a good performance across our global businesses. In Commercial Banking, adjusted profit before tax was up by 24% to $7.7bn, driven by
revenue increases across all products and in all regions, most notably Asia and the UK. Within this, Global Payments Solutions revenue grew by
104% on the back of higher interest rates, while trade revenue was up 14% with growth in all regions.
Global Banking and Markets delivered adjusted profit before tax of $5.4bn, up 8% compared with 2021. Global Payments Solutions was again the
main driver, with 119% growth in net interest income from higher interest rates, and a strong performance in Global Foreign Exchange. In Wealth
and Personal Banking, adjusted profit before tax of $8.5bn was 27% higher than 2021. Net interest income growth drove a good performance in
Personal Banking, while there was also balance sheet growth in the UK, Asia outside Hong Kong, and Mexico.
We restricted adjusted cost growth to 1% in 2022 as a result of the significant cost-saving actions that we have taken. This represents a good
outcome given the high inflation environment. After good capital generation in the fourth quarter, our CET1 ratio at the end of 2022 was 14.2% and
back within our target range of 14% to 14.5%. We are able to pay a second interim dividend of $0.23 per share, bringing the total 2022 dividend to
$0.32 per share.
Improved returns and substantial distribution capacity
We are firmly on track to achieve our target of a return on tangible equity of at least 12% from 2023 onwards. We have built up a good level of
expected credit loss provisions, and we also expect the headwinds associated with macroeconomic uncertainty and the ongoing challenges within
the China commercial real estate sector to subside, enabling expected credit losses to start to normalise.
There will be no easing off at all on costs. Our cost to achieve programme has now ended, but we will continue to seek and find opportunities to
create efficiencies that will deliver sustainable cost savings in future years. We are now considering up to $300m of additional costs for severance in
2023. These costs will need to be reported in our costs line. Taking this into account, we will aim for approximately 3% cost growth in 2023. Tight
cost discipline will remain a priority for the whole Group.
As a result of the improving quality of our returns, we are establishing a dividend payout ratio of 50% of reported earnings per share for 2023 and
2024, excluding material significant items. We will aim to restore the dividend to pre-Covid-19 levels as soon as possible. We also intend to revert to
paying quarterly dividends from the start of 2023. Given the capital generation at the end of 2022, we will bring forward the consideration of buy-
backs to the announcement of our results for the first quarter of 2023.
Finally, subject to the completion of the sale of our banking business in Canada, I am pleased that the Board will consider payment of a special
dividend of $0.21 per share in early 2024 as a priority use of the surplus capital generated by the transaction. We understand the importance of
dividends to our shareholders and expect them to benefit from improved capital distributions ahead.
My colleagues are getting it done
I would like to end by thanking my colleagues around the world. Over the last three years, they have managed a period of substantial change,
embraced the opportunities that our transformation has presented and gone the extra mile to support our customers – all while living through a global
pandemic. More recently, there have also been the Russia-Ukraine war, the real-life financial strains caused by high inflation and the devastating
earthquakes in Türkiye for them to deal with. We have only made the progress that we have because of their efforts. They are exemplifying our value
of getting it done, and I am proud to lead them.
Overall, 2022 was another good year for HSBC. We completed the first phase of our transformation and our international connectivity is now
underpinned by good, broad-based profit generation around the world. This contributed to a strong overall financial performance. We are on track to
deliver higher returns in 2023 and have built a platform for further value creation. With the delivery of higher returns, we will have increased
distribution capacity, and we will also consider a special dividend once the sale of HSBC Canada is completed.
Noel Quinn
Group Chief Executive
21 February 2023

HSBC Holdings plc Annual Report and Accounts 2022 | 10

Our strategy
We are implementing our strategy across the four strategic pillars aligned to our purpose, values
and ambition.
Transformation journey
We have made progress in our transformation in six key areas, as we start to improve financial performance and build a strong foundation for future
growth.
Firstly, we have retained a market leading position in international connectivity. We are the number one trade finance bank and number three bank in
foreign exchange globally, based on peer analysis undertaken by Coalition Greenwich. Across our global businesses, international connectivity is core
to who we serve, with approximately 45% of our wholesale client business coming from cross-border relationships and approximately 6 million
international customers banking with Wealth and Personal Banking. International clients remain our most attractive client base in Wealth and
Personal Banking, with revenue around double that of domestic customers. In addition, global transaction banking revenue, a cornerstone of our
international connectivity, has grown 7% each year since 2019.
Secondly, we have also reshaped our portfolio through strategic exits in continental Europe and the Americas. We have exited our domestic mass
market retail business in the US, and are in the process of selling our retail banking operations in France, our banking business in Canada, our
business in Russia and our branch operations in Greece, subject to regulatory and governmental approvals. We have taken actions to improve the
returns profile of the Group, including generating cumulative gross RWA reductions of $128bn since the start of our programme, exceeding our
target of more than $110bn. We have continued to reallocate capital to Asia, with the proportion of our tangible equity allocated to Asia increasing to
47% at the end of 2022, and we remain on track with our medium- to long-term aspiration to increase this to 50%. We have also invested through a
series of bolt-on acquisitions in Asia, including AXA’s business in Singapore and L&T Investment Management in India, and we have increased our
stakes in HSBC Life China and HSBC Qianhai.
Capital allocation
Asia
(as a % of Group tangible equity)1
1 Based on tangible equity of the Group’s major legal entities excluding associates, holding companies, and consolidation adjustments.
Gross RWA reduction
$128bn
Since the start of the programme Target: >$110bn by the end of 2022.
Technology investment
$6.1bn
(2019: $5.1bn)
Thirdly, over the last three years we have built a broad and geographically diverse base of profit generation. We remain the leading bank in Hong
Kong across key areas including deposits, lending and trade finance, while in mainland China, our business contributed $1.0bn of adjusted profit
before tax in 2022, excluding the share of profit from our associate, Bank of Communications Co., Limited. We have also grown our businesses in
the rest of Asia, with adjusted profit before tax of $4.2bn, up 24% compared with 2019. Outside of Asia, HSBC UK Bank plc delivered $5.0bn of
adjusted profit before tax in 2022, while our HSBC Bank plc and US businesses have transformed into being leaner and more internationally focused.
In the Middle East and North Africa, we are the leading bank in capital markets, while in Mexico, the return on average tangible equity was 18.0% in
2022.
Fourthly, we have retained our strong focus on cost discipline. Within the past year, notwithstanding inflationary pressures, we contained adjusted
cost growth compared with 2021. As a result, excluding the benefit of a reduced UK bank levy, adjusted costs have remained flat since 2019, with a
19% increase in technology spend offset by gross saves within our global businesses, operations and other costs. Since 2019, we have taken
actions to become a more efficient organisation, reducing our office real estate footprint by 37%, branches by 21% and operations headcount by
approximately 11%.
As we transformed, we have also built a platform for growth and returns upon which we will build new value creation opportunities. We have
continued to grow our balance sheet, with our deposits growing by 4% and assets growing by 5% each year since 2019. Increasing fee-based
revenue and growing our Wealth and Personal Banking franchise remain important priorities for the Group, and we have gained traction, with Wealth
revenue up 3% and transaction banking revenue up 7% since 2019. However, given the changes to the macroeconomic environment, together with
the implementation of IFRS 17, the metrics ‘Insurance and fees as a percentage of Group adjusted revenue’ and ‘WPB as a percentage of Group
tangible equity’ are no longer appropriate to measure our progress in these areas.
We continue to view technology as a key enabler of our growth ambitions, and have also increased our investment from approximately $5.1bn in
2019 to $6.1bn in 2022. During the year, we have scaled up existing digital propositions and launched others. Details of these can be found on the
following pages.
Fifthly, we have supported a sustainable dividend policy with strong capital and liquidity. Finally, the above five themes have resulted in a strong
platform for growth and returns, upon which we will build new value creation opportunities.

11 | HSBC Holdings plc Annual Report and Accounts 2022

Delivery in 2022
Our strategy centres on four key pillars: focus on our areas of strengths, digitise at scale to adapt our operating model for the future, energise our
organisation for growth, and support the transition to a net zero global economy.
Focus on our strengths
In our global businesses
In each of our global businesses, we continue to focus on areas where we are strongest and have opportunities to grow.
Wealth and Personal Banking
Adjusted revenue for our Wealth and Personal Banking business was $24.4bn in 2022, up 16% compared with 2021. This was driven by growth in
Personal Banking, where adjusted revenue was $15.9bn, up 37%. We continued to make progress in executing our Wealth, Asset Management and
Insurance strategy, attracting net new invested assets of $80bn, compared with $64bn in 2021, with $59bn coming from Asia. Our Asia Insurance
value of new business reached $1.1bn, up 24%.
We continued to grow our digital propositions during the year. We launched Global Money in the UK and Australia, with the proposition now live in
eight markets. This new proposition recorded approximately $11bn of transactions in 2022, enabling customers to make cheaper and faster
international payments. We also signed up more than 900,000 users to our Pinnacle financial planning app to bring the total user base to over 1
million.
Within our Wealth business, in partnership with BlackRock, we launched Prism, a hybrid advisory service to help investors make more informed
investment decisions.
$80bn
Net new invested assets in 2022.
Commercial Banking
Adjusted revenue for our Commercial Banking business reached $16.2bn in 2022, up 29% compared with 2021. Adjusted revenue rose in all regions,
and notably in Hong Kong, which grew by 36%. Fee income increased by 8% to $3.7bn, reflecting growth in Global Payments Solutions and Global
Trade and Receivables Finance.
Our digital propositions have gained significant traction, with payments processed on HSBCnet mobile increasing by nearly 62% during the year.
Kinetic, our digital business banking account for SMEs in the UK, gained approximately 29,000 customers, taking its overall customer base to
approximately 53,000. Business Go, our new global digital platform for SMEs, has gone live and has grown to over 95,000 users as of 2022.
In 2022, we launched our first Banking-as-a-Service proposition in the US with Oracle Netsuite, embedding HSBC’s banking products within Oracle’s
Cloud enterprise resource planning platform.
We continue to actively help our clients with their climate transition goals, and have completed the global roll-out of our core sustainable product
suite covering loans, trade finance and bonds. We also launched our enhanced HSBC Sustainability Tracker for Business Banking customers.
$3.7bn
Fee income in 2022.
Global Banking and Markets
Adjusted revenue for our Global Banking and Markets business was $15.4bn in 2022, up 10% compared with 2021, driven by strong performances in
Global Payments Solutions and Markets and Securities Services, primarily from our Global Foreign Exchange business. During the year, we continued
to drive efforts for cross-business line collaboration through referrals and cross-sell of products, with adjusted collaboration revenue of approximately
$3.7bn in 2022, compared with approximately $3.5bn in 2021. Our Global Banking and Markets franchise remains an internationally connected one,
with our clients doing business with us in multiple markets. In 2022, our clients in Europe and the Americas drove approximately $2.6bn of client
business into Asia and the Middle East, an increase of approximately 30%.
We continued to develop our digital propositions with the launch of HSBC Orion, a new proprietary tokenisation platform to issue digital bonds based
on distributed ledger technology.
We also extended our sustainable investment product range, launching a biodiversity screened equity index created in partnership with biodiversity
data specialist Iceberg data lab and Euronext.
c.$2.6bn
Client business 1 booked in the East from clients managed in the Americas and Europe.
1 Client business differs from reported revenue as it relates to certain client-specific income, and excludes certain products (including Principal Investments, GBM ’other’
and asset management), Group allocations, recoveries and other non-client-related and portfolio level revenue. It also excludes Hang Seng. GBM client business includes
an estimation of client-specific day-one-trade-specific revenue from Markets and Securities Services products, which excludes ongoing mark-to-market revenue and
portfolio level revenue such as hedging. Cross-border client business represents the income earned from a client’s entity domiciled in a different geography than where
the client group’s global relationship is managed. ‘Booking location’ represents the geography of the client’s entity or transaction booking location where this is different
from where the client group’s global relationship is managed.

HSBC Holdings plc Annual Report and Accounts 2022 | 12

Digitise at scale
We continued to invest in our technology and operational capabilities to drive productivity across businesses and geographies, and to improve
customer experience. In 2022, $6.1bn, or 20%, of our overall adjusted operating expenses were dedicated to technology, up from $5.6bn in 2021.
Enhancing our digital propositions to improve customer engagement and journeys remains a significant priority. During the year, just under half of our
Wealth and Personal Banking customers were active users of our mobile applications, an increase from 42.7% in 2021, and over 75% of our
Commercial Banking customers were active on our digital applications, an increase from 71.0%. Furthermore, in Wealth and Personal Banking, nearly
half of sales were generated digitally. Our customer journeys continue to be transformed, for example, in Singapore, our Wealth and Personal
Banking customers can now open an account even before they arrive in their new country via their mobile phones.
To improve our operational efficiency, we continue to deploy technologies at scale in our organisation. Our Cloud adoption rate, which is the
percentage of our technology services on the private or public Cloud, increased from 27% to 35%.
Energise for growth
Empowering and energising our colleagues is crucial for inspiring a dynamic culture. Our Employee engagement index, our headline measure of
employee satisfaction, rose to 73% in 2022 from 67% in 2019, our baseline year. The participation rate of the survey also rose from 50% to 78%.
We remained focused on creating a diverse and inclusive environment, especially in senior leadership roles, which are those classified as band 3 and
above in our global career band structure. We achieved 33.3% female representation in senior leadership positions by the end of 2022, and are on
track to achieve our target of 35% by 2025. In 2022, we also set a Group-wide ethnicity strategy to better represent the communities we serve. We
are on track to meet this, with 2.5% of leadership roles held by colleagues of Black heritage in 2022.
We continued to help our colleagues develop future-ready skills. In 2022, the total learning hours spent on these future-ready skills (digital, data, and
sustainability) increased to approximately 375,777 hours, up from 334,651 hours in 2021.
We outline how we put our purpose and values into practice in the following ‘ESG overview‘ section.
> For further details on how we plan to energise for growth, see the Social section in the ESG review on page 73.
Transition to net zero
In November, we participated in COP27 to play our part in bringing together the public and private sector to mobilise the transition to a net zero
global economy. We also made good progress on our ambitions, including expanding our financed emissions targets to eight sectors in total,
reducing our greenhouse gas emissions, and supporting our customers in their transition to a net zero future including the launch of new climate
solutions.
Becoming a net zero bank
We continue to pursue our climate ambition to become net zero in our operations and supply chain by 2030, and align our financed emissions to the
Paris Agreement goal of net zero by 2050. In 2022, we reduced our absolute greenhouse emissions in our operations to 285,000 tonnes CO2e,
which represents a 58.5% reduction from our 2019 baseline.
So far, we have set interim 2030 targets for on-balance sheet financed emissions for eight sectors. We also published updated energy and thermal
coal phase-out policies during the year, which are important mechanisms to help phase down our financed emissions in these areas while supporting
our customers in their own transition plans. We plan to extend our financed emissions analysis to new sectors – shipping, agriculture, commercial
real estate and residential real estate – in future disclosures. We remain committed to setting facilitated emissions targets, and aim to continue to
engage with industry initiatives to produce a consistent and comparable cross-industry approach.
Supporting customers through transition
We have made progress in our ambition to support our customers through their transition to net zero. In 2022, we provided and facilitated a total of
$84.2 bn of sustainable finance and investments, bringing our cumulative amount since 1 January 2020 to $210.7 bn of our $750bn to $1tn ambition
by 2030.
Unlocking new climate solutions
In 2022, Climate Asset Management, the dedicated natural capital investment manager formed as a joint venture with climate change investment
and advisory firm Pollination, achieved commitments of more than $650m across its two natural capital strategies. We also officially launched
Pentagreen, a joint venture with Temasek, to finance the development of sustainable infrastructure in south-east Asia.
> For further details on our climate ambition, see the Environmental section in the ESG review on page 46.
Growth and returns
Looking ahead, we will continue to build on our areas of strength, using our international connectivity and strong geographical diversity spanning
every region. We will also continue to drive our transaction banking, wealth and digital platforms in order to grow fee income. Cost discipline remains
a priority for us, while we drive investment in technology to increase productivity and growth. As a result, we expect to achieve more than 12%
RoTE from 2023 onwards – the highest in a decade – and have substantial distribution capacity in 2023 and 2024.

13 | HSBC Holdings plc Annual Report and Accounts 2022

ESG overview
We conduct our business to support the sustained success of our customers, people and other
stakeholders.
Our approach
We are guided by our purpose: to open up a world of opportunity for our colleagues, customers and communities. Our purpose is underpinned by our
values: we value difference; we succeed together; we take responsibility; and we get it done. Our purpose and values help us to deliver our strategy
and unlock long-term value for our stakeholders.
Our approach to ESG is shaped by our 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 climate, economies, societies, supply chains and people’s lives are interconnected.
We recognise we can play an important role in tackling ESG challenges. We focus our efforts on three areas: the transition to net zero, building
inclusion and resilience, and acting responsibly.
Transition to net zero
The transition to net zero is one of the biggest challenges for our generation. Success will require governments, customers and finance providers to
work together. Our global footprint means that many of our clients operate in high-emitting sectors and regions that face the greatest challenge in
reducing emissions. This means that our transition will be challenging but is an opportunity to make an impact.
We recognise that to achieve our climate ambition we need to be transparent on the opportunities, challenges, related risks and progress we make.
To deliver on our ambition, we require enhanced processes, systems, controls, governance and new sources of data. We continue to invest in our
climate resources and skills, and develop our business management process to integrate climate impacts. As we enhance our systems, processes,
controls and governance, certain aspects of our reporting will rely on manual sourcing and categorisation of data. Given the challenges on data
sourcing as well as the evolution of our processes as mentioned above, this has had an impact on certain climate disclosures including thermal coal.
In 2023, we will continue to review our approach to our disclosures, with our reporting needing to evolve to keep pace with market developments.
We set out in more detail the steps we are taking on our climate ambitions in the ESG review on page 47.
Build inclusion and resilience
Building inclusion and resilience helps us to create long-term value. By removing barriers and being a fair and equitable bank, we can attract the best
talent, serve a wider customer base and support our communities.
An inclusive, healthy and stimulating environment for our people helps us to succeed. We have set goals for gender and ethnic diversity, and we
focus on employee sentiment, and support our colleagues’ resilience through well-being and learning resources.
We strive to provide inclusive and accessible banking for our customers. We help our customers to build financial resilience by providing resources
that help them manage their finances, and services that help them protect what they value. This is critical in challenging times, as we continue to
support our stakeholders in the wake of Covid-19 and in the face of a rising cost of living.
Finally, we give back to our communities through philanthropic giving, disaster relief and volunteering.
Act responsibly
We are focused on running a strong and sustainable business that puts the customer first, values good governance, and gives our stakeholders
confidence in how we do what we do. Our conduct approach guides us to do the right thing and to focus on the impact we have for our customers
and the financial markets in which we operate. Customer experience is at the heart of how we operate. We aim to act responsibly and with integrity
across the value chain.
On page 16, we have set out ways that we have supported our stakeholders through a challenging year.
ESG disclosure map and directory

Transition to net zero | Our climate ambition | Read more on our approach to the transition to net zero | Page 46
Read more on our progress made against our ambition to achieve net zero in our financed emissions by 2050 | Page 50
Read more on our progress made against our $750bn to $1tn sustainable finance and investment ambition | Page 57
Read more on our ambition to achieve net zero in our own operations by 2030 | Page 62
Detailed Task Force on Climate-related Financial Disclosures (‘TCFD’) | We make disclosures consistent with Task Force on Climate- related Financial Disclosures (‘TCFD’) recommendations, highlighted with the symbol: TCFD | Page 68
Build inclusion and resilience | Diversity and inclusion disclosures | Read more on how we are building an inclusive environment that reflects our customers and communities, and our latest pay gap statistics | Page 74
Pay gap disclosures | Page 75
Act responsibly | How we govern ESG | Read more on our ESG governance approach and human rights | Page 86 Page 87
Human rights and modern slavery disclosures
How our ESG targets link to executive remuneration | Read more on our ESG targets embedded in executive remuneration | Page 16; Pages 282 to 287
| Our ESG Data Pack | Our ESG Data Pack provides more granular ESG information, including the breakdown of our sustainable finance and investment progress, and complaints volumes | www.hsbc. com/esg

HSBC Holdings plc Annual Report and Accounts 2022 | 14

Engaging with our stakeholders and our material ESG topics
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. Disclosure standards such as the TCFD,
World Economic Forum (‘WEF’) Stakeholder Capitalism Metrics and Sustainability Accounting Standards Board (‘SASB’), as well as the ESG Guide
under the Hong Kong Stock Exchange Listing Rules and other applicable rules and regulations, are considered as part of the identification of material
issues and disclosures.

Our stakeholders | How we engage | Material topics highlighted by the engagement 1
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 our employee Snapshot survey, Exchange meetings, and our ‘speak-up’ channels, including our global whistleblowing platform, HSBC Confidential | –Employee training –Diversity and inclusion –Employee engagement
Investors | We engage with our shareholders through our AGMs, virtual and in-person meetings, conferences and our annual investor survey | –Thermal coal policies –Energy policies –Becoming a net zero bank in our own operations and financed emissions
Communities | We welcome dialogue with external stakeholders, including non-governmental organisations (‘NGOs’) and other civil societies groups. We engage directly on specific issues and by taking part in external forums and working groups | –Financial inclusion and community investment
Regulators and governments | We proactively engage with regulators and governments to facilitate strong relationships through virtual and in-person meetings and by responding to consultations individually and jointly via industry bodies | –Anti-bribery and corruption –Conduct and product responsibility
Suppliers | Our code of conduct for suppliers of goods and services sets out how we engage with our suppliers on ethical and environmental performance | –Supply chain management –Human rights

1 These form part of our ESG disclosures suite together with other requirements, and are not exhaustive or exclusive to one stakeholder group. For further details on our
disclosures, see our ESG review and ESG Data Pack, as well as our ESG reporting centre at www.hsbc.com/esg.
Supporting our customers facing a rising cost of living
We know that many of our customers around the world are facing increasing cost of living pressures from higher inflation, and we are committed to
helping them.
Colleagues across our global businesses have been reaching out to customers to provide them with increased access to support, such as free
financial health checks, as well as proactively contacting those who we believe could benefit from additional assistance.
Proactive support
We have focused our support on our customers in the UK, which is our largest market to be affected by rising cost of living pressures, using our
guidelines and procedures to help provide the right outcomes. We also engage closely and regularly with our key regulators to help ensure we meet
their expectations of financial institutions’ activities more generally during volatile markets.
For our personal customers in financial difficulty, we enhanced our range of digital resources, with the launch of a new ‘Rising cost of living hub’ on
our public website. The hub provides useful articles and tools to help budget, manage money and gain access to the range of support we are
providing. Other measures in 2022 included:
–conducting a review of our existing tools and services, helping to ensure requests for borrowing remained affordable;
–helping those most in need with temporary support, such as reducing overdraft borrowing costs in eligible accounts;
–providing the opportunity to mortgage customers coming to the end of an existing fixed rate to secure a new rate earlier; and
–removing the payments of penalties for customers in need of funds having to close fixed-rate savers accounts early.
In our CMB business, our focus has been towards helping Business Banking clients exhibiting signs of financial vulnerability, as well as participating
in local government-backed initiatives targeted at extending financial support to SMEs. When a customer is in need of assistance, we review on a
case-by-case basis, with potential solutions including repayment holidays, extending loan repayments and offering extensions to collection periods.
Other measures in 2022 included:
–improving our customer support and education, including through webinars and our financial well-being website, to guide how best to
improve financial resilience and forecast cash flows;
–enhancing the identification of customers exhibiting signs of financial vulnerability, by using data and front-line insights provided from
relationship management teams;
–increasing the education provided to our colleagues on the various forms of financial support available to clients; and
–proactively getting in touch with customers to help ensure awareness of available support, including communicating with over 40,000
SMEs, and increasing the number of outbound calls in the fourth quarter of 2022 by 190%, when compared with the previous quarter, to
those displaying signs of lower financial resilience.
> For further details on our conduct and product responsibilities, see the ESG review on page 94. For further details of how we are supporting our colleagues amid rising
inflation, see page 25.

15 | HSBC Holdings plc Annual Report and Accounts 2022

Our ESG ambitions, metrics and targets TCFD
We have established ambitions and targets that guide how we do business, including how we operate and how we serve our customers. These
include targets designed to help us achieve our environment and social sustainability goals. They also help us to improve employee advocacy, the
diversity of senior leadership and strengthen our market conduct. The targets for these measures are linked to the pillars of our ESG strategy:
transitioning to net zero, building inclusion and resilience, and acting responsibly.
To help us achieve our ESG ambitions, a number of measures are included in the annual incentive and long-term incentive scorecards of the Group
Chief Executive, Group Chief Financial Officer and Group Executives that underpin the ESG metrics in the table below.
We have developed a forward-looking roadmap to consider greater use of ESG measures in executive performance assessment. For a summary of
how all financial and non-financial metrics link to executive remuneration, see pages 282 to 287 of the Directors’ remuneration report.
The table below sets out some of our key ESG metrics that we use to measure our progress against our ambitions. For further details of how well
we are doing, see the ESG review on page 43.

Environmental: Transition to net zero 1 | Financed emissions 2 | Sustainable finance and investment 3 | Net zero in our own operations 4
8 sectors | $210.7 bn | 58.5%
Number of sectors where we have set on-balance sheet financed emissions targets. Ambition: Achieve net zero in our financed emissions by 2050. | Cumulative total provided and facilitated since January 2020. (2021: $126.7bn) Ambition: Provide and facilitate $750bn to $1tn of sustainable finance and investment by 2030. | Cumulative reduction in absolute operational greenhouse gas emissions from 2019 baseline. (2021: 50.3%) Ambition: Achieve net zero in our own operations and supply chain by 2030.
Social: Build inclusion and resilience | Gender diversity 5 | Ethnic diversity 5 | Employee engagement 6
33.3% | 37% increase | 73%
Women in senior leadership roles. (2021: 31.7%) Target: Achieve 35% women in senior leadership roles by 2025. | Of Black colleagues in senior leadership roles from 2020 baseline. (2021: 17.5% increase) Target: Double the number of Black colleagues in senior leadership roles between 2020 and 2025. | Employee engagement score. (2021: 72%) Target: Maintain 72% in the Snapshot Employee engagement index.
Governance: Acting responsibly | Conduct training 7 | Customer satisfaction 8
98% | 4 out of 6 | 5 out of 6
Employees who completed conduct training in 2022. (2021: 99%) Target: At least 98% of employees complete conduct and financial crime training each year. | WPB markets that sustained top-three rank and/or improved in customer satisfaction. (2021: 5 out of 6) Target: To be ranked top three and/or improve customer satisfaction rank. | CMB markets that sustained top-three rank and/or improved in customer satisfaction. (2021: 2 out of 6) Target: To be ranked top three and/or improve customer satisfaction rank

1 For further details of our approach to transition to net zero, methodology and PwC’s limited assurance reports, see www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre.
2 See page 52 for further details on our targets for six of these sectors, which include oil and gas; power and utilities; cement; iron, steel and aluminium; aviation; and
automotive. See page 66 for further details about our thermal coal mining and coal fired power targets, as well as our thermal coal phase-out policy.
3 In October 2020, we announced our ambition to provide and facilitate between $750bn to $1tn of sustainable finance and investment by 2030. For further details and
breakdown, see the ESG review on page 58. For details on how this target links with the scorecards, see page 282.
4 This absolute greenhouse gas emission figure covers scope 1, scope 2 and scope 3 business travel emissions. For further details of how this target links with the
scorecards, see page 282.
5 Senior leadership is classified as those at band 3 and above in our global career band structure. The progress for the ethnicity target is tracked from a 31 December 2020
baseline against our 2020 commitment to double the number of Black senior leaders. We have since refined our approach to ethnicity by focusing on targets by market.
For further details, see the ESG review on page 75. For details on how this target links with the scorecards, see page 282.
6 For further details, see the ESG review on page 77. For details on how this target links with the scorecards, see page 282.
7 The completion rate shown relates to the financial crime ‘Take another look’ training module and conduct ‘Taking responsibility’ training module in 2022.
8 The markets where we report rank positions for WPB and CMB – the UK, Hong Kong, mainland China, India, Mexico and Singapore – are in line with the annual
executive scorecards. This represents a change from 2021, when the metric was based on all markets where benchmarking studies were run. For further details of
customer satisfaction, see the ESG review on page 89. For further details of how this target links with the scorecards, see page 282.

HSBC Holdings plc Annual Report and Accounts 2022 | 16

Task Force on Climate-related Financial Disclosures (‘TCFD’) TCFD
The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (‘TCFD’) recommendations set an important framework for
understanding and analysing climate-related risks, and we are committed to regular, transparent reporting to help communicate and track our
progress. We will advocate the same from our customers, suppliers and the industry.
We have set out our key climate-related financial disclosures throughout the Annual Report and Accounts 2022 and related disclosures. In 2022,
while recognising that further work lies ahead as we develop our management and reporting capabilities, we made certain enhancements to our
disclosures. These include reporting relevant quantitative results from our first internal climate-related scenario analysis, including the carbon prices
that we used. We also began to incorporate climate-related considerations into our annual financial planning cycle, and disclosed how management
has considered the impact of climate-related risks on our financial position and forward-looking performance.
We have considered our ‘comply or explain’ obligation under the UK’s Financial Conduct Authority’s Listing Rules, and confirm that we have made
disclosures consistent with the 11 TCFD Recommendations and Recommended Disclosures save for certain items, which we summarise below.
–For financed emissions we do not plan to set 2025 targets. We set targets in line with the Net-Zero Banking Alliance (‘NZBA‘) guidelines by
setting 2030 targets. While the NZBA define 2030 as intermediate, we use different time horizons for climate risk management. We define
short term as time periods up to 2025; medium term is between 2026 and 2035; and long term is between 2036 and 2050. These time
periods align to the Climate Action 100+ disclosure framework. In 2022, we disclose interim 2030 targets for on-balance sheet financed
emissions for eight sectors as we outline on page 18. For the shipping sector, we chose to defer setting a baseline and target until there is
sufficient reliable data to support our work, allowing us to more accurately track progress towards net zero. In March 2022, we said we
would set capital markets emissions targets for the oil and gas, and power and utilities sectors based on the industry reporting standard
from the Partnership for Carbon Accounting Financials (’PCAF’) once published. We remain committed to setting facilitated emissions
targets, and aim to continue to engage with industry initiatives to produce a consistent and comparable cross-industry approach. We intend
to review the financed emissions baselines and targets annually, where relevant, to help ensure that they are aligned with market practice
and current climate science.
–We do not fully disclose impacts from climate-related opportunities on financial planning and performance including on revenue, costs and
the balance sheet, quantitative scenario analysis, detailed climate risk exposures for all sectors and geographies or physical risk metrics.
This is due to transitional challenges in relation to data limitations. We expect these data limitations to be addressed in the medium term
as more reliable data becomes available and technology solutions are implemented.
–We currently disclose partial scope 3 greenhouse gas emissions including business travel, supply chain and financed emissions. In relation
to financed emissions, we published on-balance sheet financed emissions for six sectors as detailed on page 18. Future disclosure on
financed emissions, and related risks is reliant on our customers publicly disclosing their carbon emissions and related risks. We aim to
disclose financed emissions for additional sectors in our Annual Report and Accounts 2023 and related disclosures. Our approach to
disclosure of financed emissions for additional sectors can be found at: www.hsbc.com/who-we-are/esg-and-responsible-business/esg-
reporting-centre.
> For a full summary of our TCFD disclosures, including detailed disclosure locations for additional information, see pages 68 to 72. The additional
information section on page 423 provides further detail.
Connecting international investors to sustainable solutions
We are connecting investors around the world with governments to support the transition to net zero.
In May, we helped the Indonesian government raise $3.25bn in an Islamic bond, known as a sukuk, with $1.5bn of the proceeds dedicated to be
used exclusively for eligible spending that delivers on the UN’s Sustainable Development Goals, with guidance and support from the UNDP.
We were joint lead manager and joint bookrunner, and were also mandated as joint green structuring adviser.
The order book topped $10bn, with most of the buyers from Asia and the Middle East.
The deal demonstrated how our specialist expertise can build trusted relationships. We have been discussing green financing solutions with the
Indonesian government since 2018 and were previously appointed to structure both its green and sustainability financing programmes.

17 | HSBC Holdings plc Annual Report and Accounts 2022

How we measure our net zero progress TCFD
One of our strategic pillars is to support the transition to a net zero global economy. Our ambition is to align our financed emissions to the Paris
Agreement goal to achieve net zero by 2050 or sooner. The Paris Agreement aims to limit the rise in global temperatures to well below 2°C,
preferably to 1.5°C, above pre-industrial levels. To limit the rise in global temperatures to 1.5°C, the global economy would need to reach net zero
greenhouse gas emissions by 2050.
We have set interim 2030 targets for on-balance sheet financed emissions for eight sectors. These include six sectors for which we have reported
2019 and 2020 emissions: oil and gas; power and utilities; cement; iron, steel and aluminium; aviation; and automotive. We have also set targets for
thermal coal power and thermal coal mining. We remain committed to setting facilitated emissions targets, and aim to continue to engage with
industry initiatives to produce a consistent and comparable cross-industry approach. We also recognise that we require enhanced capabilities and
new sources of data, as set out on page 47.
We continue to track our progress against our ambition to provide and facilitate $750bn to $1tn of sustainable finance and investment by 2030,
aligned to our published data dictionary, and our ambition to achieve net zero in our own operations and supply chain by 2030. We also recognise that
green finance taxonomies are not consistent globally, and evolving taxonomies and practices could result in revisions in our sustainable finance
reporting going forward.
In the year ahead we plan to set interim targets for financed emissions across additional sectors and will continue our transformation programme to
embed the climate transition into our core business and risk processes. We will continue to work on our climate transition plan, which will bring
together – in one place – our financed emissions targets and climate strategy, with how we plan to embed this into our processes, infrastructure,
governance and engagement. We plan to publish this in 2023, and update on progress annually thereafter.
We acknowledge this is a journey and recognise that regular reassessment will be needed to take into account climate scenarios, better data and
revisions in reporting standards, as well as to reflect real world developments and trends. Our modelling inputs and assumptions will be impacted
over time by the evolution of external parameters, such as policy and regulatory changes across our markets, technology innovation uptake, and
macroeconomic events beyond our control. As a result of this, certain metrics and targets may need to be revised. In the following table, we set out
our metrics and indicators and assess our progress against them.
> For further details of our approach to measuring financed emissions, including scope, methodology, assumptions and limitations, see page 50.

Climate strategic pillars and ambition | Metrics and indicators | Progress to date
Becoming a net zero bank Align our financed emissions to achieve net zero by 2050 or sooner | Number of sectors analysed for financed emissions 1 | We have published on-balance sheet financed emissions for six sectors including cement; iron, steel and aluminium; aviation; and automotive. We also continue to disclose our financed emissions for the oil and gas and power and utilities sectors 2 (see pages 50 to 56).
Be net zero in our operations and supply chain by 2030 or sooner | Absolute operational greenhouse gas emissions (tonnes CO 2 e)3 | 58.5% cumulative reduction in absolute greenhouse gas emissions from 2019 baseline (see page 62)
Percentage of renewable electricity sourced across our operations | Increase from 37.5% in 2021 to 48.3% (see page 62)
Percentage of energy consumption reduced | 24.0% cumulative reduction in energy consumption from 2019 baseline (see page 62)
Supporting our customers Support our customers in their transition to net zero and a sustainable future | Sustainable finance and investment provided and facilitated ($bn)4 | $210.7 bn cumulative progress since 2020 (for further breakdown see page 58)
Unlocking new climate solutions Help transform sustainable infrastructure into a global asset class, and create a pipeline of bankable projects | Natural capital investment | Climate Asset Management, which forms part of our goal to unlock new climate solutions, received commitments of over $650m for its two strategies: the Natural Capital Strategy and the Nature Based Carbon Strategy (for further details of our approach to responsible investment, see page 60)
Climate technology investment | Achieved our initial goal to fund $100m to climate technology companies, and subsequently raised our target to $250m (see page 60)
Philanthropic investment to climate innovation ventures, renewable energy, and nature- based solutions | Committed $95.8m to our NGO partners since 2020, as part of the Climate Solutions Partnership (see page 84)

1 For further details of our approach and methodology, see our Financed Emissions – Approach and Methodology Update at www.hsbc.com/who-we-are/esg-and-
responsible-business/esg-reporting-centre.
2 Our disclosures for our 2019 emissions for our oil and gas, and power and utilities sectors have been revised. For further details, see page 55.
3 Our reported scope 3 greenhouse gas emissions of our own operations in 2022 are related to business travel. For further details on scope 1, 2 and 3, and our progress
on greenhouse gas emissions and renewable energy targets, see page 63 and our ESG Data Pack at www.hsbc.com/esg. For further details of our methodology and
PwC’s limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
4 The detailed definitions of the contributing activities for sustainable finance are available in our revised Sustainable Finance and Investment Data Dictionary 2022. For
this, together with our ESG Data Pack and PwC’s limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.

18 | HSBC Holdings plc Annual Report and Accounts 2022

Responsible business culture
We have the responsibility to help protect our customers, our communities and the integrity of the financial system. In this section, we outline our
requirements under the Non-Financial Reporting Directive.
Employee matters
We are opening up a world of opportunity for our colleagues through building an inclusive organisation that values difference, takes responsibility and
seeks different perspectives for the overall benefit of our customers.
At times our colleagues may need to speak up about behaviours in the workplace. We encourage colleagues to speak to their line manager in the
first instance, and our annual employee Snapshot survey showed that 84% of colleagues have trust in their direct manager. We recognise that at
times people may not feel comfortable speaking up through the usual channels. HSBC Confidential is our global whistleblowing channel, allowing our
colleagues past and present to raise concerns confidentially and, if preferred, anonymously (subject to local laws).
We promote an environment where our colleagues can expect to be treated with dignity and respect. We are an organisation that acts where we
find behaviours that fall short. Our index measuring colleagues’ confidence in speaking up increased by 1 percentage point to 76% in 2022,
significantly above the industry benchmark.
We aspire to be an organisation that is representative of the communities which we serve. To help achieve this, we have set commitments on the
gender and ethnic diversity of our senior leadership.
We have committed to achieving a target of 35% of senior leadership roles held by women (classified as those at band 3 and above in our global
career band structure) by 2025. We remain on track, having achieved 33.3% in 2022.
In July 2020, we set out our early global ethnicity commitments to double the number of Black employees in senior leadership roles. To date we
have achieved a 37% increase through leadership development, inclusive hiring practices and developing the next generation of high-performing
talent. We have made good progress, but we know there is more to be done.
To support our ambition, we have placed a strong focus on enhancing the quality and transparency of our ethnicity data through the expansion of our
self-identification capability. As our self-disclosures improve, we can use this data to develop market-specific goals that are connected to the
communities we serve.
The table below outlines high-level diversity metrics.
1 Senior leadership is classified as those at band 3 and above in our global career band structure.
> For further details of how we look after our people, including our diversity targets, transformation employee metrics and how we encourage our employees to speak up,
see the Employees section of the ESG review on page 74.
Social matters
We have a responsibility to invest in the long-term prosperity of the communities where we operate. We aim to provide people with the skills and
knowledge needed to thrive in the post-pandemic environment, and through the transition to a sustainable future. For this reason, we focus our
support on programmes that help develop employability and financial capability. We also support climate solutions and innovation, and contribute to
disaster relief when needed. For further details of our programmes, see the ‘Communities’ section of the ESG review on page 83.
Human rights
Our commitment to respecting human rights, principally as they apply to our employees, our suppliers and through our financial services lending and
investment, is set out in our Statement on Human Rights. This statement, along with our statements under the UK’s Modern Slavery Act, is available
on www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre. For further details, see the ‘Human rights’ section of the ESG
review on page 87.
Anti-corruption and anti-bribery
We require compliance with all applicable anti-bribery and corruption laws in all markets and jurisdictions in which we operate. We set a high
standard globally in our global anti-bribery and corruption policy, which also focuses on the spirit of relevant laws and regulations to help demonstrate
our commitment to ethical behaviours and conduct as part of our environmental, social and corporate governance.
Environmental matters
For details of our climate ambition and carbon emission metrics, see the ESG review on page 46.

Non-financial information statement This section primarily covers our non-financial information as required by the regulations. Other related information can be found as follows: > For further details of our key performance indicators, see page 1. > For further details of our business model, see page 4. > For further details of our principal risks and how they are managed, see pages 38 to 41.

Equipping our colleagues with sustainability skills
We are developing a range of sustainability-related resources and initiatives to help equip our colleagues with the skills to be able to support our net
zero ambition. We expanded mandatory training that educates all colleagues on our approach to sustainability. In October, we launched the
Sustainability Academy to equip specific colleagues with key skills to improve their understanding of topics ranging from climate change to
biodiversity. We launched an ESG-themed recognition campaign through the ‘At Our Best’ platform that encouraged colleagues to recognise each
other’s ESG contributions. The campaign was well supported with nearly 200,000 unique recognitions made, an increase of 50% on the previous
year’s Spotlight campaign.
> For further details on the Sustainability Academy, see page 82.

19 | HSBC Holdings plc Annual Report and Accounts 2022

Board decision making and
engagement with stakeholders
The Board is committed to effective engagement with all our stakeholders and seeks to
understand their interests and the impacts on them when making decisions.
Section 172 (1) statement
This section, from pages 20 to 23 forms our section 172(1) statement. It describes how the Directors have performed their duty to promote the
success of the company, 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 Board understands its fundamental role in formulating and overseeing the Group’s strategy to achieve long-term success and fulfil its purpose of
opening up a world of opportunity. Every scheduled Board meeting features the Group’s strategy as an item of discussion. When taking principal
decisions, the Directors remain mindful that the matter for consideration should be aligned to one of the four strategic pillars. For further details of
our purpose, values and strategy, see pages 4 and 11 to 13.
The Board, together with senior management, have given high priority to the format and content of papers presented to the Board and its
committees for their consideration. The Group Chief Executive and the Group Chairman promote best governance practice by requiring that materials
contain appropriate information to allow Directors to take informed decisions in keeping with their duties. The Corporate Governance and Secretariat
team supports the provision of relevant information by providing governance guidance and direction regarding the key areas for consideration in
relation to section 172 factors in order to help the Directors to understand the likely consequences of their decisions long term.
The Group Chief Executive’s regular report to the Board provides insights into key stakeholder sentiments by highlighting the interactions he has held
with customers, regulators, employees and other stakeholders, and the importance of – and learnings from – these engagements. This informs the
Board as to how the Group fosters its relationships with stakeholders and how the Group’s business affects the environment and the communities it
serves. Directors also participate in a variety of stakeholder engagement events, which support their understanding of key issues and challenges,
which can then be factored into future decision making.
The Board recognises that to promote the Group’s success, the right culture must exist throughout the organisation, be clearly understood and be
consistently applied. This is supported by HSBC’s values, which help us succeed together by connecting, collaborating and acting with a shared
purpose. Each Board meeting begins with a ‘cultural moment’, which includes observations of behaviours within the Group aligned to our purpose
and values. The Board and its committees also receive updates on conduct issues and any consequences for stakeholders at its meetings, in
particular from the Group Chief Risk and Compliance Officer and Group Human Resources Officer. The Group’s refreshed conduct approach,
approved in 2021, also helps to support the consistent application of conduct principles across the organisation, acknowledging the importance of
maintaining a good reputation for high standards of business conduct. For further details on the Board’s oversight of culture, see the ‘Corporate
governance report’ on page 255.
Stakeholder engagement and key considerations for the Board
The Board continued to focus on its engagement with our key stakeholders, acknowledging that this engagement is core to being a responsible
business and furthers the fulfilment of our strategy. In discharging their responsibilities, the Directors sought to understand, and have regard to, the
interests and priorities of the Group’s key stakeholders, including in relation to material decisions that were taken by the Board during the course of
the year.
Virtual and physical meetings
During 2022, the Board was able to resume its active engagement with stakeholders in person following two years of Covid-19-related restrictions.
The Board met physically in several international locations, where it was able to carry out engagements with a wide range of stakeholders. For
further details of how we engaged with our stakeholders, see pages 21 and 253.
We hosted our second hybrid AGM and engaged directly with our investors leading up to and during the event. The Informal Shareholders’ Meeting
in Hong Kong also resumed for the first time since 2019 and attracted hundreds of shareholders to attend in person to receive an update on the
Group’s strategy and discuss the latest financial performance with the Group Chairman, the Group Chief Executive and the Group Chief Financial
Officer. We are focused on treating our shareholders fairly, by having a consistent approach to engagement and communication with them, and this
approach is demonstrated by our refreshed shareholder communication policy. Such a policy helps to support the Board to act fairly between
members of the company.
Doing business responsibly
Maintaining a transparent and trusting relationship with our regulators remains key to helping us ensure that we do business responsibly and that we
are able to respond to challenges appropriately. In addition to continuous assessment meetings with the UK regulator (including with Board
committee chairs), the Group Chairman, the Group Chief Executive and the Group Chief Financial Officer met with our regulators in the UK and Hong
Kong on a regular basis. These included meetings in connection with our recovery and resolution planning, which involved several Board members
engaging directly with the UK regulator. The Group Chairman and the Group Chief Executive also met regularly with government officials globally to
continue to foster strong international relations. In addition, certain Board members also continued to be actively involved in climate initiatives and
attend global events such as the Group Chief Executive’s attendance at the COP27 Summit in Egypt.
During Board meetings, the Directors continued to balance discussions on the Group’s performance, emerging risks and duties to shareholders,
while remaining conscious of responsibilities to support communities and help customers. Feedback from – and engagement with – stakeholders
helps inform the Board on the execution of its responsibilities.
On pages 22 and 23, we set out four examples that demonstrate how the Board made certain decisions while considering stakeholders, in
accordance with the Directors’ section 172 duties, and how the decisions support or accelerate the delivery of the Group’s strategy.

HSBC Holdings plc Annual Report and Accounts 2022 | 20

Stakeholder engagement key events in 2022

Stakeholders | Engagement | Impact
Customers We recognise that the greater our understanding of our customers’ needs, the better we can help support them to achieve their financial aims and succeed in our purpose and strategy. | –Engagement events with customers ranging from small businesses to multinational companies, in key markets. –Meetings with business customers in key industries to discuss plans regarding the transition to net zero. –Board reporting on retail customer surveys including net promoter scores and millennial retail customers’ satisfaction. | –By formally and informally engaging with customers and potential customers, the Board can form a deeper understanding of why clients do business with us and how they contribute to achieving our purpose and ambition. –Meetings with clients help the Board to understand how the Group can work to achieve its commitment to transition to net zero. –Customer surveys provide insights into how our customers perceive our services and inform how we can drive meaningful improvements.
Employees We want to continue to be a positive place to work and build careers, with the success of the Group’s strategy dependent upon having motivated people with the expertise and skills required to deliver it. | –Employee events, including leadership forums, webcasts, townhalls, global jams, off-sites and employee Exchanges. –Extensive interaction with employee resource groups across multiple events in many jurisdictions. –Several dedicated talent sessions, including with women and other diverse talent pools. –Next Gen gatherings for graduates, including dedicated focus group interactive sessions. | –Meeting with colleagues across jurisdictions allowed the Board to hear directly the employee voice on important issues. –These interactions helped inform the Board when it considers people matters such as career development, policies and business operations, including technology needs. Engagement also helps the Board to contextualise employee Snapshot survey results. –The appointment of a dedicated workforce engagement non-executive Director has created a different way for the employee voice to be heard and demonstrates the Board’s commitment to understanding what matters to our people.
Investors We seek to understand investor needs and sentiment through ongoing dialogue and a variety of engagements with both retail and institutional investors. | –Numerous meetings with analysts and several roadshows to discuss interim and year-end results. –Remuneration Committee Chair investor meetings with top investors and proxy advisers. –Annual retail investor events such as the AGM in the UK and the Informal Shareholders’ Meeting in Hong Kong. | –Regular and ad hoc interactions with institutional and retail investors allow for updates on strategy delivery, including the transition to net zero. This in turn helps the Board understand investor sentiment on material matters throughout the year. –Such engagements also serve to inform investors of key developments so that they are well informed and able to respond appropriately when significant events are communicated.
Communities We seek to play an important role in supporting the communities in which we operate through our corporate social responsibility and broader engagement activities. | –Forums and summits supporting ESG causes, such as the Glasgow Financial Alliance for Net Zero, the Financial Services Task Force of the Sustainable Markets Initiative and the World Economic Forum. –Visits to local community education facilities in the UK and Dubai to promote initiatives and collaboration, including a ‘future coders’ event and a local sustainability project. | –The Directors’ participation at a range of community initiatives helps them to experience first-hand the positive effect the Group has on local communities as an employer, sponsor, collaborator and supporter. –The Board recognises that the Group can influence meaningful change in many ways, including by educating, encouraging broader thinking, helping to shape policy and formulating worldwide solutions, creating safe environments and achieving net zero ambitions.

Regulators and governments Maintaining constructive dialogue and relations with the relevant authorities in the markets in which we operate helps support the effective functioning of economies globally and the achievement of our strategic aims. | –Various meetings across our key markets with governmental officials, including leaders, ministers and ambassadors. –Regular meetings with our many regulators, including in the UK and Hong Kong, and elsewhere. –Meetings with non-government bodies and organisations including the European Central Bank, Bank of England, Monetary Authority of Singapore, State Bank of India, Public Investment Fund and the Bank for International Settlements. | –Frequent and varied engagement between the Board and government officials and regulators provides an opportunity for an open, two-way communication. It is also critical in ensuring that the Board understands and meets its regulatory obligations. –Meeting with international officials allows the Board to communicate the Group’s strategy, perspectives and insights while ensuring that Directors remain abreast of political and regulatory trends. It also allows the Board to share perspectives on standards of best practice across industries and regions.
Suppliers We engage with suppliers, which helps us operate our business effectively and execute our strategy. | –Regular reports and updates from the Group Chief Operating Officer on supplier matters. –Meetings with existing and prospective auditors as part of the audit tender process. –A meeting with customers (who are also our suppliers) in the Middle East. –Interactive sessions with catering and real estate suppliers including on their net zero plans. | –Meeting with our suppliers helps Directors understand our suppliers’ challenges and how we can work collaboratively to succeed, particularly in achieving our net zero ambitions. –It is key for the Board to understand the Group’s supply chain and how suppliers’ operations are aligned to our purpose and values. –This supports the Board when approving its Modern Slavery Act Statement.

21 | HSBC Holdings plc Annual Report and Accounts 2022

Principal decisions
The Board operates having regard to the duties of the Directors, including the relevant matters set out in section 172(1)(a)-(f) of the Companies Act
2006. The following examples demonstrate how these Board decisions, taken in 2022, align to each of our four strategic pillars.
Focus on our strengths
Stakeholders: Regulators and Governments/Customers/Employees/Investors
The Board undertook a strategic review of the Group’s Canada business in support of
the Group’s strategic aims.
The Board, together with senior management, keep under review potential inorganic opportunities to help accelerate the delivery of our strategy and
deliver value for shareholders. In 2022, to further the Group’s strategy and ambition, and following a strategic review, the Board took the decision for
the Group to sell its Canadian business to Royal Bank of Canada.
The review considered HSBC Canada’s relatively low market share and whether it was in the Group’s best interests to invest in HSBC Canada’s
expansion and growth in the context of opportunities in other markets. It was concluded that the best course of strategic action was for the Group to
sell HSBC Canada. The Board’s decision to approve the sale was aligned to the Group’s strategic pillar of focus on our strengths.
The implications of the transaction for several key stakeholders were considered and many stakeholders were engaged with, including Canadian
government officials and regulators in both the UK and Canada. Financial and legal advisers were engaged throughout the process to provide
specialist advice to help inform the Board’s understanding and allow it to take a decision. Transaction terms were carefully negotiated to provide
certainty for the Group’s employees in Canada. The Board also acknowledged that completion of the transaction would require engagement with
additional key stakeholders, including employees, customers and suppliers.
The Board considered there to be a number of benefits to the disposal, including simplifying the Group structure and helping to further the aim of
becoming a market leader in wealth management, with a particular focus on Asia. In addition, the transaction would unlock significant value for the
Group and realise a good return for our shareholders.
For the reasons set out above, in taking this decision, the members of the Board exercised their statutory duties including the duty to act in the way
that they considered, in good faith, would be most likely to promote the long-term success of the company for the benefit of its members as a
whole.
Energise for growth
Stakeholders: Governments and Regulators/Customers/Employees/Suppliers
The Board approved a review of its headquarters’ office location in London to
support its employees in creating a more dynamic and agile environment in which to
work.
Our strategic pillar, energise for growth, includes a commitment to inspire a dynamic culture where the best talent want to work. Throughout the
Covid-19 pandemic, we saw how we could continue to deliver our work commitments through a hybrid working model and the value that hybrid
working brings for our clients and colleagues. Our workstyle approach is helping us to attract and retain diverse talent, while enabling us to reduce
our office footprint.
We want our head office to connect people, drive collaboration, foster alternative workstyles and promote well-being. With this in mind, in
September 2022, the Board considered a proposal to review the location of our global headquarters. While we are committed to remain in London,
the success of hybrid working has meant our workspace requirements are changing, creating the opportunity to drive a new real estate model fit for
a modern bank.
The views from several stakeholders helped to shape this key decision. Employee surveys provided evidence to support hybrid working, which
informed the decision to review the global headquarters location. The Board recognised the importance of taking this decision early enough to
provide sufficient notice to relevant suppliers, including the affected landlords, to best prepare for any changes. Our UK regulators were also engaged
with in good time to ensure that they were informed of our intentions to stay in London.
An important Board consideration factored into the new office environment review included that it should be more digitally enabled, so as to help us
work smarter and develop future-ready skills. The Board also acknowledged that the new office environment should be designed in a sustainable
way to help meet our net zero commitments. In taking this decision, the Board focused on its strategic aspiration to have a more flexible and
dynamic workspace that meets the needs of everyone. The Board took into account the section 172 factors along with the relevant stakeholder
engagement, which informed its decision to commence the review with a view to best promote the success of the company for the long term.

22 | HSBC Holdings plc Annual Report and Accounts 2022

Transition to net zero
Stakeholders: Investors/Governments and Regulators/Customers/Communities/Employees
The Board remained active and directly engaged on the Group’s response to the
climate change agenda, agreeing an updated energy policy aligned to our ambition to
support the transition to a net zero global economy.
The Board has remained focused on its commitments, following the climate change resolution passed at the 2021 AGM, to support our customers
on their transitions to a low-carbon future.
In 2022, the Board approved an update to the thermal coal phase-out policy. It also approved the publication of an updated energy policy, which was
considered well aligned to our strategic approach to transition to net zero. The energy policy seeks to balance three objectives: driving down global
greenhouse gas emissions; the need to enable an orderly transition that builds resilience in the longer term; and the need to support a just and
affordable transition. In developing this policy, the Board was informed of the engagement undertaken with several internal and external stakeholders
including: governments, major clients, large institutional investors and leading scientific and international bodies and industry participants. The Board
took into consideration the active role we are seeking to play in supporting and accelerating the energy transition in the markets we serve and the
crucial importance of engaging with our customers on their own transition plans. The Board also considered the long-term impacts of the policy on its
stakeholders including the need to balance the responsibility of facilitating a just transition, helping to ensure continued access to affordable energy
sources in the markets we serve, and supporting an accelerated transition.
Since publication of the energy policy, stakeholder engagement has continued, including with key institutional investors to discuss the policy, its
impacts and alignment with our ambition to help finance our clients’ transition to net zero. Extensive engagement also continues to take place among
employees and with clients as we begin the implementation of the policy.
In taking the decision to approve the energy policy and in overseeing the Group’s climate commitments, the Board gave due regard to the section
172 factors, in particular the impact of the decision on the environment and communities the company serves, our continuing valuable relationships
with customers and investors, and the long-term success of the company.
Digitise at scale
Stakeholders: Icons: Employees/Customers/ Investors
The Group is committed to creating and delivering on fast, easy, digital customer
experiences.
The Group’s digital strategy aims to ensure that ways of working for colleagues, as well as the experience of our customers, are technologically
advanced and efficient. Digitise at scale means we are focused on creating and delivering fast, easy, digital customer experiences by partnering with
technology innovators and working together to enable new customer benefits. The Board’s oversight of our digital strategies and policies is important
given that these are critical in helping to ensure the Group’s resiliency and customer security.
The Group Chief Executive regularly reports to the Board on his engagements with – and feedback from – customers on the Group’s digital strategy
progress. The Board has engaged with many customers over the past year, and is focused on ensuring that our customers’ experiences meet their
expectations. Customer survey insights throughout 2022 have been used to deepen understanding of the digital landscape challenges customers
face, and to help drive solutions. Consequently, the Group has led several key digital customer deliveries in 2022, with approximately 49% of
customers being mobile active and around 48% of retail sales being performed through digital channels. Delivery of these new initiatives improved
customer experiences across our global markets in 2022, and supported the Group’s efforts to execute at speed and automate at scale – a
cornerstone of our strategy.
The Board also receives updates from the Group Chief Operating Officer on the various ways the Group is furthering its digital strategy. Vision 27,
which is our long-term technology strategy, featured regularly on the Board agenda and was launched at the beginning of 2022. Its aim is to help
transform HSBC into a digital-first bank over the next five years. One of the Vision 27 initiatives is the development of a digital technology map,
which is a bespoke tool developed to capture all of the Group’s applications and systems and provide insight and data points on these including
usage by businesses, regions and entities. The Board and the Technology Governance Working Group have also challenged management on the
prioritisation of digital initiatives, as well as the demise of legacy and non-strategic applications, as part of efforts to streamline the large and complex
technology architecture. This is a key focus in helping to improve the resiliency and efficiency of our systems for colleagues and customers.
In taking these decisions, whether by the Board directly, or the business through its delegated authority, the digital needs of customers and
employees are taken into account in order to promote the long-term success of the company and become a truly data-led organisation.

23 | HSBC Holdings plc Annual Report and Accounts 2022

Remuneration
Our remuneration policy supports the achievement of our strategic objectives by aligning reward
with our long-term sustainable performance.
Our remuneration approach
We have refreshed our reward strategy and proposition for the workforce in response to the new or elevated challenges we are facing as we move
beyond the Covid-19 pandemic, including the cost of living pressures many of our colleagues are experiencing. The commitments we make to
colleagues are critical to support us in energising for growth and delivering sustainable performance.
> For further details of what we did during 2022 to help ensure remuneration outcomes were consistent with this approach, see page 292.
Remuneration for our executive Directors
Our current remuneration policy for executive Directors was approved by 96% of our shareholders at our AGM in 2022 and will apply for a maximum
of three years until the AGM in 2025. We made no changes to the remuneration structure or to the maximum opportunity payable for each element
of remuneration. Details of the policy can be found on pages 257 to 265 of our previous Annual Report and Accounts 2021.
The table below shows the amount our executive Directors earned in 2022. For details of Directors’ pay and performance for 2022, see the Directors’
remuneration report on page 282.

Single figure of remuneration
| Noel Quinn | Ewen Stevenson
(£000) | 2022 | 2021 | 2022 | 2021
Base salary | 1,329 | 1,288 | 775 | 751
Fixed pay allowance | 1,700 | 1,700 | 1,085 | 1,062
Cash in lieu of pension | 133 | 129 | 77 | 75
Taxable benefits | 119 | 95 | 7 | 3
Non-taxable benefits | 86 | 71 | 50 | 42
Total fixed | 3,367 | 3,283 | 1,994 | 1,933
Annual incentive | 2,164 | 1,590 | 1,091 | 978
Notional returns | 31 | 22 | — | —
Replacement award | — | — | 1,180 | 754
Long-term incentive | — | — | 436 | —
Total variable | 2,195 | 1,612 | 2,707 | 1,732
Total fixed and variable | 5,562 | 4,895 | 4,701 | 3,665

Notes and commentary related to this table are provided in the Directors’ remuneration report on page 284.

24 | HSBC Holdings plc Annual Report and Accounts 2022

Remuneration for our executive Directors continued
Variable pay for our executive Directors is driven primarily by achievement against performance scorecards, with measures and targets set by the
Group Remuneration Committee at the start of the year to align pay outcomes with the delivery of our strategy and plan. After the formulaic
scorecard outcome was determined, the Group Remuneration Committee applied a downward adjustment of 5% and 15% to Noel Quinn’s and
Ewen Stevenson’s 2022 annual incentive outcomes, respectively, to take into account specific risk matters around capital management in the year.
Further details are provided in the Directors’ remuneration report.
Executive Directors’ annual incentive scorecard outcome
(% of maximum opportunity)

Group Chief Executive | 75.35%
Group Chief Financial Officer | 65.15%

Remuneration for our colleagues
Variable pay pool
($m)
The Group Remuneration Committee determined an overall variable pay pool for Group employees of $3,359m (2021: $3,495m). This followed a
review of our performance against financial and non-financial metrics set out in the Group risk framework. The Group Remuneration Committee
considered our 2022 financial performance, with a 17% increase in adjusted profit before tax, return on average tangible equity of 9.9% and costs
slightly up year on year. The Group Remuneration Committee also considered the external environment, the challenging economic outlook and
projected outcomes across the market to ensure we remain competitive to attract and retain talent.
The distribution of the pool was differentiated by business performance. Overall year-on-year variable pay outcomes were strongest in CMB,
followed by WPB but down in GBM to reflect relative performance. There was robust differentiation for individual performance so that our highest
performers received meaningful variable pay increases compared with the previous year. We have protected variable pay for junior colleagues, which
is up on average, recognising the inflationary and cost of living challenges experienced across most of our markets.
In determining 2023 fixed pay increases, we considered the impact of inflation in each country where we operate. Increases were targeted towards
more junior and middle management colleagues as fixed pay is a larger proportion of their overall pay. Across the Group, there was an overall
increase of 5.5% in fixed pay, compared with 3.6% for 2022. The level of increases varies by country, depending on the economic situation and
individual roles. There were no fixed pay increases for most of our senior leaders, including our executive Directors.
For details of how the Group Remuneration Committee sets the pool, see page 276.
Supporting our colleagues during 2022
We know that many colleagues around the world are facing different pressures, and we are committed to supporting them, adapting our approach
according to the market.
For colleagues who are still significantly impacted by the pandemic, for example in mainland China and Hong Kong, we provided care packages and
increased well-being sessions. In mainland China, we also delivered food essentials and provided inconvenience allowances. Separately, in Argentina
and Türkiye, we made regular adjustments to fixed pay given the continuing inflationary pressures. In Sri Lanka, we made one-off payments and
fixed pay increases during the year to address high inflation. In the UK, we provided almost 17,000 junior colleagues with a one-off payment of
£1,500 to help with energy cost pressures.
We have continued to provide a wide range of resources to all our colleagues globally, including wider support on financial guidance, employee
assistance programmes and access to hardship funds.
> For further details of how we are supporting colleague well-being, see page 80.

HSBC Holdings plc Annual Report and Accounts 2022 | 25

Financial overview
In assessing the Group’s financial performance, management uses a range of financial measures
that focus on the delivery of sustainable returns for our shareholders and maintaining our financial
strength.
Executive summary
Financial performance in 2022 was supported by a rise in global interest rates, which materially improved our net interest income, and we maintained
our strong focus on cost discipline, despite inflationary pressures and continued investment. While our revenue outlook remains positive, there are
continued risks around inflation and increasing macroeconomic uncertainty in many of the markets in which we operate.
Reported profit after tax for 2022 of $16.7bn was 13% higher, which included an effective tax rate charge of 4.9% due to the benefit of credits
related to the recognition of deferred tax assets. Our return on average tangible equity (‘RoTE’) improved by 1.6 percentage points to 9.9%. Reported
profit before tax of $17.5bn decreased by 7%, which included an impairment of $2.4bn following the reclassification of our retail banking operations
in France to held for sale, as well as a more normalised charge for expected credit losses (‘ECL’), compared with a net release in 2021. These
reductions were mitigated by the favourable impact of higher interest rates on reported revenue and a reduction in reported operating expenses,
primarily due to the favourable impact of foreign currency translation differences.
The Group CET1 capital ratio fell 1.6 percentage points to 14.2% at 31 December 2022. In addition, customer deposit and lending balances both fell
compared with 31 December 2021, reflecting the reclassification to held for sale of balances, notably from our retail banking operations in France and
our banking business in Canada, as well as from the adverse impact of foreign currency translation differences. Notwithstanding these impacts, there
was mortgage growth in the UK and Hong Kong, which mitigated a reduction in term lending in CMB in Hong Kong.
Group financial targets
Return on average tangible equity <>
9.9%
(2021: 8.3%)
In 2022, RoTE was 9.9%, an increase of 1.6 percentage points from 2021.
Despite increasing macroeconomic uncertainty, the impact of our growth and transformation programmes, together with the positive revenue
outlook, give us confidence in achieving our RoTE target of at least 12% for 2023 onwards.
Adjusted operating expenses <>
$30.5bn
(2021: $30.1bn)
During 2022, we continued to demonstrate strong cost discipline, despite inflationary pressures. We achieved 1% growth in adjusted operating
expenses compared with 2021, relative to our target of broadly stable adjusted operating expenses.
Our cost to achieve programme concluded on 31 December 2022. Cumulatively, since the start of the programme in 2020, we have realised gross
savings of $5.6 bn, with cost to achieve spend of $6.5 bn. We expect approximately $1bn of additional gross cost saves from this programme in 2023,
due to actions taken in 2022.
We retain our focus on cost discipline and will target 2023 adjusted cost growth of approximately 3% on an IFRS 4 basis. This includes up to $300m
of additional severance costs in 2023, which we expect to generate further efficiencies into 2024. There may also be an incremental adverse impact
from retranslating the 2022 results of hyperinflationary economies at constant currency.
Gross risk-weighted asset reductions
$128bn
Since the start of the programme.
At 31 December 2022, the Group had delivered cumulative gross RWA reductions of $128bn, relative to our target to achieve gross RWA reductions
of $110bn or more by the end of 2022. This included accelerated saves of $9.6bn made in 2019. This programme concluded on 31 December 2022.
Capital and dividend policy
CET1 ratio
14.2%
Dividend payout ratio
44%
At 31 December 2022, our common equity tier 1 (‘CET1’) capital ratio was 14.2%, down 1.6 percentage points from 31 December 2021. Having
fallen below 14% during 2022, we are back within our medium-term CET1 target range of 14% to 14.5%. We intend to continue to manage capital
efficiently, returning excess capital to shareholders where appropriate.
The Board has approved a second interim dividend for 2022 of $0.23 per ordinary share. The total dividend per share in 2022 of $0.32 results in a
dividend payout ratio of 44%, relative to our 2022 target range of between 40% and 55% from 2022 onwards. In determining our dividend payout
ratio for 2022, the impairment on the planned sale of our retail banking operations in France, the $1.8bn impact from the recognition of a deferred tax
asset for the UK tax group and HSBC Canada’s financial results from the 30 June 2022 net asset reference date are excluded from the reported
earnings per share.
We are establishing a dividend payout ratio of 50% for 2023 and 2024, excluding material significant items (including the planned sale of our retail
banking operations in France and the planned sale of our banking business in Canada), with consideration of buy-backs brought forward to our first
quarter results in May 2023, subject to appropriate capital levels. We also intend to revert to paying quarterly dividends from the first quarter of 2023.
Subject to the completion of the sale of our banking business in Canada, the Board’s intention is to consider the payment of a special dividend of
$0.21 per share as a priority use of the proceeds generated by completion of the transaction. A decision in relation to any potential dividend would be
made following the completion of the transaction, currently expected in late 2023, with payment following in early 2024. Further details in relation to
record date and other relevant information will be published at that time. Any remaining additional surplus capital is expected to be allocated towards
opportunities for organic growth and investment alongside potential share buy-backs, which would be in addition to any existing share buy-back
programme.

26 | HSBC Holdings plc Annual Report and Accounts 2022

Key financial metrics

| For the year ended
Reported results | 2022 | 2021 | 2020
Reported profit before tax ($m) | 17,528 | 18,906 | 8,777
Reported profit after tax ($m) | 16,670 | 14,693 | 6,099
Cost efficiency ratio (%) | 64.4 | 69.9 | 68.3
Net interest margin (%) | 1.48 | 1.20 | 1.32
Basic earnings per share ($) | 0.75 | 0.62 | 0.19
Diluted earnings per share ($) | 0.74 | 0.62 | 0.19
Dividend per ordinary share (in respect of the period) ($) | 0.32 | 0.25 | 0.15
Dividend payout ratio (%)1 | 44 | 40 | 79
Alternative performance measures <> |  |  |
Adjusted profit before tax ($m) | 24,010 | 20,603 | 11,695
Adjusted cost efficiency ratio (%) | 55.0 | 64.0 | 62.3
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers (%) | 0.36 | (0.08) | 0.87
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers, including held for sale (%)2 | 0.35 | (0.08) | 0.87
Return on average ordinary shareholders’ equity (%) | 8.7 | 7.1 | 2.3
Return on average tangible equity (%) | 9.9 | 8.3 | 3.1
| At 31 December
Balance sheet | 2022 | 2021 | 2020
Total assets ($m) | 2,966,530 | 2,957,939 | 2,984,164
Net loans and advances to customers ($m) | 924,854 | 1,045,814 | 1,037,987
Customer accounts ($m) | 1,570,303 | 1,710,574 | 1,642,780
Average interest-earning assets ($m) | 2,203,639 | 2,209,513 | 2,092,900
Loans and advances to customers as % of customer accounts (%) | 58.9 | 61.1 | 63.2
Total shareholders’ equity ($m) | 187,484 | 198,250 | 196,443
Tangible ordinary shareholders’ equity ($m) | 149,355 | 158,193 | 156,423
Net asset value per ordinary share at period end ($) | 8.50 | 8.76 | 8.62
Tangible net asset value per ordinary share at period end ($) | 7.57 | 7.88 | 7.75
Capital, leverage and liquidity |  |  |
Common equity tier 1 capital ratio (%)3 | 14.2 | 15.8 | 15.9
Risk-weighted assets ($m)3,4 | 839,720 | 838,263 | 857,520
Total capital ratio (%)3,4 | 19.3 | 21.2 | 21.5
Leverage ratio (%)3,4 | 5.8 | 5.2 | 5.5
High-quality liquid assets (liquidity value) ($bn)4,5 | 647 | 688 | 678
Liquidity coverage ratio (%)4,5 | 132 | 139 | 139
Net stable funding ratio (%)4,5 | 136 | N/A | N/A
Share count |  |  |
Period end basic number of $0.50 ordinary shares outstanding (millions) | 19,739 | 20,073 | 20,184
Period end basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions) | 19,876 | 20,189 | 20,272
Average basic number of $0.50 ordinary shares outstanding (millions) | 19,849 | 20,197 | 20,169

For reconciliations of our reported results to an adjusted basis, including lists of significant items, see page 109. Definitions and calculations of other alternative
performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 128.
1 Dividend per share, in respect of the period, as a percentage of earnings per share adjusted for certain items (recognition of certain deferred tax assets: $0.11 reduction
in EPS; planned sales of the retail banking operations in France and banking business in Canada: $0.09 increase in EPS). No items were adjusted in 2021 or 2020.
2 Includes average gross loans and advances to customers reported within ‘assets held for sale’.
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 208. Leverage ratios are reported
based on the disclosure rules in force at that time, and include claims on central banks. Current period leverage metrics exclude central bank claims in accordance with the
UK leverage rules that were implemented on 1 January 2022. References to EU regulations and directives (including technical standards) should, as applicable, be read as
references to the UK’s version of such regulation or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018, and as may be subsequently
amended under UK law.
4 Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those subsequently submitted
in regulatory filings. Where differences are significant, we will restate in subsequent periods.
5 The liquidity coverage ratio is based on the average value of the preceding 12 months. The net stable funding ratio is based on the average value of four preceding
quarters. The LCR in December 2021 has been restated for consistency. We have not restated the prior periods for NSFR as no comparatives are available.

HSBC Holdings plc Annual Report and Accounts 2022 | 27

Reported results
Reported profit
Reported profit after tax of $16.7bn was $2.0bn or 13% higher than in 2021, and included a $2.2bn credit arising from the recognition of a deferred
tax asset from historical tax losses in HSBC Holdings. It also benefited from other deferred tax asset and uncertain tax position reassessments,
resulting in an effective tax rate of 5%.
Reported profit before tax of $17.5bn was $1.4bn or 7% lower than in 2021. The decrease reflected a net ECL charge of $3.6bn in 2022, which
included stage 3 charges of $2.2bn, in part relating to the commercial real estate sector in mainland China, as well as from the impact of heightened
economic uncertainty, inflation and rising interest rates. This compared with a net release of $0.9bn in 2021. This adverse movement in reported ECL
was partly offset by higher reported revenue and lower reported operating expenses.
The increase in reported revenue primarily reflected higher net interest income from the positive impact of interest rate rises on all of our global
businesses. This was partly offset by an impairment of $2.4bn recognised following the reclassification of our retail banking operations in France as
held for sale on 30 September 2022, an adverse impact of foreign currency translation differences and unfavourable market impacts in life insurance
manufacturing in WPB. Lower reported operating expenses primarily reflected the favourable impact of foreign currency translation differences,
while restructuring and other related costs increased.
Effective 1 January 2023, IFRS 17 ‘Insurance Contracts’ sets the requirements that an entity should apply in accounting for insurance contracts it
issues and reinsurance contracts it holds. IFRS 17 replaces IFRS 4 and could have a significant adverse impact on the profitability of our insurance
business on transition. For further details of the impact of IFRS 17 on the results of our insurance operations, see page 335.
Reported revenue
Reported revenue of $51.7bn was $2.2bn or 4% higher than in 2021, primarily due to an increase in net interest income from the positive impact of
interest rate rises, mainly in Global Payments Solutions (‘GPS’) in CMB and GBM, and in Personal Banking in WPB. In GBM, Global Foreign Exchange
revenue benefited from increased client activity due to elevated levels of market volatility. In addition, there were strong sales in our life insurance
manufacturing business in WPB, with growth in the value of new business, while insurance revenue also included a gain following a pricing update
for our policyholders‘ funds held on deposit with us in Hong Kong to reflect the cost to provide this service.
These increases were partly offset by an impairment of $2.4bn recognised following the reclassification of our retail banking operations in France as
held for sale on 30 September 2022, as well as losses of $0.4bn associated with the planned sales of our branch operations in Greece and our
business in Russia. Reported revenue included an adverse impact of foreign currency translation differences of $3.1bn, and unfavourable market
impacts in life insurance manufacturing in WPB of $1.0bn, compared with favourable movements in 2021 of $504m. There was also a decrease in
Markets Treasury revenue, which is allocated to our global businesses, due to lower net interest income from the impact of rising interest rates on
our funding costs and flattening yield curves across all regions, as well as from lower disposal gains related to risk management activities.
Lower net fee income reflected a reduction in investment distribution income in WPB due to muted customer sentiment resulting in reduced activity
in equity markets, and Covid-19-related restrictions in Hong Kong in early 2022, which resulted in the temporary closure of parts of our branch
network. Since then, restrictions have substantially been eased. Additionally i n GBM, there were lower fees in Capital Markets and Advisory, in line
with the reduced global fee pool. In Principal Investments, lower revaluation gains resulted in a reduction in revenue relative to 2021.
Reported ECL
Reported ECL were a net charge of $3.6bn, which included stage 3 charges of $2.2bn, in part relating to the commercial real estate sector in
mainland China. We also recognised additional stage 1 and stage 2 allowances to reflect heightened levels of economic uncertainty, inflation, supply
chain risks and rising interest rates, in part offset by the release of most of our remaining Covid-19-related allowances. This compared with a net
release of $0.9bn in 2021 relating to Covid-19-related allowances previously built up in 2020.
> For further details of the calculation of ECL, see pages 153 to 162.
Reported operating expenses
Reported operating expenses of $33.3bn were $1.3bn or 4% lower than in 2021, primarily as foreign currency translation differences resulted in a
favourable impact of $2.2bn, as well as from the non-recurrence of a 2021 goodwill impairment of $0.6bn related to our WPB business in Latin
America.
Reported operating expenses also reflected the impact of ongoing cost discipline across the Group. This helped mitigate the cost of increased
investment in technology of $0.5bn, which included investments in our digital capabilities, as well as the impact of business volume growth and
inflation. Restructuring and other related costs increased by $1.0bn.

Reported results | 2022 $m | 2021 $m | 2020 $m
Net operating income before change in expected credit losses and other credit impairment charges (‘revenue’) | 51,727 | 49,552 | 50,429
Change in expected credit losses and other credit impairment charges | (3,592) | 928 | (8,817)
Net operating income | 48,135 | 50,480 | 41,612
Total operating expenses | (33,330) | (34,620) | (34,432)
Operating profit | 14,805 | 15,860 | 7,180
Share of profit in associates and joint ventures | 2,723 | 3,046 | 1,597
Profit before tax | 17,528 | 18,906 | 8,777
Tax expense | (858) | (4,213) | (2,678)
Profit after tax | 16,670 | 14,693 | 6,099

Reported share of profit from associates and joint ventures
Reported share of profit from associates and joint ventures of $2.7bn was $0.3bn or 11% lower than in 2021, primarily as 2021 included a higher
share of profit from Business Growth Fund (‘BGF’) due to the recovery in asset valuations. This was partly offset by an increase in the share of profit
from The Saudi British Bank (‘SABB’).
Tax expense
Tax in 2022 was a charge of $0.9bn and included a $2.2bn credit arising from the recognition of a deferred tax asset from historical tax losses in
HSBC Holdings. This was a result of improved profit forecasts for the UK tax group, which accelerated the expected utilisation of these losses and
reduced uncertainty regarding their recoverability. We also benefited from other deferred tax asset and uncertain tax position reassessments during
2022. Excluding these, the effective tax rate for 2022 was 19.2%, which was 3.1 percentage points lower than in 2021. The effective tax rate for
2022 was decreased by the remeasurement of deferred tax balances following the substantive enactment in the first quarter of 2022 of legislation to
reduce the rate of the UK banking surcharge from 8% to 3% from 1 April 2023.

HSBC Holdings plc Annual Report and Accounts 2022 | 28

Adjusted performance
Our reported results are prepared in accordance with IFRSs, as detailed in the financial statements on page 335.
We also present alternative performance measures (non-GAAP financial measures). These include adjusted performance, which we use to align
internal and external reporting, identify and quantify items management believes to be significant, and provide insight into how management
assesses period-on-period performance. Alternative performance measures are highlighted with the following symbol:<>
To derive adjusted performance, we adjust for:
•the year-on-year effects of foreign currency translation differences; and
•the effect of significant items that distort year-on-year comparisons, which are excluded to improve understanding of the underlying trends in the
business.
The results of our global businesses are presented on an adjusted basis, which is consistent with how we manage and assess global business
performance.
> For reconciliations of our reported results to an adjusted basis, including lists of significant items, see page 109. Definitions and calculations of other alternative
performance measures are included in our ‘Reconciliation of alternative performance measures’ on page 128.

Adjusted results <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021 $m | %
Net operating income before change in expected credit losses and other credit impairment charges (‘revenue’) | 55,345 | 47,020 | 48,848 | 8,325 | 18
Change in expected credit losses and other credit impairment charges | (3,592) | 754 | (8,815) | (4,346) | >(200)
Total operating expenses | (30,466) | (30,104) | (30,445) | (362) | (1)
Operating profit | 21,287 | 17,670 | 9,588 | 3,617 | 20
Share of profit in associates and joint ventures | 2,723 | 2,933 | 2,107 | (210) | (7)
Profit before tax | 24,010 | 20,603 | 11,695 | 3,407 | 17
Tax | (4,287) | (4,241) | (3,274) | (46) | (1)
Profit after tax | 19,723 | 16,362 | 8,421 | 3,361 | 21

Adjusted profit before tax <>
Adjusted profit after tax of $19.7bn was $3.4bn or 21% higher than in 2021.
Adjusted profit before tax of $24.0bn was $3.4bn or 17% higher than in 2021, reflecting higher adjusted revenue, mainly from net interest income
growth following global interest rate rises. This increase was partly offset by an ECL charge in 2022, compared with a net release in 2021. The ECL
charge in 2022 reflected stage 3 charges, as well as the impact of heightened economic uncertainty, inflation, supply chain risks and rising interest
rates. Adjusted profit from associates and joint ventures decreased, while adjusted operating expenses increased by 1% compared with 2021,
reflecting investment in technology mitigated by continued cost discipline.
Reconciliation of reported profit before tax to adjusted profit after tax

| 2022 $m | 2021 $m | 2020 $m
Reported profit before tax | 17,528 | 18,906 | 8,777
Currency translation | — | (1,180) | (303)
Significant items: | 6,482 | 2,877 | 3,221
– customer redress programmes | (39) | 38 | (33)
– disposals, acquisitions and investment in new businesses | 2,817 | — | 10
– fair value movements on financial instruments | 579 | 242 | (264)
– impairment of goodwill and other intangibles | (4) | 587 | 1,090
– past service costs of guaranteed minimum pension benefits equalisation | — | — | 17
– restructuring and other related costs | 3,129 | 2,143 | 2,078
– settlements and provisions in connection with legal and regulatory matters | — | — | 12
– goodwill impairment (share of profit in associates and joint ventures) | — | — | 462
– currency translation on significant items | — | (133) | (151)
Adjusted profit before tax | 24,010 | 20,603 | 11,695
Adjusted tax charge 1 | (4,287) | (4,241) | (3,274)
Adjusted profit after tax | 19,723 | 16,362 | 8,421

1.For a reconciliation of reported to adjusted tax charge, see page 109.
Adjusted revenue <>
Adjusted revenue of $55.3bn was $8.3bn or 18% higher than in 2021. The increase was driven by net interest income growth of $7.7bn following
global interest rate rises, mainly in GPS in CMB and GBM, and Personal Banking in WPB. Global Foreign Exchange in GBM benefited from increased
client activity due to elevated levels of market volatility, and there were strong sales in our insurance business in WPB, with the value of new
business up by $0.2bn or 23%. In addition, insurance revenue included a $0.3bn gain following a pricing update for our policyholders‘ funds held on
deposit with us in Hong Kong to reflect the cost to provide this service.

29 | HSBC Holdings plc Annual Report and Accounts 2022

These increases in adjusted revenue were partly offset by a net unfavourable movement in market impacts in life insurance manufacturing in WPB of
$1.4bn. In addition, lower net fee income reflected a reduction in investment distribution income, as muted customer sentiment led to reduced
activity in equity markets, and Covid-19-related restrictions in Hong Kong in early 2022 resulted in the temporary closure of parts of our branch
network. Since then, restrictions have substantially been eased. In GBM, there were lower fees in Capital Markets and Advisory revenue, in line with
the reduced global fee pool. In Principal Investments, revenue fell due to lower revaluation gains relative to 2021.
Revenue relating to Markets Treasury decreased by $0.7 bn due to lower net interest income from the impact of rising interest rates on our funding
costs and flattening yield curves across all regions, as well as from lower disposal gains related to risk management activities. This revenue is
allocated to our global businesses.
Adjusted ECL <>
Adjusted ECL were a net charge of $3.6bn, which included stage 3 charges of $2.2bn, in part relating to the commercial real estate sector in
mainland China. The charge also included stage 1 and stage 2 allowances to reflect heightened economic uncertainty, inflation, supply chain risks and
rising interest rates, in part offset by the release of most of our remaining Covid-19-related allowances. The net ECL release of $0.8bn in 2021 related
to Covid-19 allowances previously built up in 2020.
Adjusted operating expenses <>
Adjusted operating expenses of $30.5bn were 1% higher compared with 2021, as we actively managed the impact of inflation on our cost base
through ongoing cost discipline. These reductions helped mitigate an increase from continued investment in technology of $0.5bn, which included
investments in our digital capabilities, as well as growth due to business volume-related cost growth and the impact of inflation. Adjusted operating
expenses also included the adverse impact of retranslating the prior year results of our operations in hyperinflationary economies at 2022 average
rates of foreign exchange.
The number of employees expressed in full-time equivalent staff (‘FTE’) at 31 December 2022 was 219,199, a decrease of 498 compared with 31
December 2021. The number of contractors at 31 December 2022 was 6,047, a decrease of 145.
Adjusted share of profit from associates and JVs <>
Adjusted share of profit from associates and joint ventures of $2.7bn was 7% lower than in 2021, primarily as 2021 included a higher share of profit
from BGF due to the recovery in asset valuations. This was partly offset by an increase in the share of profit from SABB.
Balance sheet and capital
Balance sheet strength
At 31 December 2022, our total assets of $3.0tn were broadly unchanged from 31 December 2021 on a reported basis, which included adverse
effects of foreign currency translation differences of $152bn. On a constant currency basis, total assets increased $161bn, primarily from a growth in
derivative asset balances.
Reported loans and advances to customers decreased by $121bn. On a constant currency basis, loans and advances fell by $66bn, primarily due to
the reclassification of $81bn of balances to held for sale, notably associated with our retail banking operations in France and our banking business in
Canada. While our near-term outlook on lending growth remains cautious, we expect mid-single-digit percentage annual loan growth in the medium
to long term.
Reported customer accounts of $1.6tn decreased by $140bn, and by $52bn on a constant currency basis, mainly due to the reclassification to held
for sale.
Reported loans and advances to customers as a percentage of customer accounts was 58.9%, which was lower compared with 61.1% at 31
December 2021.
Distributable reserves
The distributable reserves of HSBC Holdings at 31 December 2022 were $35.2bn, compared with $32.2bn at 31 December 2021. The increase was
primarily driven by profits generated of $12.4bn and a foreign exchange gain on the redemption of additional tier 1 securities of $0.4bn, offset by
ordinary dividend payments and additional tier 1 coupon distributions of $6.5bn, other reserves movements of $2.3bn and $1bn related to our share
buy-back programme.
Capital position
We actively manage the Group’s capital position to support our business strategy and meet our regulatory requirements at all times, including under
stress, while optimising our capital efficiency. To do this, we monitor our capital position using a number of measures. These include our capital
ratios and the impact on our capital ratios as a result of stress.
Our CET1 ratio at 31 December 2022 was 14.2%, down 1.6 percentage points from 2021. Capital generation was more than offset by new
regulatory requirements, a fall in the fair value through other comprehensive income (‘FVOCI’), dividends, share buy-backs and foreign exchange
movements. RWAs were relatively stable with growth broadly offset by foreign exchange movements.
Liquidity position
We actively manage the Group’s liquidity and funding to support our business strategy and meet regulatory requirements at all times, including under
stress. To do this, we monitor our position using a number of risk appetite measures, including the liquidity coverage ratio and the net stable funding
ratio. During 2022, the average high-quality liquid assets we held was $647 bn. This excludes high-quality liquid assets in legal entities which are not
transferable due to local restrictions.
> For further details, see page 205.
$2,967bn
14.2%

HSBC Holdings plc Annual Report and Accounts 2022 | 30

Wealth and Personal Banking
We serve around 38 million customers globally, including 6 million of whom are international, from
retail customers to ultra high net worth individuals and their families.
Contribution to Group adjusted profit before tax <>

% contribution to Group
36%

To meet our customers’ needs, we offer a full suite of products and services across transactional banking, lending and wealth.
WPB continued to invest in our key strategic priorities of expanding our Wealth franchise in Asia, developing our transactional banking and lending
capabilities, and addressing our customers’ international needs. Performance benefited from our product diversification in the context of rising
interest rates mitigating adverse movements in market impacts in insurance and lower customer activity in equity markets. The results included a
more normalised level of adjusted ECL charges in 2022, compared with releases in 2021.

Adjusted results <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Net operating income | 24,367 | 20,963 | 21,481 | 3,404 | 16
Change in expected credit losses and other credit impairment charges | (1,137) | 213 | (2,878) | (1,350) | >(200)
Operating expenses | (14,726) | (14,489) | (14,536) | (237) | (2)
Share of profit in associates and JVs | 29 | 34 | 6 | (5) | (15)
Profit before tax | 8,533 | 6,721 | 4,073 | 1,812 | 27
RoTE excluding significant items (%)1 | 18.5 | 15.2 | 9.1 |  |

1 Since 1 January 2021, the UK bank levy has been included in the calculation of this measure. Comparative data have not been re-presented.
Divisional highlights
$80bn
WPB net new invested assets in 2022, up 25% compared with 2021.
6 million
International customers at 31 December 2022, an increase of 7% compared with 2021.
> International customers are those who bank in more than one market, those whose address is different from the market we bank them in and customers whose
nationality, or country of birth for non-resident Indians and overseas Chinese, is different to the market we bank them in. Customers may be counted more than once
when banked in multiple countries. Customer numbers exclude those acquired through our purchase of L&T Investment Management.
$8.5bn
$24.4bn
Creating a seamless digital journey for our international customers
To deliver on our strategic focus on better serving and growing our 6 million international customers, we have enhanced our proposition for
customers with international needs.
In 2022, we launched digital international account opening in Singapore, the UK and Australia, and made enhancements to the existing onboarding
journeys in Hong Kong, the US, Canada, mainland China and the Channel Islands, allowing customers to open their accounts even before they arrive
in their new country. Global Money Transfers offers customers an easy, quick, and competitively priced way for foreign currency payments, and is
now live in eight markets. In addition, a partnership-enabled innovation allows customers in Singapore to access their credit history from other
markets, using this information to expedite credit card limit decisions.

31 | HSBC Holdings plc Annual Report and Accounts 2022

Management view of adjusted revenue <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Wealth | 8,091 | 8,783 | 7,737 | (692) | (8)
– investment distribution | 3,066 | 3,377 | 3,177 | (311) | (9)
– Global Private Banking | 1,978 | 1,746 | 1,712 | 232 | 13
net interest income | 946 | 620 | 661 | 326 | 53
non-interest income | 1,032 | 1,126 | 1,051 | (94) | (8)
– life insurance manufacturing | 1,914 | 2,508 | 1,838 | (594) | (24)
– asset management | 1,133 | 1,152 | 1,010 | (19) | (2)
Personal Banking | 15,911 | 11,587 | 12,683 | 4,324 | 37
– net interest | 14,610 | 10,258 | 11,472 | 4,352 | 42
– non-interest income | 1,301 | 1,329 | 1,211 | (28) | (2)
Other 1 | 365 | 593 | 1,061 | (228) | (38)
Net operating income 2 | 24,367 | 20,963 | 21,481 | 3,404 | 16

1 ‘Other’ includes the distribution (where applicable) of retail and credit protection insurance, disposal gains and other non-product-specific income. It also includes
allocated revenue from Markets Treasury (2022: $494m, 2021: $807m, 2020: $1,048m), HSBC Holdings interest expense and hyperinflation.
2 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
Financial performance
Adjusted profit before tax of $8.5bn was $1.8bn or 27% higher than in 2021. Despite an adverse movement of $1.4bn in market impacts in life
insurance manufacturing, adjusted revenue increased primarily from rising interest rates. There was also a net adjusted ECL charge in 2022 of
$1.1bn, compared with a net release of $0.2bn in 2021.
Adjusted revenue of $24.4bn was $3.4bn or 16% higher. Net interest income grew in Personal Banking by $4.4bn due to rising interest rates and
balance sheet growth in the UK, Asia, Mexico and the Middle East. This was partly offset by lower Wealth revenue due to adverse market impacts of
$1.4bn in life insurance manufacturing, despite strong insurance sales and an increase in net interest income of $0.3bn in Global Private Banking.
In Personal Banking, revenue of $15.9bn was up $4.3bn or 37%.
•Net interest income was $4.4bn or 42% higher due to the positive impact of rising interest rates. This was supported by strong balance sheet
growth in the UK, Asia, Mexico and the Middle East. Compared with 2021, deposit balances in Asia increased by $6bn. Mortgage lending
increased in the UK by $9bn and in Hong Kong by $3bn. In addition, unsecured lending increased in Asia by 5% and Mexico by 18%.
In Wealth, revenue of $8.1bn was down $0.7bn or 8%, notably from lower life insurance manufacturing as described above. However, our
investments in Asia contributed to the generation of net new invested assets of $80bn during 2022.
•Life insurance manufacturing revenue was $0.6bn or 24% lower due to a net adverse movement in market impacts of $1.4bn. In 2022, an
adverse movement of $1.0bn compared with favourable impacts of $0.5bn in 2021, reflecting a weaker performance in equity markets. However,
the value of new business written increased by $0.2bn or 23%, reflecting the launch of new products. In addition, there was a $0.3bn gain
following a pricing update for our policyholders’ funds held on deposit with us in Hong Kong to reflect the cost to provide this service. We also
recognised a $0.1bn gain on the completion of our acquisition of AXA Singapore.
•Investment distribution revenue was $0.3bn or 9% lower, as muted customer sentiment led to lower activity in equity markets, which compared
with a strong 2021, and as Covid-19-related restrictions in Hong Kong in early 2022 resulted in the temporary closure of parts of our branch
network. Since then, restrictions have substantially been eased.
•Global Private Banking revenue was $0.2bn or 13% higher due to the positive impact of rising interest rates on net interest income. This increase
was partly offset by a decline in brokerage and trading revenue, reflecting reduced client activity compared with a strong 2021.
•Asset management revenue was $19m or 2% lower, as adverse market conditions led to unfavourable valuation movements. This was in part
mitigated by growth in management fees from net new invested assets of $45bn in 2022 and improved performance fees.
Other revenue fell by $0.2bn or 38%, notably from a lower allocation of revenue from Markets Treasury.
Adjusted ECL were a net charge of $1.1bn, reflecting a more normalised level of ECL charges, including provisions relating to a deterioration in the
forward economic outlook from heightened levels of uncertainty and inflationary pressures. This compared with a net release of $0.2bn in 2021 from
Covid-19-related allowances previously built up in 2020.
Adjusted operating expenses of $14.7bn were $0.2bn or 2% higher, mainly due to continued investments, notably in wealth in Asia including the
costs related to our AXA Singapore acquisition, and from the impact of higher inflation. These increases were partly offset by the benefits of our cost-
saving initiatives.
The reported results of our WPB business included an impairment of $2.4bn recognised following the reclassification of our retail banking operations
in France as held for sale on 30 September 2022. This impairment is excluded from our adjusted results. At 31 December 2022, loans and advances
to customers of $52.4bn and customer accounts of $56.6bn were classified as held for sale, notably relating to our retail banking operations in France
and our banking business in Canada.

HSBC Holdings plc Annual Report and Accounts 2022 | 32

Commercial Banking
We support businesses in 54 countries and territories, ranging from small enterprises to large
companies operating globally.
Contribution to Group adjusted profit before tax <>

% contribution to Group
32%

We help businesses grow by supporting their financial needs, facilitating cross-border trade and payments, and providing access to
products and services. We help them access international markets, provide expert financial advice and offer access to a full suite of HSBC
solutions from across the Group’s other businesses.
We continued our investment in technology, launching new products to support customers and make banking with us easier. With our clients and
partners we have made progress in delivering our sustainability strategy. We act as a trusted transition partner, seeking to provide sustainable supply
chain solutions, and aim to capture growth opportunities as we transition into a new low-carbon economy. Strong performance in Global Payments
Solutions (‘GPS’) continued due to interest rate rises and 19% growth in fee income. This was partly offset by an adjusted ECL charge in 2022
relative to a net release in 2021.

Adjusted results <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Net operating income | 16,215 | 12,538 | 12,889 | 3,677 | 29
Change in expected credit losses and other credit impairment charges | (1,858) | 225 | (4,710) | (2,083) | >(200)
Operating expenses | (6,642) | (6,554) | (6,475) | (88) | (1)
Share of profit in associates and JVs | 1 | 1 | (1) | — | —
Profit before tax | 7,716 | 6,210 | 1,703 | 1,506 | 24
RoTE excluding significant items (%)1 | 14.2 | 10.8 | 1.3 |  |

1 Since 1 January 2021, the UK bank levy has been included in the calculation of this measure. Comparative data have not been re-presented.
Divisional highlights
19%
Growth in adjusted net fee income in GPS, supported by repricing and strategic initiatives. <>
43%
Growth in adjusted net interest income across all CMB products, notably in GPS (up 149%) and GTRF (up 24%).<>
$7.7bn
$16.2bn
Funding digital growth and innovation
We are helping technology companies to grow in Asia by providing them with specialist financing solutions. These include Grab, a leading south-east
Asian platform, which has been on a journey of growth over the last decade. Based in Singapore, the company started as a ride-hailing app in 2012,
and has since expanded to provide transport, food delivery and digital payments services. It has become an everyday, multi-use platform for more
than 33 million consumers every month.

33 | HSBC Holdings plc Annual Report and Accounts 2022

Management view of adjusted revenue <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Global Trade and Receivables Finance | 2,084 | 1,829 | 1,687 | 255 | 14
Credit and Lending | 5,722 | 5,667 | 5,465 | 55 | 1
Global Payments Solutions | 6,839 | 3,354 | 4,040 | 3,485 | >100%
Markets products, Insurance and Investments and Other 1 | 1,570 | 1,688 | 1,697 | (118) | (7)
– of which: share of revenue for Markets and Securities Services and Banking products | 1,185 | 1,005 | 898 | 180 | 18
Net operating income 2 | 16,215 | 12,538 | 12,889 | 3,677 | 29

1 Includes CMB’s share of revenue from the sale of Markets and Securities Services and Banking products to CMB customers. GBM’s share of revenue from the sale of
these products to CMB customers is included within the corresponding lines of the GBM management view of adjusted revenue. Also includes allocated revenue from
Markets Treasury, HSBC Holdings interest expense and hyperinflation.
2 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
Financial performance
Adjusted profit before tax of $7.7bn was $1.5bn or 24% higher than in 2021. This was driven by an increase in adjusted revenue across all CMB
products and in all regions, notably in Asia and the UK, and included a 149% increase in GPS net interest income. This was partly offset by a net
adjusted ECL charge compared with a net release of adjusted ECL in 2021. Adjusted operating expenses remained stable, as increased investment
spend was mitigated by continued cost discipline.
Adjusted revenue of $16.2bn was $3.7bn or 29% higher:
•In GPS, revenue increased by $3.5bn, with growth in all regions, particularly in Asia and the UK, driven by higher margins, reflecting interest rate
rises and business repricing actions. Revenue also benefited from a 6% increase in average deposit balances. There was a 19% increase in fee
income, notably in cards and payments, with growth in all regions, notably in the UK, supported by the delivery of our strategic fee initiatives.
•In Global Trade and Receivables Finance (‘GTRF‘), revenue increased by $0.3bn or 14%, with growth in all regions, notably in the UK and Asia,
driven by an increase in average balances, which rose by 17% compared with 2021 at improved margins. In addition, fee income grew by 4%
compared with 2021.
•In Credit and Lending, revenue increased by $0.1bn or 1%, notably in Canada and Latin America, driven by a 3% growth in average balances. In
addition, fee income grew by 1%.
•In Markets products, Insurance and Investments and Other, revenue decreased by $0.1bn or 7%, reflecting the adverse effects of hyperinflation
accounting in Türkiye and Argentina, as well as lower Markets Treasury and insurance revenue. This was partly offset by a n 18% increase in
collaboration revenue from GBM products, notably Foreign Exchange.
Adjusted ECL were a net charge of $1.9bn, compared with a net release of $0.2bn in 2021. The charge in 2022 primarily related to stage 3 charges in
Asia, mainly in the commercial real estate sector in mainland China, and higher charges in the UK reflecting heightened levels of uncertainty and
inflationary pressures. This compared with a net release in 2021 of Covid-19-related allowances previously built up in 2020.
Adjusted operating expenses of $6.6bn remained broadly stable (up 1%). The continued investment in technology and the impact of higher inflation
were mitigated by continued cost discipline on discretionary spend and through hiring efficiencies, as well as from the impact of our cost-saving
initiatives.
At 31 December 2022, loans and advances to customers of $25.1bn and customer accounts of $22.1bn relating to our banking business in Canada
were reclassified as held for sale.

HSBC Holdings plc Annual Report and Accounts 2022 | 34

Global Banking and Markets
We support multinational corporates, financial institutions and institutional clients, as well as
public sector and government bodies.
Contribution to Group adjusted profit before tax <>

% contribution to Group
23%

We are leaders in facilitating global trade and payments, particularly into and within Asia and the Middle East, enabling our clients in
the East and West to achieve their objectives by accessing our expertise and geographical reach. Our product specialists deliver a
comprehensive range of transaction banking, financing, capital markets and advisory, and risk management services.
GBM adjusted profit before tax increased in 2022, reflecting a strong revenue performance due to higher client activity related to volatility and
rising interest rates. This was partly offset by adjusted ECL charges, which included a build-up of reserves, reflecting heightened levels of
economic uncertainty, compared with releases in 2021. We continued to invest in technology to modernise our infrastructure, innovate product
capabilities and to support our clients.

Adjusted results <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Net operating income | 15,359 | 13,982 | 14,696 | 1,377 | 10
Change in expected credit losses and other credit impairment charges | (587) | 313 | (1,227) | (900) | >(200)
Operating expenses | (9,325) | (9,250) | (8,895) | (75) | (1)
Share of profit in associates and JVs | (2) | — | — | (2) | —
Profit before tax | 5,445 | 5,045 | 4,574 | 400 | 8
RoTE excluding significant items (%)1 | 10.7 | 8.6 | 6.7 |  |

1 Since 1 January 2021, the UK bank levy has been included in the calculation of this measure. Comparative data have not been re-presented.
Divisional highlights
50%
Adjusted revenue generated in Asia in 2022. <>
$94bn
Cumulative gross RWA reductions since the start of our RWA programme in 2020. This included accelerated saves of $9.6bn made in 2019.
$5.4bn
$15.4bn
Connecting the world to the biggest IPO in UAE
In April 2022, the initial public offering (‘IPO’) of Dubai Electricity and Water Authority raised $6.1bn for the Government of Dubai, which sold
shares in the largest IPO ever to be carried out in the UAE, and the largest IPO focused on the utility sector in 2022. As joint global coordinator
and joint bookrunner, we supported the state-owned utility company through the transaction, which attracted $85.7bn of demand. This
demonstrated the depth of interest from international, regional and local investors, and the capacity for growth opportunities in the Middle East.
We supported the company to articulate its energy transition plans to investors. The company is a supporter of the Dubai Clean Energy Strategy
2050, which aims to provide 100% of Dubai’s energy production capacity from clean energy sources by 2050.

35 | HSBC Holdings plc Annual Report and Accounts 2022

Management view of adjusted revenue<> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Markets and Securities Services | 8,926 | 7,810 | 8,489 | 1,116 | 14
– Securities Services 1 | 2,072 | 1,799 | 1,724 | 273 | 15
– Global Debt Markets | 706 | 838 | 1,399 | (132) | (16)
– Global Foreign Exchange | 4,215 | 3,158 | 3,917 | 1,057 | 33
– Equities | 1,007 | 1,156 | 790 | (149) | (13)
– Securities Financing | 920 | 827 | 929 | 93 | 11
– Credit and funding valuation adjustments | 6 | 32 | (270) | (26) | (81)%
Banking | 7,282 | 6,244 | 6,392 | 1,038 | 17
– Global Trade and Receivables Finance | 742 | 675 | 668 | 67 | 10
– Global Payments Solutions | 3,131 | 1,727 | 1,932 | 1,404 | 81
– Credit and Lending | 2,363 | 2,465 | 2,550 | (102) | (4)
– Capital Markets and Advisory 1 | 748 | 1,188 | 1,002 | (440) | (37)
– Other 2 | 298 | 189 | 240 | 109 | 58
GBM Other | (849) | (72) | (185) | (777) | >(100)%
– Principal Investments | 57 | 371 | 112 | (314) | (85)
– Other 3 | (906) | (443) | (297) | (463) | >(100)%
Net operating income 4 | 15,359 | 13,982 | 14,696 | 1,377 | 10

1 From 1 June 2020, Issuer Services was transferred to Global Banking. This resulted in revenue of $80m being recorded in Securities Services in 2020.
2 Includes portfolio management, earnings on capital and other capital allocations on all Banking products.
3 Includes notional tax credits and Markets Treasury, HSBC Holdings interest expense and hyperinflation.
4 ‘Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).
Financial performance
Adjusted profit before tax of $5.4bn was $0.4bn or 8% higher than in 2021. Growth in adjusted revenue of $1.4bn or 10% was partly offset by a
net adjusted ECL charge in 2022 of $0.6bn, compared with a net release in 2021 of $0.3bn, and from an increase of $0.1bn in adjusted operating
expenses.
Adjusted revenue of $15.4bn was $1.4bn or 10% higher, reflecting a more than 100% growth in GPS net interest income from higher interest
rates, and a strong Markets and Securities Services performance driven by increased client activity and disciplined risk management.
In Markets and Securities Services, revenue increased by $1.1bn or 14%.
•In Securities Services, revenue grew by $0.3bn or 15% from higher net interest income as global interest rates rose, partly offset by reduced
fee income from lower market levels.
•In Global Debt Markets, revenue fell by $0.1bn or 16%, reflecting lower primary issuances and challenging market conditions.
•In Global Foreign Exchange, revenue growth of $1.1bn or 33% reflected increased client activity due to elevated market volatility and the
combined macroeconomic impacts of rising inflation, higher interest rates and a strengthening of the US dollar, as well as a strong trading
performance.
•In Equities, revenue fell by $0.1bn or 13% in the context of a strong prior year and lower client activity in 2022.
•In Securities Financing, revenue increased by $0.1bn or 11%, driven by client franchise growth and a strong trading performance.
In Banking, revenue increased by $1.0bn or 17%.
•In GPS, revenue increased by $1.4bn or 81%, driven by margin growth as a result of the rising global interest-rate environment and business
pricing actions, together with active portfolio management and average balance growth. Fee income grew in all regions from the continued
delivery of our strategic initiatives.
•Capital Markets and Advisory revenue decreased $0.4bn or 37%, primarily from lower fees in line with the reduced global fee pool and
adverse valuation movements on leveraged loans, net of hedging.
In GBM Other, Principal Investments revenue declined by $0.3bn or 85%, as 2022 included lower valuation gains compared with 2021. There
was also a reduction in revenue from Markets Treasury and the impact of hyperinflationary accounting, which are allocated to the global
businesses. GBM Other also included a loss of $0.1bn from a buy-back of legacy securities.
Adjusted ECL were a net charge of $0.6bn. This included stage 3 charges predominantly in the commercial real estate sector in mainland China,
and in Europe, which also reflected allowances due to a deterioration in the forward economic outlook given the heightened levels of uncertainty
and inflationary pressures. This compared with the net release of $0.3bn in 2021 of Covid-19-related allowances previously built up in 2020.
Adjusted operating expenses of $9.3bn increased by $0.1bn or 1% as the impact of higher inflation and strategic investments were in part
mitigated by our ongoing cost discipline.

HSBC Holdings plc Annual Report and Accounts 2022 | 36

Corporate Centre
Contribution to Group adjusted profit before tax <>

% contribution to Group
9%

The results of Corporate Centre primarily comprise the share of profit from our interests in our associates and joint ventures. It also
includes Central Treasury, stewardship costs and consolidation adjustments.
Corporate Centre performance in 2022 reflected a lower share of profit from our associates, an increase in hedging costs and revaluation losses on
investment properties. These reductions were in part mitigated by a favourable allocation of the UK bank levy and related prior year credits.

Adjusted results <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Net operating income | (596) | (463) | (218) | (133) | (29)
Change in expected credit losses and other credit impairment charges | (10) | 3 | — | (13) | >(200)
Operating expenses | 227 | 189 | (539) | 38 | 20
Share of profit in associates and JVs | 2,695 | 2,898 | 2,102 | (203) | (7)
Profit before tax | 2,316 | 2,627 | 1,345 | (311) | (12)
RoTE excluding significant items (%)1 | 5.4 | 5.6 | 3.1 |  |

1 Since 1 January 2021, the UK bank levy has been included in the calculation of this measure. Comparative data have not been re-presented.
Financial performance
Adjusted profit before tax of $2.3bn was $0.3bn or 12% lower than in 2021 due to a reduction in adjusted share of profit in associates and joint
ventures, and lower adjusted revenue.
Adjusted revenue was $0.1bn or 29% lower, primarily reflecting revaluation losses on investment properties, compared with gains in 2021, and an
increase in costs associated with hedging foreign exchange exposure. The reduction also included the consideration paid in respect of an exchange
offer for subordinated notes undertaken by HSBC Holdings plc.
Adjusted operating expenses decreased by $38m or 20%, reflecting a favourable allocation of the UK bank levy and related prior year credits. Since
2021, the UK bank levy and any related credits have been allocated across our global businesses and Corporate Centre, primarily to GBM.
Adjusted share of profit from associates and joint ventures of $2.7bn decreased by $0.2bn or 7%, primarily as 2021 included a higher share of profit
from BGF in the UK, due to a recovery in asset valuations. This was partly offset by an increase in the share of profit from SABB.

Management view of adjusted revenue <> | 2022 $m | 2021 $m | 2020 $m | 2022 vs 2021
$m | %
Central Treasury 1 | (77) | (99) | 151 | 22 | 22
Legacy portfolios | (17) | (31) | (19) | 14 | 45
Other 2,3 | (502) | (333) | (350) | (169) | (51)
Net operating income 4 | (596) | (463) | (218) | (133) | (29)

1 Central Treasury includes adverse valuation differences on issued long-term debt and associated swaps of $77m (2021: losses of $99m; 2020: gains of $151m).
2 Other comprises consolidation adjustments, funding charges on property and technology assets, revaluation gains and losses on investment properties and property
disposals and other revenue items not allocated to global businesses. The reduction in 2022 related primarily to adverse revaluation gains and losses on investment
properties.
3 Revenue from Markets Treasury, HSBC Holdings net interest expense and hyperinflation impacts were allocated to the global businesses, to align them better with their
revenue and expense. The total Markets Treasury revenue component of this allocation for 2022 was $1,549m (2021: $2,202m; 2020: $2,699m).
4 ’Net operating income’ means net operating income before change in expected credit losses and other credit impairment charges (also referred to as ‘revenue’).

37 | HSBC Holdings plc Annual Report and Accounts 2022

Risk overview
Active risk management helps us to achieve our strategy, serve our customers and communities
and grow our business safely.
Managing risk
Geopolitical tensions have resulted in an increasingly fragmented macroeconomic, trade and regulatory environment. The global economic slowdown
and high inflationary pressures are exacerbating the risks linked to this fragmentation.
Global commodity markets have been significantly impacted by the Russia-Ukraine war, leading to supply chain disruptions and increased prices for
both energy and non-energy commodities. This, combined with extensive monetary policy loosening at the height of the Covid-19 pandemic,
contributed to a sharp increase in inflation, creating further challenges for central banks and our customers. The continuation of – or any further
escalation in – the Russia-Ukraine war could have additional economic, social and political consequences. These include further sanctions and trade
restrictions, longer-term changes in the macroeconomic environment, and the risk of higher and sustained inflation, including continued increases in
energy and non-energy prices. Interest rates have increased in reaction to inflationary pressures and we have adapted our interest rate risk
management strategy in response.
China’s policy measures issued at the end of 2022 have increased liquidity and the supply of credit to the mainland China commercial real estate
sector. Recovery in the underlying domestic residential demand and improved customer sentiment will be necessary to support the ongoing health
of the sector. We will continue to monitor the sector closely, notably the risk of further idiosyncratic real estate defaults and the potential associated
impact on wider market, investor and consumer sentiment. Given that parts of the global economy are in, or close to, recession, the demand for
Chinese exports may also diminish.
We continued to focus on improving the quality and timeliness of the data used to inform management decisions, through measures such as early
warning indicators, prudent active management of our risk appetite, and ensuring regular communication with our Board and key stakeholders.
While the financial performance of our operations varied in different geographies, our balance sheet and liquidity remained strong.
Our risk appetite
Our risk appetite defines our desired forward-looking risk profile, and informs the strategic and financial planning process. It provides an objective
baseline to guide strategic decision making, helping to ensure that planned business activities provide an appropriate balance of return for the risk
assumed, while remaining within acceptable risk levels. Risk appetite supports senior management in allocating capital, funding and liquidity
optimally to finance growth, while monitoring exposure to non-financial risks.
Capital and liquidity remain at the core of our risk appetite framework, with forward-looking statements informed by stress testing. We continue to
develop our climate risk appetite as we engage with businesses on including climate risk in decision making and starting to embed climate risk
appetite into business planning.
At 31 December 2022, our CET1 ratio and ECL charges were within their defined risk appetite thresholds. Wholesale ECL charges increased towards
the end of 2022, with additional stage 1 and 2 allowances recorded, as a result of the uncertain macroeconomic environment. Monitoring of
measures against our risk appetite remains a key focus. During 2022, we enhanced the monitoring and forecasting of our CET1 ratio through regular
reviews in periods of high volatility.

Key risk appetite metrics
Component | Measure | Risk appetite | 2022
Capital | CET1 ratio – end point basis | ≥13.0% | 14.2%
Change in expected credit losses and other credit impairment charges 1 | Change in expected credit losses and other credit impairment charges as a % of advances: (WPB) | ≤0.50% | 0.24%
Change in expected credit losses and other credit impairment charges as a % of advances: wholesale (GBM, CMB) | ≤0.45% | 0.40%

1 Includes change in expected credit losses and other impairment charges and advances related to assets that are held for sale.
Stress tests
We regularly conduct stress tests to assess the resilience of our balance sheet and our capital adequacy, as well as to provide actionable insights
into how key elements of our portfolios may behave during a crisis. We use the outcomes to calibrate our risk appetite and to review the robustness
of our strategic and financial plans, helping to improve the quality of management’s decision making. The results from the stress tests also drive
recovery and resolution planning to help enhance the Group’s financial stability under various macroeconomic scenarios. The selection of stress
scenarios is based upon the identification and assessment of our top risks, emerging risks and our risk appetite. During 2022, assessments were
made of the impact on the Group of the Russia-Ukraine war and the consequences from the deteriorating global economic outlook.
The results of the most recent stress test, referred to as the solvency stress test, published by the Bank of England (‘BoE’) in December 2021
confirmed the Group was sufficiently capitalised.
The BoE’s 2022 annual cyclical scenario stress test, originally due for submission in June 2022, was rescheduled to commence in September 2022 in
light of the uncertainty related to the Russia-Ukraine war, and was submitted in January 2023.
As a result of this postponement, our own internal stress test will now be conducted in the first quarter of 2023, and will explore the potential
impacts of key vulnerabilities to which we are exposed across certain key regions, including a lower interest-rate environment, additional
macroeconomic headwinds including lower oil prices and the introduction of foreign exchange shocks. This focused internal stress test will consider
the impacts of the various risk scenarios on those specific regions across all risk types and on capital resources.
Climate risk
To support the requirements for assessing the impacts of climate change, we have developed a set of capabilities to execute climate stress testing
and scenario analysis. These are used to help improve our understanding of our risk exposures for risk management and business decision making.

HSBC Holdings plc Annual Report and Accounts 2022 | 38

In 2021, the Prudential Regulation Authority requested all major UK banks to run a climate-related stress test to explore the impacts of a set of
scenarios: an early policy action, a late policy action and no additional policy action scenario. This was followed in the first half of 2022 with a second
round to explore our strategic responses to such scenarios. We also conducted climate change stress testing exercises for the European Central
Bank and the Monetary Authority of Singapore, and in the second half of 2022 we ran an internal climate scenario analysis to identify challenges and
opportunities to our net zero strategy, as well as to inform capital planning and risk appetite.
> For further details of our approach to climate risk stress testing, see ‘Insights from scenario analysis’ on page 67.
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy.
Climate risk can impact us either directly or through our relationships with our clients. This includes potential climate risk arising as a result of our net
zero ambition, which could lead to reputational concerns, and potential legal and/or regulatory action if we are perceived to mislead stakeholders on
our business activities or if we fail to achieve our stated net zero targets. Our most material exposure to climate risk relates to corporate and retail
client financing activity within our banking portfolio. We also have significant responsibilities in relation to asset ownership by our insurance business,
employee pension plans, and asset management business.
We seek to manage climate risk across all our businesses in line with our Group-wide risk management framework, and are incorporating climate
considerations within our existing risk types to reflect our strategic ambition to align to net zero.
> For further details of our approach to climate risk management, see ‘Climate risk‘ on page 221.
> For further details of our TCFD disclosures, see the ‘ESG review‘ on page 43.
Our operations
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, legal and regulatory consequences. In our approach to defending 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 have made progress with the implementation of our business transformation plans. We seek to manage change execution risk so we can
prioritise, manage and deliver change initiatives effectively and safely, and at the scale, complexity and pace required.
> For further details on our risk management framework and risks associated with our banking and insurance manufacturing operations, see pages 142 to 144.
Geopolitical and macroeconomic risks
The Russia-Ukraine war has continued to elevate geopolitical instability and has resulted in the use of significant sanctions and trade restrictions
against Russia by the UK, the US and the EU, as well as other countries. In response to such sanctions and trade restrictions, Russia has
implemented certain countermeasures.
The Russia-Ukraine war, alongside the economic impacts that continue to result from the Covid-19 pandemic, has contributed to increased
commodity prices, which, combined with extensive monetary policy loosening during the height of the Covid-19 pandemic, has led to a sharp
increase in inflation. In response, central banks both in developed and emerging markets tightened monetary policy sharply in 2022. Inflation is
expected to abate in the coming months, albeit only gradually as the ongoing Russia-Ukraine war is likely to keep energy and food prices at high
levels.
Fiscal deficits are likely to remain high in both developed and emerging markets as further public spending is rolled out to help the private sector
manage rising prices, against a backdrop of slower growth and higher interest rates. This could increase the strains on highly leveraged sovereigns,
corporates and households. While the average maturity of sovereign debt in developed markets has lengthened, rising interest rates could reduce
the affordability of debt and may eventually bring into question its sustainability in some countries. Among emerging markets, countries that need to
refinance maturing US dollar-denominated debt in the context of a strong dollar may face increasing difficulties.
Our businesses also continue to consider the impact of the increasing cost of living on our customers. We are engaging closely with our key
regulators to help ensure we continue to meet their expectations of financial institutions’ activities at a time of market volatility.
Higher inflation and interest rate expectations around the world – and the resulting economic uncertainty – have had an impact on ECL. The
combined pressure of higher inflation and interest rates may impact the ability of our customers to repay debt. We have continued to carry out
enhanced monitoring of model outputs and the use of model overlays. This includes management adjustments based on the expert judgement of
senior credit risk managers to reflect the uncertainty in current market inflation and interest rate conditions in the forecasts from the underlying
macroeconomic scenarios. Inflation and rising interest rates have been considered both directly in certain models, and assessed via adjustments
where not directly considered. While many of the government programmes implemented during the Covid-19 pandemic to support businesses and
individuals have ceased, this has impacted the level of credit losses, which in turn may have impacted the longer-term reliability of loss and capital
models.
The relationship between China and several countries, including the UK and the US, remains complex. The UK, the US, the EU and other countries
have imposed various sanctions and trade restrictions on Chinese persons and companies, and may continue to impose further measures. In
response to foreign sanctions and trade restrictions, China has imposed sanctions and introduced new laws and trade restrictions that could impact
the Group and its customers. Further sanctions and counter-sanctions, whether in connection with Russia or China, may affect the Group and its
customers by creating regulatory, reputational and market risks.
Negotiations between the UK and the EU over the operation of the Northern Ireland Protocol are continuing. While there are signs that differences
may be diminishing, failure to reach agreement could have implications for the future operation of the EU-UK Trade and Cooperation Agreement.

39 | HSBC Holdings plc Annual Report and Accounts 2022

In August 2022, the US Inflation Reduction Act introduced a minimum tax of 15% with effect from 1 January 2023. It is possible that a minimum tax
could result in an additional US tax liability over our regular US federal corporate tax liabilities in a given year, based on differences between the US
book and taxable income (including as a result of temporary differences). Given its recent pronouncement, it is unclear at this time what, if any,
impact the US Inflation Reduction Act will have on HSBC’s US tax rate and US financial results, and HSBC will continue to evaluate its impact as
further information becomes available. In addition, potential changes to tax legislation and tax rates in the countries and territories in which we
operate could increase our effective tax rate in the future.
We continue to monitor, and seek to manage, the potential implications of all the above developments on our customers and our business.
> For further details on our approach to geopolitical and macroeconomic risks, see ‘Top and emerging risks’ on page 135.
Risks related to Covid-19
While the immediate impact of the Covid-19 pandemic on the global economy has largely abated in most markets, it continues to disrupt economic
activity in mainland China and Hong Kong despite the easing in December 2022 of the domestic Covid-19 restrictions that have adversely impacted
China’s economy, Asia tourism and global supply chains. The return to pre-pandemic levels of social interaction across all our key markets continues
to vary as governments respond differently to new waves of infection.
We continue to monitor the situation closely and, given the remaining uncertainties related to the post-pandemic landscape, additional mitigating
actions may be required.
> For further details on our approach to the risks related to Covid-19, see ‘Areas of special interest’ on page 142.
Ibor transition
The publication of sterling, Swiss franc, euro and Japanese yen Libor interest rate benchmarks, as well as Euro Overnight Index Average (‘Eonia’),
ceased from the end of 2021. Our interbank offered rate (‘Ibor’) transition programme – which is tasked with the development of new near risk-free
rate (‘RFR’) products and the transition of legacy Ibor products – has continued to support the transition of the limited number of remaining contracts
in sterling and Japanese yen Libor, which were published using a ‘synthetic’ interest rate methodology during 2022. We are prepared for the
cessation of the publication of these ‘synthetic’ interest rates from March 2023 and March 2024.
Additionally, prior to the cessation of the publication of US dollar Libor from 30 June 2023, we have implemented the majority of required processes,
technology and RFR product capabilities throughout the Group, in preparation for upcoming market events and the continued transition of legacy US
dollar Libor and other demising Ibor contracts.
We continue to be exposed to risks associated with Ibor transition, which include regulatory compliance risk, resilience risk, financial reporting risk,
legal risk, model risk and market risk. The level of these key risks is diminishing in line with our process implementation and the transition of our
legacy contracts. We have sought to implement mitigating controls, where required, and continue to actively manage and monitor these risks.
> For further details on our approach to Ibor transition, see ‘Top and emerging risks’ on page 135.
Top and emerging risks
Our top and emerging risks report identifies forward-looking risks so that they can be considered in determining whether any incremental action is
needed to either prevent them from materialising or to limit their effect.
Top risks are those that have the potential to have a material adverse impact on the financial results, reputation or business model of the Group. We
actively manage and take actions to mitigate our top risks. Emerging risks are those that, while they could have a material impact on our risk profile
were they to occur, are not considered immediate and are not under active management.
Our suite of top and emerging risks is subject to regular review by senior governance forums. We continue to monitor closely the identified risks and
ensure management actions are in place, as required.

HSBC Holdings plc Annual Report and Accounts 2022 | 40

Risk | Trend | Description
Externally driven |  |
Geopolitical and macroeconomic risks | ^ | Our operations and portfolios are subject to risks associated with political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. Heightened geopolitical tensions, alongside other factors, have also disrupted supply chains globally. Inflation, rising interest rates and slower Chinese economic activity may prompt a global recession that would affect our credit portfolio.
Technology and cybersecurity risk | > | We face a risk of service disruption resulting from technology failures or malicious activities by internal or external threats. We continue to monitor ongoing geopolitical events and changes to the threat landscape. We operate a continuous improvement programme to protect our technology operations and to counter a fast-evolving cyber threat environment.
Evolving regulatory environment risk | > | The regulatory and compliance risk environment has become more complex, in part due to heightened geopolitical tensions. There has been increased regulatory focus on operational and cyber resilience, crypto-asset-related risks and sanctions. These, alongside other regulatory priorities, may result in change requirements across the Group in the short to medium term. We continue to monitor regulatory and wider industry developments closely, and engage with regulators as appropriate.
Financial crime risk | ^ | We continue to support our customers against a backdrop of increasingly complex geopolitical, socio- economic and technological challenges, including the Russia-Ukraine war. HSBC is monitoring the impacts of the war on the Group, and using its sanctions compliance capabilities to respond to evolving sanctions regulations, noting the challenges that arise in implementing the unprecedented volume and diverse set of sanctions and trade restrictions.
Ibor transition risk | ˅ | We remain exposed to regulatory compliance, legal and resilience risks as contracts transition away from the remaining demising Ibor benchmarks to new reference rates. We continue to consider the fairness of client outcomes, our compliance with regulatory expectations and the operation of our systems and processes. The key risks are diminishing in line with our process implementation and we are progressing well in transitioning contracts in the remaining demising Ibors, specifically US dollar Libor.
Environmental, social and governance (‘ESG’) risks | ^ | We are subject to ESG risks relating to climate change, nature and human rights. These risks have increased owing to the pace and volume of regulatory developments globally, 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 costs, including adverse reputational consequences.
Digitalisation and technological advances | ^ | Developments in technology and changes in regulations have enabled new entrants to the banking industry and new products and services offered by competitors. Along with opportunities, new technology can introduce new risks. This challenges us to continue to innovate to take advantage of new digital capabilities to best serve our customers by adapting our products, and to attract and retain customers and employee talent, while ensuring that the risks are understood and managed with appropriate controls.
Internally driven |
Risks associated with workforce capability, capacity and environmental factors with potential impact on growth | > | Our businesses, functions and geographies are exposed to risks associated with employee retention and talent availability, and compliance with employment laws and regulations. Heightened demand for talent in key labour markets and continuing Covid-19-related challenges have led to increased attrition and attraction challenges, and continuing pressure on employees. We monitor hiring activities and levels of employee attrition, and each business and function has workforce plans in place to aim to ensure effective workforce forecasting to meet business demands.
Risks arising from the receipt of services from third parties | > | We procure goods and services from a range of third parties. It is critical that we have appropriate risk management policies and processes to select and govern third parties, including third parties’ supply networks, particularly for key activities that could affect our operational resilience. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations.
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 such as customer selections, product pricing, financial crime transaction monitoring, creditworthiness evaluation and financial reporting. Evolving regulatory requirements are driving material changes to the way model risk is managed across the banking industry, with particular focus on capital models. New technologies such as machine learning are driving changes to the model landscape.
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 need to ensure that non-public data is kept confidential, and that we comply with the growing number of regulations that govern data privacy and cross-border movement of data.
Change execution risk | > | Failure to effectively prioritise, manage and/or deliver transformation across the organisation impacts our ability to achieve our strategic objectives. We aim to monitor, manage and oversee change execution risk to ensure our change portfolios and initiatives continue to deliver the right outcomes for our customers, people, investors and communities.

^Risk heightened during 2022
˅ Risk decreased during 2022
>Risk remained at the same level as 2021

41 | HSBC Holdings plc Annual Report and Accounts 2022

Long-term viability and going
concern statement
Under the UK Corporate Governance Code, the Directors are required to provide a viability statement that must state whether the Group will be able
to continue in operation and meet its liabilities, taking into account its current position and the principal risks it faces. They must also specify the
period covered by, and the appropriateness of, this statement.
The Directors have specified a period of three years to 31 December 2025. They are satisfied that a forward-looking assessment of the Group for this
period is sufficient to enable a reasonable statement of viability. In addition, this period is covered by the Group’s stress testing programmes, and its
internal projections for profitability, key capital ratios and leverage ratios. Notwithstanding this, our stress testing programmes also cover scenarios
out to five years and our assessment of risks are beyond three years where appropriate (see page 135):
–This period is representative of the time horizon to consider the impact of ongoing regulatory changes in the financial services industry.
–Our updated business plan covers 2023–2027.
The Board, having made appropriate enquiries, is satisfied that the Group as a whole has adequate resources to continue operations for a period of at
least 12 months from the date of this report, and it therefore continues to adopt the going concern basis in preparing the financial statements.
Based upon their assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet liabilities as
they fall due over the next three years.
In making their going concern and viability assessments, the Directors have considered a wide range of detailed information relating to present and
potential conditions, including projections for profitability, cash flows, capital requirements and capital resources.
The Directors carried out a robust assessment of the emerging and principal risks facing the Group to determine its long-term viability, including
those that would threaten its solvency and liquidity. They determined that the principal risks are the Group’s top and emerging risks as set out on
page 40. These include geopolitical and macroeconomic risks, including rising global inflationary pressures, the Russia-Ukraine war and its impact on
sanctions and trade restrictions, disrupted supply chains globally and slower Chinese economic activity, all of which have increased to a heightened
level during 2022. Digitalisation and technological advances and environmental, social and governance risks remained at a heightened level during
2022.
The Directors assessed that all of the top and emerging risks identified are considered to be material and, therefore, appropriate to be classified as
the principal risks to be considered in the assessment of viability. They also appraised the impact that these principal risks could have on the Group’s
risk profile, taking account of mitigating actions planned or taken for each, and compared this with the Group’s risk appetite as approved by the
Board.
In carrying out their assessment of the principal risks, the Directors considered a wide range of information including:
–details of the Group’s business and operating models, and strategy (see page 12);
–details of the Group’s approach to managing risk and allocating capital;
–a summary of the Group’s financial position considering performance, its ability to maintain minimum levels of regulatory capital, liquidity
funding and the minimum requirements for own funds and eligible liabilities over the period of the assessment. Notable are the risks which
the Directors believe could cause the Group’s future results or operations to adversely impact any of the above;
–enterprise risk reports, including the Group’s risk appetite profile (see page 132) and top and emerging risks (see page 135);
–the impact on the Group due to the Russia-Ukraine war; instability in China’s commercial real estate sector; structural changes from the
Covid-19 pandemic and strained economic and diplomatic tensions between China and the US, the UK, the EU and other countries;
–reports and updates regarding regulatory and internal stress testing. The Group internal stress test has been delayed from the fourth
quarter of 2022 to the first quarter of 2023 and will include overlays applied to the 2022 annual cyclical scenario for HSBC-specific
vulnerabilities, including geopolitical issues (and related macroeconomic headwinds) along with the continued impact of Covid-19. It will
also consider the impacts of various risk scenarios across all risk types and on capital resources. The 2022 Bank of England annual cyclical
scenario, originally due in June 2022, was also postponed in light of the uncertainty related to the Russia-Ukraine war. The exercise
commenced on 26 September 2022, with the submission made to the Bank of England in early January 2023 and the results due to be
published mid-2023. The initial results of this exercise indicated the Group is sufficiently capitalised to withstand a severe but plausible
adverse stress;
–the results of our 2022 internal climate scenario analysis exercise. In 2022, the Group delivered its first internal climate scenario analysis
exercise with internal scenarios being formed with reference to external publicly available climate scenarios. Using these external
scenarios as a template, the Group adapted them by incorporating unique climate risks and vulnerabilities to which the organisation is
exposed. No issues were identified around the going concern status of the Group. Further details of the insights from the 2022 climate
scenario analysis are explained from page 67;
–reports and updates from management on risk-related issues selected for in-depth consideration;
–reports and updates on regulatory developments;
–legal proceedings and regulatory matters set out in Note 35 on the financial statements; and
–reports and updates from management on the operational resilience of the Group.
Aileen Taylor
Group Company Secretary and Chief Governance Officer
21 February 2023

HSBC Holdings plc Annual Report and Accounts 2022 | 42

Environmental, social and
governance review
Our ESG review sets out our approach to our environment, customers, employees and governance. It also explains how we aim to achieve our
purpose and deliver our strategy in a way that is sustainable and how we build strong relationships with all of our stakeholders.
44 Our approach to ESG
46 Environmental
73 Social
85 Governance
How we present our TCFD disclosures
Our overall approach to TCFD can be found on page 17 and additional information is included on pages 68 and 423. Further details have been
embedded in this section and the Risk review section on pages 221 to 230. Our TCFD disclosures are highlighted with the following symbol:
TCFD

43 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to ESG
We are on a journey to incorporate environmental, social and governance principles throughout
the organisation, and are taking steps to embed sustainability into our purpose and corporate
strategy.
About the ESG review
Our purpose is: ‘Opening up a world of opportunity’.
To achieve our purpose and deliver our strategy in a way that is sustainable, we are guided by our values: we value difference; we succeed
together; we take responsibility; and we get it done.
We also need to build strong relationships with all of our stakeholders, who are the people who work for us, bank with us, own us, regulate us,
and live in the societies we serve and on the planet we all inhabit.
Transition to net zero
We have continued to take steps to implement our climate ambition to become net zero in our operations and our supply chain by 2030, and
align our financed emissions to net zero by 2050. We have expanded our coverage of sectors for on-balance sheet financed emissions targets,
noting the challenge of evolving methodologies and data limitations. In addition, our operating environment for climate analysis and portfolio
alignment is developing. We continue work to improve our data management processes and are setting targets to align our provision of finance
with the goals and timelines of the Paris Agreement.
In March 2022, we announced plans to turn our net zero ambition for our portfolio of clients into business transformation across the Group. The
plan involves the publication of a Group-wide climate transition plan in 2023. We continued our work to review and update our wider financing
and investment policies critical to achieving net zero by 2050, which included publishing an updated energy policy and thermal coal phase-out
policy in December 2022.
We are also working with peers and industry bodies to help mobilise the financial services industry to take action on climate change, biodiversity
and nature.
Building inclusion and resilience
Our social pillar is centred around building inclusion and resilience for our colleagues and customers, as well as in the communities we serve.
We are committed to ensuring our people – and particularly our leadership – are representative of the communities that we serve, and that we
support their well-being and development so they can learn and grow in their careers. We are equally committed to ensuring there are no
unnecessary barriers to finance for our customers. We have an ambition to create a welcoming, inclusive and accessible banking experience.
Inclusion goes hand-in-hand with resilience. We build resilience for our colleagues by supporting their physical, mental and financial well-being,
and by ensuring they are equipped with the skills and knowledge to further their careers during a period of significant economic transformation.
For our customers, we build resilience primarily through education – by helping them to understand their finances and how to manage them
effectively.
Acting responsibly
Our governance pillar focuses on our approach to acting responsibly and recognises topics such as human rights, conduct and data integrity.
Our policies and procedures help us provide the right outcomes for customers, including those with enhanced care needs, which in 2022 took
into account the current cost of living crisis. Customer experience is at the heart of how we operate and is measured through customer
satisfaction and customer complaints.
We continue our journey to embed ESG principles across the organisation, including incorporating climate change-related risks within the risk
management framework, training our workforce, incorporating climate-related targets within executive scorecards, and engaging with
customers and suppliers.
Environmental – Transition to net zero
•Since 2020, we have provided and facilitated $210.7 bn of sustainable finance and investment towards our ambition of $750bn to $1tn
by 2030. We monitor developments in taxonomies and changing market guidelines in this space.
•In December, we updated our energy policy as an important mechanism to help deliver our financed emissions targets and phase
down fossil fuel financing in line with our net zero ambition, and introduced further restrictions for thermal and metallurgical coal.
•We have introduced on-balance sheet financed emissions targets for eight sectors, noting the limitations of evolving methodologies
and data quality.
> Read more in the Environmental section on page 46.
Social – Building inclusion and resilience
•In 2022, 33.3% senior leadership roles were occupied by women, with a target to achieve 35% by 2025. We have put in place
important foundations to support our goal of doubling the number of Black employees in senior leadership roles by 2025.
•Employee engagement, which is our headline measure, increased to 73% in 2022 following a five-point increase from 2019, and was
three points above benchmark.
> Read more in the Employees section on page 74.
Governance – Acting responsibly
•We conducted a review of our salient human rights issues, including stakeholder consultation with non-governmental organisations
(‘NGOs’) and potentially affected groups.
•Our customer satisfaction performance, using the net promoter score, improved in many markets in which we operate. However, we
still have work to do to improve our rank position against competitors, as some have accelerated their performance faster than us.
> Read more in the Governance section on page 85.

44 | HSBC Holdings plc Annual Report and Accounts 2022

How we decide what to measure
We listen to our stakeholders in a number of different ways, which we set out in more detail within the ‘ESG overview’ on page 14. We use the
information they provide us to identify the issues that are most important to them and consequently also matter to our own business.
Our ESG Committee and other relevant governance bodies regularly discuss the new and existing themes and issues that matter to our
stakeholders. Our management team then uses this insight, alongside the framework of the ESG Guide (which refers to our obligations under
the Environmental, Social and Governance Reporting Guide contained in Appendix 27 to The Rules Governing the Listing of Securities on the
Stock Exchange of Hong Kong Limited), and the LR9.8.6R(8) of the Financial Conduct Authority’s (‘FCA’) Listing Rules, and other applicable laws
and regulations to choose what we measure and publicly report in this ESG review.
Under the ESG Guide, ’materiality’ is considered to be the threshold at which ESG issues become sufficiently important to our investors and
other stakeholders that they should be publicly reported. We are also informed by stock exchange listing and disclosure rules globally. We know
that what is important to our stakeholders evolves over time and we plan to continue to assess our approach to help ensure we remain relevant
in what we measure and publicly report.
Recognising the need for a consistent and global set of ESG metrics, we monitor the developments related to International Sustainability
Standard Board (‘ISSB’) and other standard setters. In the absence of a globally consistent set of sustainability standards, we continued to
report against the core World Economic Forum (‘WEF’) ‘Stakeholder Capitalism Metrics’ and Sustainability Accounting Standards Board (‘SASB’)
metrics this year.
Consistent with the scope of financial information presented in our Annual Report and Accounts, the ESG review covers the operations of HSBC
Holdings plc and its subsidiaries. Given the relative immaturity of ESG-related data and methodologies in general, we are on a journey towards
improving completeness and robustness.
> For further information on our approach to reporting, see the ‘Additional information’ section of page 422.
Our reporting around ESG
We report on ESG matters throughout our Annual Report and Accounts, including the ’ESG overview’ section of the Strategic Report (pages 14
to 19), this ESG review (pages 44 to 96), and the ‘Climate risk’ and ‘Insights from climate scenario analysis’ sections of the Risk review (pages
221 to 230). In addition, we have other supplementary materials, including our ESG Data Pac k, which provides a more granular breakdown of
ESG information.

Detailed data | Additional reports | Indices
ESG Data Pack 2022 | UK Pay Gap Report 2022 Modern Slavery and Human Trafficking Statement 2022 Green Bond Report 2022 HSBC UN Sustainable Development Goals Bond and Sukuk Report 2022 | SASB Index 2022 WEF Index 2022

> For further details of our supplementary materials, see our ESG reporting centre at www.hsbc.com/esg.
Assurance relating to ESG data TCFD
HSBC Holdings plc is responsible for preparation of the ESG information and all the supporting records, including selecting appropriate
measurement and reporting criteria, in our Annual Report and Accounts, ESG Data Pack and the additional reports published on our website.
We recognise the importance of ESG disclosures and the quality of data underpinning it. We also acknowledge that our internal processes to
support ESG are in the process of being developed and currently rely on manual sourcing and categorisation of data. Certain aspects of our ESG
disclosures are subject to enhanced verification and assurance procedures including the first and second line of defence. We aim to continue to
enhance our approach in line with external expectations.
For 2022, ESG data is subject to stand-alone independent limited assurance reports by PwC in accordance with International Standard on
Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ and, in
respect of the greenhouse gas emissions, in accordance with International Standard on Assurance Engagements 3410 ‘Assurance
Engagements on Greenhouse Gas Statements’, issued by the International Auditing and Assurance Standards Board, on the following specific
ESG-related disclosures and metrics:
•our Green Bond Report 2022 (published in December 2022);
•our financed emissions for 2019 and 2020 for six sectors (see page 50);
•our progress towards our ambition to provide and facilitate $750bn to $1tn of sustainable finance and investment (see page 57);
•our own operations’ scope 1, 2 and 3 (business travel) greenhouse gas emissions data (see page 63), as well as supply chain
emissions data; and
•our 2019 baseline for financed emissions covering 38% of assets under management for our asset management business (see page
56).
The work performed by external parties to support their limited assurance report is substantially less than the work performed for a reasonable
assurance opinion, like those provided over financial statements.
Our data dictionaries and methodologies for preparing the above ESG-related metrics and third-party limited assurance reports can be found on:
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.

45 | HSBC Holdings plc Annual Report and Accounts 2022

Environmental TCFD
Transition to net zero
We are developing new solutions to the climate crisis and supporting the
transition of our customers, industries and markets to a net zero future, while
moving to net zero ourselves.
At a glance
Transition to net zero
Our net zero ambition represents one of our four strategic pillars. At the core of it is an ambition to support our customers on their transition to
net zero, so that the greenhouse gas emissions from our portfolio of clients reaches net zero by 2050. We also aim to be net zero in our
operations and supply chain by 2030. We have made good progress on our net zero ambition, including publishing an updated energy policy as
an important mechanism to meeting our financed emissions targets, and expanding our financed emissions targets to eight sectors in total. We
aim to provide and facilitate $750bn to $1tn of sustainable finance and investment to support our customers in their transition to net zero and a
sustainable future by 2030. We continue to engage with our clients on their transition plans and to provide them with financing solutions to
support their sustainability goals.
Our approach to climate risk
We recognise that to achieve our climate ambition we need to enhance our approach to managing climate risk. We have established a
dedicated programme to develop strong climate risk management capabilities.
We manage climate risks in line with our risk management framework and three lines of defence model. We also use stress testing and
scenario analysis to assess how these risks will impact our customers, business and infrastructure. This approach gives the Board and senior
management visibility and oversight of the climate risks that could have the greatest impact on HSBC, and helps us identify opportunities to
deliver sustainable growth in support of our climate ambition.
For further details on our approach to climate risk management, see ‘Environmental, social and governance risk’ on page 139, ‘Climate risk’ on page 221 and
‘Insights from scenario analysis’ on page 226.
Impact on reporting and financial statements
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 2022. We considered the impact on a number of areas of our balance sheet including expected
credit losses, classification and measurement of financial instruments, goodwill and other intangible assets, our owned properties, as well as
our long-term viability and going concern. As part of assessing the impact on our financial statements we conducted scenario analysis to
understand the impact of climate risk on our business (see page 67). For further details on our climate risk exposures, see page 145.
For further details of how management has considered the impact of climate-related risks on its financial position and performance see our ‘Critical accounting
estimates and judgements’ in Note 1 ‘Basis of preparation and significant accounting policies’ from page 335.

In this section |  |  |  |
Transition to net zero | Understanding our climate reporting | To achieve our climate ambition we need to be transparent on the opportunities, challenges, related risks and progress we make. | Page | 47
Our approach to the transition | We aim to achieve net zero in our financed emissions by 2050, and in our own operations and supply chain by 2030. | Page | 49
Financed emissions | We aim to align our financed emissions to achieve net zero by 2050 or sooner. | Page | 50
Supporting customers through transition | Our ability to help finance the transformation of businesses and infrastructure is key to building a sustainable future for our customers and society. | Page | 57
Unlocking climate solutions and innovations | We are working closely with a range of partners to help accelerate investment in natural resources, technology and sustainable infrastructure. | Page | 60
Biodiversity and natural capital strategy | By addressing nature-related risks and investing in nature, we have an opportunity to help accelerate the transition to net zero. | Page | 61
Our approach to our own operations | Part of our ambition to be a net zero bank is to achieve net zero carbon emissions in our operations and supply chain by 2030 or sooner. | Page | 62
Our approach to climate risk | Managing risk for our stakeholders | We manage climate risk across all our businesses in line with our Group-wide risk management framework. | Page | 64
Our approach to sustainability policies | Our sustainability risk policies seek to ensure that the financial services that we provide to customers do not contribute to unacceptable impacts on people or the environment. | Page | 65
Insights from scenario analysis | Enhancing our climate change stress testing and scenario analysis capability is crucial in identifying and understanding climate-related risks and opportunities. | Page | 67
Our approach to climate reporting | Task Force on Climate-related Financial Disclosures (‘TCFD’) | Our TCFD index provides our responses to each of the 11 recommendations and summarises where additional information can be found. | Page | 68

46 | HSBC Holdings plc Annual Report and Accounts 2022

Transition to net zero TCFD
Understanding our climate reporting
The transition to net zero is one of the biggest challenges for our generation
We recognise that our planet urgently needs drastic and lasting action to protect our communities, businesses and the natural environment
from the damaging effects of climate change.
Our ability to meet our net zero ambition – to align the financed emissions of our portfolio to net zero by 2050, and to become net zero in our
operations and supply chain by 2030 – relies on the pace of change taking place in the real economy and action among a broad set of
stakeholders, including policymakers. This will include responsible actions from both HSBC and our clients to address climate change.
We acknowledge that to achieve our climate ambition we need to be transparent on the opportunities, challenges, related risks and progress
we make. Our reporting will need to evolve to keep pace with market developments and we will aim to overcome challenges with regard to
consistency across different markets in which we operate. The role of standard setters and regulators will be important in achieving
standardisation. We have highlighted below some of the limitations and challenges that our organisation, and the wider industry, face with
regard to climate reporting.
Our transition will be challenging but we have an opportunity to make an impact
Our global footprint means that many of our clients operate in high-emitting sectors and regions that face the greatest challenge in reducing
emissions in the critical decades ahead to 2050. Their ability to transition effectively will be key to reaching a global net zero economy in time,
but they are often faced with increasingly high energy demand, relatively new carbon-intensive assets, and lower level of investments into clean
technologies.
Our approach is rooted in engagement with our clients to provide them with the capital and tools to help them transform their business models
and decarbonise. It is also rooted in the reality that a just and inclusive transition requires us to consider region-specific challenges and
opportunities. Additionally, countries are moving at different speeds and, given our geographical and sectoral spread, we will naturally have one
of the most complex transitions.
Limited international alignment on green taxonomies
Green finance taxonomies are not consistent globally, and evolving taxonomies and practices could result in revisions in our sustainable finance
reporting going forward. We recognise that there can be differing views of external stakeholders in relation to these evolving taxonomies, and
we will seek to align to enhanced industry standards as they are further developed. We aim to increase transparency across the different types
of green and transition finance and investment categories going forward, and plan to engage with standard setters to help evolve sustainable
finance product standards to best incentivise science-based decarbonisation, particularly in high transition risk sectors.
Engagement with clients on their transition at an early stage
Success will require governments, clients and finance providers to work together. Stable and strong policy environments are critical to
accelerating the energy transition. Active engagement between public and private stakeholders is fundamental to de-risk new technologies and
markets and establish new business structures.
We established a new process to assess client transition plans for our largest energy sector clients and those involved in thermal coal to help
inform areas for further engagement and guide business decisions. We acknowledge that our assessment of client transition plans is in the
initial stages and our engagement with clients on their plans and progress will need to continue to be embedded.
In December 2022, following extensive consultation with scientific and industry bodies, we published our updated energy policy and an update
to our thermal coal phase-out policy. These policies acknowledge a need to phase down financing of fossil fuels while also investing at scale in
climate solutions to enable a transition to net zero.
Need for enhanced governance, processes, systems, controls and data
Our climate ambition requires enhanced capabilities including governance, processes, systems and controls. We also need new sources of data,
some of which may be difficult to assure using traditional verification techniques. We continue to invest in our climate resources and skills, and
develop our business management process to integrate climate impacts. Our activities are underpinned by efforts and investment to develop
our data and analytics capabilities and to help ensure that we have the appropriate processes, systems, controls and governance in place to
support our transition.
We are taking steps to establish an ESG data utility tool to help streamline and support data needs across the organisation. We are enhancing
our processes, systems, controls and governance to help achieve the required scale to meet the demands of future ESG reporting. Certain
aspects of our reporting rely on manual sourcing and categorisation of data. This categorisation of data is not always aligned with how our
businesses are currently managed. We also have a dependency on emissions data from our clients. Given the manual nature, enhanced
verification and assurance procedures are performed on a sample basis over this reporting including the first and second line of defence. Our
models undergo independent review by an internal model review group, and we obtain limited assurance on our financed emissions and
sustainable finance disclosures from external parties including our external auditors.

47 | HSBC Holdings plc Annual Report and Accounts 2022

Understanding our climate reporting continued
Capturing the full-scope of our emissions
Having set on-balance sheet 2030 emissions targets for the oil and gas, and power and utilities sectors, we have now expanded our coverage to
include heavy industry and transport sectors, which are key drivers of energy demand. These sectors cover the most emissions-intensive parts
of our portfolio. We plan to extend our analysis to four additional sectors – shipping, agriculture, commercial real estate and residential real
estate – in our Annual Report and Accounts 2023 and related disclosures.
Our initial focus has been on on-balance sheet financing, including project finance and direct lending. We also have facilitated emissions from
our capital markets activities, through our underwriting in debt and equity capital markets and syndicated lending. We aim to update our targets
and baselines to include both on-balance sheet and off-balance sheet activities following the publication of the industry standard for capital
markets methodology by the Partnership for Carbon Accounting Financials (‘PCAF’). This should give guidance on how to apportion the
emissions responsibility between a facilitator and an investor within capital markets activities.
Our Asset Management business released a coal phase-out policy in September 2022, and made its initial emissions disclosure in November
2022 with a portfolio decarbonisation target for 2030 to align investments with the goals of the Paris Agreement. The commitment covers listed
equity and corporate fixed income where data and methodologies are most mature. We will also consider the inclusion of emissions on our
insurance business.
Disclosure challenges for year-end reporting
Given the challenges on data sourcing, as well as the evolution of our processes and industry standards as mentioned above, there has been an
impact on certain climate disclosures:
–Thermal coal exposures: We acknowledge that our processes, systems, controls and governance are not yet designed to fully identify
and disclose thermal coal exposures, particularly for exposures within broader conglomerates. We are reassessing the reliability of our
data and reviewing our basis of preparation to help ensure that we are reporting all relevant thermal coal exposures aligned to our
thermal coal policy. As a result, we have not reported thermal coal exposures in this Annual Report and Accounts 2022. We expect
that our updated thermal coal exposure dating back to 31 December 2020 will be made available for reporting as soon as practicable
in 2023, although this is dependent on availability and quality of data.
–Facilitated emissions: In March 2022, we said we would set capital markets emissions targets for the oil and gas, and power and
utilities sectors based on the industry reporting standard from the PCAF once published. We have chosen to defer setting targets for
facilitated emissions until the PCAF standard for capital markets is published, which is expected in 2023. We had intended to disclose
facilitated emissions for 2019 and 2020 for the oil and gas, and power and utilities sectors for transparency, as we did last year.
However, following internal and external assurance reviews performed during the year, we identified certain data and process
limitations and have deferred the publication of our facilitated emissions for 2019 and 2020 for these two sectors while additional
verification procedures are performed. We aim to provide these disclosures as soon as practicable in 2023. We continue to monitor
the developments in industry standards for the publication of such emissions and associated targets, and, as mentioned above, we
will seek to align to the PCAF standard when published. However, we will aim to provide transparency on our 2019 and 2020
facilitated emissions for the oil and gas, and power and utilities sectors as they become available, which may be in advance of the
PCAF standard being available.
–Shipping financed emissions targets: For the shipping sector, we have chosen to defer setting a baseline and target until there is
sufficient reliable data to support our work, allowing us to more accurately track progress towards net zero.
Continuing to evolve our climate disclosures
In 2023, we plan to publish our first Group-wide climate transition plan to provide further details of our strategic approach to net zero and how
we plan to transform our organisation to execute our ambition. We also aim to publish an updated deforestation policy and build out our
financed emissions portfolio coverage to include agriculture, residential real estate, commercial real estate and shipping, and plan to update our
targets for certain sectors to include facilitated emissions once the PCAF standard is launched.
In 2023, we will continue to review our approach to disclosures, with our reporting needing to evolve to keep pace with market developments.
> For details of assurance around ESG data, see page 45.
> For details of our approach to calculating financed emissions and the relevant data and methodology limitations, see page 52.
> For details of our sustainable finance and investment ambition, see page 57.
> For details of our approach to thermal coal, see page 66.
Awarded as a green lease leader
We are carrying out a programme to promote green lease clauses across our global portfolio of leased buildings, which commit our landlords to
helping us reduce our impact on the environment. As part of this programme, in May 2022, we agreed to move our US headquarters to The
Spiral office tower at 66 Hudson Boulevard in Manhattan, New York, which we expect to reduce our total energy consumption by 60%
compared with 2021. The Spiral is on track to achieve industry leading LEED Gold and Fitwel certifications for sustainability and building health.
Alongside our real estate broker JLL, and our landlord Tishman Speyer, we were recognised by the Green Lease Leaders Organisation with a
Green Lease Leaders Team Transaction Award – Platinum Level, for our collaboration to improve the energy efficiency and sustainability of
buildings.

HSBC Holdings plc Annual Report and Accounts 2022 | 48

Our approach to the transition
We are committed to a net zero future. Our global footprint means we play a significant role in the sectors and regions most critical to the
transition to net zero. Many of our clients operate in the high-emitting sectors and regions that face the greatest challenge in reducing
emissions. This means we can have a significant impact in helping to drive down emissions in the real economy, but this is a challenging
process that will take time.
The Paris Agreement aims to limit the rise in global temperatures to well below 2°C, preferably to 1.5°C, compared with pre-industrial levels. To
limit the rise in global temperatures to 1.5°C, the global economy would need to reach net zero greenhouse gas emissions by 2050. We are
committed to a science-aligned phase-down of fossil fuel finance in line with the Paris Agreement.
We have committed to publish our own Group-wide climate transition plan in 2023. This plan will bring together our climate strategy, science-
based targets, and how we plan to embed this into our processes, policies, governance and capabilities. It will outline, in one place, not only our
commitments, targets and approach to net zero across the sectors and markets we serve, but also how we are transforming our organisation to
embed net zero and help finance the transition. Our approach to nature and enabling a just and resilient transition will also be incorporated into
our climate transition plan.
Our net zero policies
In December 2022, we published our updated policy covering the broader energy system, including upstream oil and gas, oil and gas power
generation, coal, hydrogen, renewables and hydropower, nuclear, biomass and energy from waste. The policy seeks to balance three related
objectives: driving down global greenhouse gas emissions; enabling an orderly transition that builds resilience in the longer term; and supporting
a just and affordable transition. In December, we also expanded our thermal coal phase-out policy, in which we committed to not providing new
finance or advisory services for the specific purposes of the conversion of existing coal-to-gas-fired power plants, or new metallurgical coal
mines. Our updated energy and thermal coal phase-out policies were drafted in consultation with leading independent scientific and
international bodies and investors. Details on the policies can be found in ‘Our approach to sustainability policies’ on page 65.
Working with our customers and suppliers
We believe we can make the most significant impact by working with our customers to support their transition to a net zero global economy.
We aim to align our financed emissions to net zero by 2050 or sooner. We are setting targets on a sector by sector basis that are consistent
with net zero outcomes by 2050. In assessing financed emissions, we focus on those parts of the sector that we consider are most material in
terms of greenhouse gas emissions, and where we believe engagement and climate action have the greatest potential to effect change, taking
into account industry and scientific guidance.
We have set interim 2030 targets for on-balance sheet financed emissions for eight sectors. These include six sectors for which we have
reported 2019 and 2020 emissions: oil and gas; power and utilities; cement; iron, steel and aluminium; aviation; and automotive. We have also
set targets for thermal coal power and thermal coal mining.
In 2022, we established a process to assess client transition plans to help inform areas for further engagement and guide business decisions.
We expect engagement with our customers on their transition plans to form a core part of our approach as we pursue our targets. We
acknowledge that our assessment of client transition plans is in the initial stages and our engagement with clients on their plans and progress
will need to continue to be embedded.
We aim to become net zero in our operations and supply chain by 2030. This covers our direct and indirect greenhouse gas emissions, known
as scope 1, 2 and 3 emissions. As well as transforming our own operations and supply chain to net zero, we are asking our suppliers to do the
same.
The next section provides further details on how we are measuring our progress on our financed emissions ambition. For further details of the
progress made to date on our own operations and supply chain, see page 62. The diagram below shows how these ambitions map to our scope
1, 2 and 3 emissions.
Explaining scope 1, 2 and 3 emissions
To measure and manage our carbon emissions, we follow the Greenhouse Gas Protocol global framework, which identifies three scopes of
emissions. Scope 1 represents the direct emissions we create. Scope 2 represents the indirect emissions resulting from the use of electricity
and energy to run a business. Scope 3 represents indirect emissions attributed to upstream and downstream activities taking place to provide
services to customers. Our upstream activities include business travel and emissions from our supply chain including transport, distribution and
waste. Our downstream activities include those related to investments and financed emissions.
Under the protocol, scope 3 emissions are also broken down into 15 categories, of which we provide reporting emissions data for three related
to upstream activities, which are: purchased goods and services (category 1); capital goods (category 2); and business travel (category 6). We
also provide reporting data for one category related to downstream activities, which is investments and financed emissions (category 15).
> For further breakdown of our scope 1, 2 and 3 emissions, see our ESG Data Pack at www.hsbc.com/esg.

Our own operations and supply chain (see page 63) | Our financed emissions (see page 51)
Scope 2 Indirect | Scope 3 Indirect | Scope 1 Direct | Scope 3 Indirect
↑ | ↑ | ↑ | ↑
| Purchased goods and services (category 1) |  |
Electricity, steam heating and cooling | Company facilities |
| Investments and financed emissions (category 15)
Capital goods (category 2) |
|  | Company vehicles
| Business travel (category 6)
Upstream activities | HSBC Holdings | Downstream activities

49 | HSBC Holdings plc Annual Report and Accounts 2022

Financed emissions TCFD
We announced our ambition to become a net zero bank in October 2020, including an aim to align our financed emissions to net zero by 2050 or
sooner. We plan to publish initial financed emissions targets for 2030, and in five-year increments thereafter. We remain committed to working
with our customers to support their journey towards a net zero future, and deploying capital towards decarbonisation solutions for the most
emissions-intensive sectors.
Our analysis of financed emissions considers on-balance sheet financing, including project finance and direct lending. We distinguish between
‘on-balance sheet financed’ and ‘facilitated’ emissions where necessary. Financed emissions link the financing we provide to our customers and
their activities in the real economy, and provide an indication of the greenhouse gas emissions associated with those activities. They form part
of our scope 3 emissions, which include emissions associated with the use of a company’s products and services. We also recognise that we
have more to do to embed these targets in our business, including enhanced capabilities and new sources of data as set out on page 47.
In 2021, we started measuring our financed emissions for two emissions-intensive sectors: oil and gas, and power and utilities. On the
following pages, we present the progress for both sectors against the on-balance sheet financed emissions baseline that we now measure
ourselves against. We have also begun measuring the financed emissions and setting targets for four additional sectors: cement; iron, steel and
aluminium; aviation; and automotive. During our analysis of the shipping sector, we noted significant data gaps. We have therefore chosen to
defer setting a baseline and target for this sector until there is sufficient reliable data to support our work.
We plan to measure and report progress on an annual basis, and plan to extend our analysis to four new sectors – shipping, agriculture,
commercial real estate and residential real estate – in our Annual Report and Accounts 2023 and related disclosures. For the new sectors, we
plan to set production intensity targets. We believe these targets are robust as they are linked to real world production, and allow us to deploy
capital towards solutions for progressive decarbonisation, supporting our clients’ transition plans.
Our approach to financed emissions
In our approach to assessing our financed emissions, our key methodological decisions were shaped in line with industry practices and
standards. We recognise these are still developing.
Coverage of our analysis
For each sector, we focused our analysis on the parts of the value chain where we believe the majority of emissions are produced based upon
industry benchmarks, and to help reduce double counting of emissions. For aviation, we have focused on scope 1 emissions from airlines and
scope 3 from aircraft lessors as we believe the use of lower emissions aviation fuels and different propulsion systems for new aircraft is where
attention needs to be prioritised to meet net zero targets. By estimating emissions and setting targets for customers that directly account for, or
indirectly control the majority of emissions in each industry, we can focus our engagement and resources where we believe the potential for
change is highest.
With regards to the different types of greenhouse gases measured, we include CO 2 and methane (measured in CO 2 e) for the oil and gas
sectors, and CO 2 only for the remaining sectors due to data availability and greenhouse gas emissions materiality within each sector.
To calculate annual on-balance sheet financed emissions, we used drawn balances as at 31 December in the year of analysis related to
wholesale credit and lending, which included business loans, trade and receivables finance, and project finance as the value of finance provided
to customers. We excluded products that were short term by design, which are typically less than 12 months in duration, following guidance
from the Partnership for Carbon Accounting Financials (‘PCAF’), and to reduce volatility.
The chart below shows the scope of our financed emissions analysis of the six sectors, including upstream, midstream and downstream
activities within each sector.

Sector | Scope of emissions | Value chain in scope |  |  | Coverage of greenhouse gases
Oil and gas | 1, 2 and 3 | Upstream (e.g. extraction) | Midstream (e.g. transport) | Downstream (e.g. fuel use) | Integrated/diversified | CO 2/methane
Power and utilities | 1 and 2 | Upstream (e.g. generation) | Midstream (e.g. transmission and distribution) | Downstream (e.g. retail) | CO 2
Cement | 1 and 2 | Upstream (e.g. raw materials, extraction) | Midstream (e.g. clinker and cement manufacturing) | Downstream (e.g. construction) | CO 2
Iron, steel and aluminium | 1 and 2 | Upstream (e.g. raw materials, extraction) | Midstream (e.g. ore to steel) | Downstream (e.g. construction) | CO 2
Aviation | 1 for airlines, 3 for aircraft lessors | Upstream (e.g. parts manufacturers) | Midstream (e.g. aircraft manufacturing) | Downstream (e.g. airlines and air lessors) | CO 2
Automotive | 1, 2 and 3 | Upstream (e.g. suppliers) | Midstream (e.g. motor vehicle manufacture) | Downstream (e.g. retail) | CO 2

Key:

Included in analysis

50 | HSBC Holdings plc Annual Report and Accounts 2022

Setting our targets
We set targets for sectors based on decarbonisation pathways that are constructed using the Net Zero Emissions by 2050 scenario produced by
the International Energy Agency (‘IEA’).
Following guidance from the Net-Zero Banking Alliance (‘NZBA’) and the Science Based Targets Initiative (‘SBTi’) this scenario has low reliance
on negative emissions technologies, or the possibility for the rise in global temperatures to exceed 1.5°C before cooling again. The scenario
makes reasonable assumptions about the potential for carbon sequestration through nature-based solutions and land use change.
Our approach for financed emissions accounting does not rely on purchasing offsets to achieve any financed emissions targets we set.
Meeting our targets for 2030 is dependent on immediate and significant deployment of available clean technology solutions, as shown by the
IEA’s Net Zero by 2050 roadmap for the global energy sector. Innovation in this decade needs to be accompanied by large‐scale construction of
infrastructure to enable the implementation of cleaner technologies. This will require strong policy support and public and private capital to be
deployed at scale.
We also recognise that the supply and demand side of the market need to move concurrently. The reduction of fossil fuels in favour of clean
energy supply needs to be matched by an increase in demand from industry, buildings and transport to consume clean energy. Both the supply
and demand still require significant policy support to enable this transition economically.
An evolving approach
We believe methodologies for calculating financed emissions and setting targets should be transparent and comparable, and should provide
science-based insights that focus engagement efforts, inform capital allocation and develop solutions that are both timely and impactful. We
continue to engage with regulators, standard setters and industry bodies to shape our approach to measuring financed emissions and managing
portfolio alignment to net zero. We also work with data providers and our clients to help us gather data from the real economy to improve our
analysis.
Scenarios used in our analysis are modelled upon allocation assumptions of the available carbon budget and actions that need to be taken to
drive the global transition to 1.5°C outcomes. Assumptions include technology development and/or adoption, shifts in the energy mix, the
retirement of assets, behavioural changes and implementation of policy levers, among others. We expect that scenario developers will be
continually working to improve the usability, accuracy and granularity of pathways.
Leading the electric battery charge in Indonesia
We are supporting Hyundai in its journey to produce only electrical vehicles by 2040. We acted as a mandated lead arranger and lender towards
a $711m loan to a joint venture company between Hyundai Motor, Kia, Hyundai Mobis and LG Energy Solution. The financing will help fund the
construction of an electric vehicle battery manufacturing plant in Karawang, Indonesia, which would be the first in south-east Asia. The facility
will have an annual production capacity of 10 gigawatt hours (‘GWh’)-worth of lithium-ion battery cells.
As the electric vehicle battery sector continues to grow, the facility will help establish Indonesia as an electric vehicle supply chain hub in Asia
and be a crucial contributor to Hyundai’s net zero ambitions in the region.
Connecting the offshore energy industry
The global transition to a net zero economy provides opportunities for companies looking to create new connections to renewable energy
sources. UK-based JDR Cable Systems, which is part of TFK Group, links global offshore energy sources to the land using its subsea cable
technology. As it looks to expand its production, and with the backing of UK Export Finance, we helped to provide a £100m investment loan to
finance the building of a new facility in Cambois, near Blyth, Northumberland. The new facility, which occupies the site of a former coal-fired
power station, will help JDR expand its product portfolio. It is expected to complete in 2024.

51 | HSBC Holdings plc Annual Report and Accounts 2022

Financed emissions continued
Data and methodology limitations
Our financed emissions estimates and methodological choices are shaped by the availability of data for the sectors we analyse.
–We are members of Partnership for Carbon Accounting Financials (‘PCAF’), which seeks to define and develop greenhouse gas
accounting standards for financial institutions. PCAF developed the Global GHG Accounting and Reporting Standard for the Financial
Industry, which focuses on measuring and reporting financed emissions. The PCAF Standard provides guidance on assigning data
quality scoring per asset class, creating data transparency and encouraging improvements to data quality in the medium and long
term.
–We found that data quality scores varied across the different sectors and years of our analysis, although not significantly. While we
expect our data quality scores to improve over time, as companies continue to expand their disclosures to meet growing regulatory
and stakeholder expectations, there may be fluctuations within sectors year on year, and/or differences between the data quality
scores between sectors due to changes in data availability.
–The majority of our clients do not yet report the full scope of greenhouse gas emissions included in our analysis, in particular scope 3
emissions. In the absence of client-reported emissions, we estimate them using proxies based on company production and revenue
figures, and validated key data inputs with our global relationship managers. Although we sought to minimise the use of non-
company-specific data, we applied industry averages in our analysis where company-specific data was unavailable. As data improves,
estimates will be replaced with reported figures. Our 2019 emissions for our oil and gas, and power and utilities sectors have been
revised as a result of changes to data sources.
–Third-party data sets that feed into our analysis may have up to a two-year lag in reported emissions figures, and we are working with
data providers to help reduce this.
–The methodology and data used to assess financed emissions and set targets are new and evolving, and we expect industry
guidance, market practice, and regulations to continue to change. We plan to refine our analysis using appropriate data sources and
current methodologies available for the sectors we analyse.
–In line with the PCAF Standard, to calculate sector-level baselines and annual updates, our portfolio-level financed emissions are
weighted by the ratio of our financing in relation to the value of the financed company. We believe this introduces volatility and are
assessing if portfolio weight is more appropriate. We remain conscious that the economic value used in the financed emissions
calculation is sensitive to changes in drawn amounts or market fluctuations, and we plan to be transparent around drivers for change
to portfolio financed emissions where possible.
–The classification of our clients into sectors is performed with inputs from subject matter experts and will also continue to evolve with
improvements to data and our sector classification approach.
–The operating environment for climate analysis and portfolio alignment is also maturing. We continue to work to improve our data
management processes, and are implementing steering mechanisms to align our provision of finance with the goals and timelines of
the Paris Agreement.
Our methodology for financed emissions is set out in our Financed Emissions Methodology, which is available at www.hsbc.com/who-we-are/
esg-and-responsible-business/esg-reporting-centre.
Targets and progress
We have set out in the table below our defined targets for the on-balance sheet financed emissions for the following sectors: oil and gas; power
and utilities; cement; iron, steel and aluminium; aviation; and automotive. On the following pages, we provide more granular details on our
financed emissions within these sectors.

Sector | 2019 baseline | 2020 progress | 2030 target | Unit 1 | Target type | Target scenario
Oil and gas | 33.0 | 30.1 | (34)% | Mt CO2e | Absolute | IEA NZE 2050
Power and utilities 2 | 589.9 | 509.6 | 138 | tCO2/GWh | Intensity | IEA NZE 2050
Cement | 0.64 | 0.64 | 0.46 | tCO2/t cement | Intensity | IEA NZE 2050
Iron, steel and aluminium 3 | 1.8 | 2.0 | 1.05 (1.43) | tCO2/t metal | Intensity | IEA NZE 2050
Aviation | 84.0 | 103.9 | 63 | tCO2/million rpk | Intensity | IEA NZE 2050
Automotive | 191.5 | 176.2 | 66 | tCO2/million vkm | Intensity | IEA NZE 2050

1 Our absolute and intensity emission metrics and targets are measured based on the drawn exposures of the counterparties in scope for each sector, which is a
subset of our total loans and advances. For the oil and gas sector, absolute emissions are measured in million tonnes of carbon dioxide (‘Mt CO2e’) and intensity is
measured in million tonnes of carbon dioxide per exajoule (‘Mt CO2e/Ej’); for the power and utilities sector, it is measured in tonnes of carbon dioxide equivalent per
gigawatt hour (‘tCO2/GWh’); for the cement sector, it is measured in tonnes of carbon dioxide per tonne of cement (‘tCO2/t cement’); for the iron, steel and
aluminium sector, it is measured in tonnes of carbon dioxide per tonne of metal (‘tCO2/t metal’); for the aviation sector, it is measured in tonnes of carbon dioxide
per million revenue passenger kilometres (‘tCO2/million rpk’); and for the automotive sector, it is measured in tonnes of carbon dioxide per million vehicle kilometres
('tCO2/million vkm’).
2 Our power and utilities target units have been revised from our 2021 analysis, and the target has been revised from 0.14 Mt CO2e/TWh to 138 tCO2/GWh due to
rounding. The target value remains unchanged.
3 While the iron, steel and aluminium 2030 target is aligned with the IEA Net Zero Emissions by 2050 scenario, we also reference the Mission Possible Partnership
Technology Moratorium scenario, whose 2030 reference range is shown in parentheses.

52 | HSBC Holdings plc Annual Report and Accounts 2022

Financed emissions continued
When assessing the changes from 2019 to 2020, it is important to emphasise the long-term commitment that is needed to meet our 2030
interim targets and how changes to exposure and market fluctuations impact yearly updates. Movement from one year to the next may not
reflect future trends for the financed emissions of our portfolio, and as we are at the beginning of our journey to track and measure progress,
we believe it would be premature to infer future trends from the 2019 to 2020 progress at this stage. In addition, the Covid-19 pandemic led to
anomalies in our portfolio’s financed emissions for 2020.
For some sectors, our financed emissions baseline will be different from the Net Zero Emissions by 2050 reference scenario baseline. Where
we have applied an absolute reduction target such as for the oil and gas sector, and the target is defined as a percentage reduction from the
baseline they will be the same. Similarly, when the sector portfolio intensity is very similar to that of the global average, the baselines may be
the same.
We plan to report financed emissions and progress against our targets annually and to be transparent in our disclosures about the
methodologies applied. However, financed emissions figures may not be reconcilable or comparable year on year, and targets may require
recalibration as data, methodologies and reference scenarios develop.
Oil and gas
For the oil and gas sector, we cover all scopes for upstream as well as integrated companies to help ensure we include the vast majority of CO2
and methane emissions created by crude oil and natural gas extraction and consumption. In line with the IEA Net Zero Emissions by 2050
scenario, we target an absolute reduction of 34% in on-balance sheet financed emissions by 2030, using 2019 as our baseline. We believe
decarbonising the energy system, and therefore our ability to meet our targets, requires electrification of the economy, combined with a shift
from consuming fossil fuels towards the use of more renewable electricity and alternative fuels.
Due to data quality and modelling improvements, we have revised our 2019 baseline to 33.0 million tonnes of carbon dioxide (‘Mt CO2e’). The
sector’s PCAF data quality score is 2.7 for scope 1 and 2, and 2.9 for scope 3 in 2019, indicating that we need to find better data sources, such
as reported and verified emissions. Many clients report scope 1 and 2, but for scope 3 we have had to estimate many data points using
production and revenue proxies, in line with PCAF guidance. In 2020, absolute financed emissions decreased 9%, mostly as a result of changes
in our portfolio during the first year of the Covid-19 pandemic.

Oil and gas Mt CO2e | 2020 progress from baseline
| (9)%

Power and utilities
For the power and utilities sector, we include scope 1 and 2, and focus on power generation only. We also follow the IEA Net Zero Emissions
by 2050 scenario and target an on-balance sheet financed emissions intensity of 138 tonnes of carbon dioxide equivalent per gigawatt hour
(‘tCO2/GWh’) by 2030, using 2019 as our baseline. The power and utilities sector is expected to expand significantly as the electrification of
transport, heating and other activities will drive an increase in electricity demand. To enable this growth through low-emission sources of
electricity, we have chosen an intensity target. We believe financing for renewable electricity will need to increase significantly to help us meet
our targets, alongside smart grids and energy storage.
Due to data quality and modelling improvements, we have revised our 2019 baseline to 589.9 tCO2/GWh, which is higher than the IEA global
average. The PCAF score is 3.3, for scope 1 and 2 in 2019, as many of our smaller clients are not disclosing their scope 1 to 2 emissions. These
have mostly been estimated using production or revenue, which will be replaced when we have reported and verified emissions from clients. In
2020, the emissions intensity of our portfolio decreased by 14% as a result of clients moving their generation mix to lower emission sources
and portfolio shifts.

Power and utilities2 tCO2/GWh | 2020 progress from baseline
| (14)%

Cement
We cover scope 1 and 2 for all companies with clinker and cement manufacturing facilities. In line with the IEA Net Zero Emissions by 2050
scenario, we target an on-balance sheet financed emissions intensity of 0.46 tonnes of carbon dioxide per tonne of cement (‘tCO2/t cement’) by
2030, using 2019 as our baseline. Some emission reductions can be achieved through energy efficiency. However, we believe that to
significantly reduce fuel and process emissions from cement manufacturing, and our ability to meet our targets, large-scale investments are
required in new technologies, such as clinker substitution, alternative fuel use such as bioenergy, and carbon capture use and storage. Our 2020
emission intensity stayed level with 2019, as there were no significant changes to the emission intensity of our clients. The PCAF score for the
cement sector is 2.2 for scope 1 and 2 in 2019, which is higher compared with other sectors, as we have reported emissions data for a large
portion of our clients, and have only needed to estimate emissions through production or revenue proxies for the smaller clients in our portfolio.

Cement tCO2/t cement | 2020 progress from baseline
| 0

Key

— Net Zero Emissions by 2050 Scenario | — On-balance sheet financed emissions intensity

53 | HSBC Holdings plc Annual Report and Accounts 2022

Iron, steel and aluminium
We cover scope 1 and 2 for midstream iron, steel and aluminium production. Due to the low materiality of the aluminium sector’s financed
emissions within our portfolio, we have combined them with our iron and steel financed emissions. For the iron, steel and aluminium sector, we
target an on-balance sheet financed emissions intensity of 1.05 (1.43) tonnes of carbon dioxide per tonne of metal (‘tCO2/t metal’) by 2030,
using 2019 as our baseline. We use the IEA Net Zero Emissions by 2050 scenario as our core target scenario, and have included the net zero-
aligned Mission Possible Partnership Technology Moratorium as an alternative scenario. We recognise that our ability to meet our targets in so-
called ‘hard-to-abate’ sectors is dependent on strong policy support to unlock widespread investment and the scaling up of crucial nascent
technologies. We will continue to monitor the progress in the uptake of low-carbon technologies, and assess real economy progress against the
IEA and Mission Possible Partnership scenarios. The emissions intensity in 2020 rose due to increased financing to the aluminium sector, which
has a higher carbon intensity than that of steel. The PCAF score is 2.5 in 2019, as only a small number of clients have reported emissions, and
for many we have had to make estimates based on their revenue.

Iron, steel and aluminium3 tCO2/t metal | 2020 progress from baseline
| 11%

Aviation
In the aviation sector, we included airlines’ scope 1 emissions and aircraft lessors’ scope 3 emissions, as we believe this captures direct
emissions from aircraft as the main source of emissions. We exclude military and dedicated cargo flights. As per the IEA Net Zero Emissions by
2050 scenario, we target an on-balance sheet financed emissions intensity of 63 tonnes of carbon dioxide per revenue passenger kilometre
(‘tCO2/rpk’) by 2030, using 2019 as our baseline. To reach these intensity levels, and help meet our targets, we believe the sector needs
significant policy support investments into alternative fuels, such as sustainable aviation fuel, and new aircraft to reduce emissions. Sustainable
aviation fuel is currently too costly and in limited supply, so the industry’s decarbonisation efforts are highly dependent on partnerships between
energy companies, airlines and aircraft manufacturers. Due to the travel disruption caused by the Covid-19 pandemic in 2020, emissions
intensity figures increased significantly as aeroplanes carried fewer passengers on average. This can be seen in the IEA numbers as well as our
client portfolio. For the aviation sector, the PCAF score is 2.8 for scope 1 and 2, and 2.8 for scope 3 in 2019, as emissions or production data is
available for most clients, although we continue to have a challenge with finding reported emissions from smaller firms.

Aviation tCO2/million rpk | 2020 progress from baseline
| 24%

Automotive
For the automotive sector, we look at scope 1, 2 and 3 emissions from the manufacturing of vehicles, and tank-to-wheel exhaust pipe
emissions for light-duty vehicles. We excluded heavy-duty vehicles from our analysis, following industry practice. We will consider including
them at a later stage of our analysis as data and methodologies develop. We target an on-balance sheet financed emissions intensity of 66
tonnes of carbon dioxide per vehicle kilometre (‘tCO2/vkm’) by 2030, using 2019 as our baseline. This is in line with the IEA Net Zero Emissions
by 2050 scenario, modified to match the share of new in-year vehicle sales for light-duty vehicles. We believe decarbonisation of the automotive
sector, and therefore our ability to meet our targets, needs large-scale investments in new electric vehicle and battery manufacturing plants,
widespread charging infrastructure, and government policies to support electric vehicles. Our 2020 intensity reduced by 8% as a result of
clients manufacturing more efficient vehicles, and the increased sales of electric vehicles. The PCAF score for the automotive sector is only 3.3
for scope 1 and 2, and 3.4 for scope 3 in 2019, as most companies only report their scope 1 and 2 emissions. We had to estimate scope 3
emissions using vehicle production numbers. Increased self-reporting of scope 3 emissions from clients would significantly improve data
quality.

Automotive tCO2/million vkm | 2020 progress from baseline
| (8)%

Key

— Net Zero Emissions by 2050 Scenario | — On-balance sheet financed emissions intensity | – – MPP Tech Moratorium

Our analysis of shipping emissions
As part of our work in 2022, we analysed financed emissions for the shipping sector to establish a baseline. During our analysis we noted
significant data gaps in reported emissions and data from external vendors at the company level. For scope 1 emissions, which are typically the
easiest to source, we would have needed to have made estimates using outstanding amounts rather than production or revenue indicators,
which would have resulted in the least accurate data quality scoring. We have therefore chosen to defer setting a baseline and target for this
sector until there is sufficient reliable data to support our work, allowing us to more accurately set a baseline and track progress towards net
zero. We will continue to engage with strategic clients within the sector to encourage disclosure and discuss their transition plans. We believe
the shipping industry will require significant policy support and innovation to allow for the use of lower emissions fuels in existing as well as
new ships. On the supply side, the provision of low-carbon fuels will need to increase sufficiently to meet this new demand.

54 | HSBC Holdings plc Annual Report and Accounts 2022

Financed emissions
The table below summarises the results of our assessment of financed emissions using 2019 and 2020 data.

|  | On-balance sheet financed emissions – wholesale credit lending and project finance 1,2
Sector | Year | Scope 1–2 (Mt CO2)† | Scope 3 (Mt CO2)† | Emissions intensity | PCAF data quality score 3,†
Scope 1 and 2 | Scope 3
Oil and gas 4, 5 | 2019 | 3.7 | 29.3 | 72.2 | 2.7 | 2.9
2020 | 3.3 | 26.8 | 71 | 2.7 | 2.9
Power and utilities 4,5 | 2019 | 12.1 | N/A | 589.9 | 3.3 | N/A
2020 | 11.8 | N/A | 509.6 | 3.2 | N/A
Cement | 2019 | 2.2 | N/A | 0.64 | 2.2 | N/A
2020 | 1.3 | N/A | 0.64 | 2.3 | N/A
Iron, steel and aluminium | 2019 | 3.2 | N/A | 1.8 | 2.5 | N/A
2020 | 2.7 | N/A | 2 | 2.8 | N/A
Aviation | 2019 | 6.2 | 0.11 | 84 | 2.8 | 2.8
2020 | 4.9 | 0.08 | 103.9 | 2.6 | 3
Automotive | 2019 | 0.11 | 4.0 | 191.5 | 3.3 | 3.4
2020 | 0.14 | 4.9 | 176.2 | 3.2 | 3.3

1 Total amount of short-term finance excluded for all sectors listed is $9.3bn in 2019 and $7.6bn in 2020
2 Total loans and advances analysed in 2019 were $38.3bn representing 1.7% of wholesale credit and lending and project finance at 31 December 2019, and in 2020
were $34.7bn representing 1.7% of wholesale credit and lending and project finance at 31 December 2020.
3 PCAF scores where 1 is high and 5 is low. This is a weighted average score based financing for on-balance sheet financed emissions.
4 In the Annual Report and Accounts 2021 the units for power and utilities were reported last year as MtCO2e, and are now amended to Mt CO2. Oil and gas absolute emissions are
measured in MtCO2e. This year we amended the units for the power and utilities sector from Mt CO2e/TWh’ to tCO2/GWh to align to market practice. While the target value
remains unchanged this has led to a revision in the figure reported from 0.14 Mt CO2e/TWh’ to 138 tCO2/GWh.
5 Our 2019 emissions for our oil and gas, and power and utilities sectors have been revised due to changes in data impacting drawn amounts of client lending, and
amendments to the assumptions governing the in-scope client population.
† Data is subject to independent limited assurance by PwC in accordance with ISAE 3000/ ISAE 3410. For further details, see our Financed Emissions Methodology
and PwC's limited assurance report, which are available at www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
Our analysis of facilitated emissions
In March 2022, we said we would set capital markets emissions targets for the oil and gas, and power and utilities sectors based on the
industry reporting standard from the PCAF once published. We have chosen to defer setting targets for facilitated emissions until the PCAF
standard for capital markets is published, which is expected in 2023. We had intended to disclose facilitated emissions for 2019 and 2020 for
the oil and gas, and power and utilities sectors for transparency, as we did last year. However, following internal and external assurance reviews
performed during the year, we identified certain data and process limitations and have deferred the publication of our facilitated emissions for
2019 and 2020 for these two sectors while additional verification procedures are performed. We aim to provide these disclosures as soon as
practicable in 2023. We continue to monitor the developments in industry standards for the publication of such emissions and associated
targets, and, as mentioned above, we will seek to align to the PCAF standard when published. However, we will aim to provide transparency on
our 2019 and 2020 facilitated emissions for the oil and gas, and power and utilities sectors as they become available, which may be in advance
of the PCAF standard being available.

55 | HSBC Holdings plc Annual Report and Accounts 2022

Financed emissions continued
Embedding financed emissions into our business
Our net zero ambition is underpinned by our relationships with customers and collective engagement, so that we are able to support our
customers to take action to address climate change in their own activities.
To achieve this, we aim to embed how we manage and assess financed emissions within our financing portfolios to provide a basis for
informing client engagement and business management decisions from a climate perspective.
In 2022, we developed an operating model across our Global Sustainability teams to strengthen our processes, systems, controls and
governance. The Global Sustainability function also established a Sustainability Centre of Excellence, a team of sustainability specialists with
deep subject matter expertise on new climate technologies, climate analytics and transition planning and assessment, to help us fulfil our net
zero commitments and serve our customers.
The Global Sustainability Centre of Excellence, together with the Group Risk and Compliance, and Global Finance functions, have continued to
develop our approach, including working to embed financed emissions into our business activities and culture. We have strengthened our
climate data and analytics capability to help inform decision making and portfolio management, as well as expanded the resources to support
business engagement.
We are placing climate and sustainability at the heart of our engagement with customers, and in particular those customers with the greatest
potential to effect change. In 2022, we requested and assessed transition plans for EU and OECD managed clients in scope of our thermal coal
phase-out policy. We have also requested and are assessing transition plans for our major oil and gas clients (see page 49).
We aim to provide and facilitate $750bn to $1tn of sustainable finance and investment by 2030 to support our customers in their transition to
net zero and a sustainable future. In 2022, we also started to develop an approach for allocating financing to scale technologies critical to reach
net zero.
Our own climate transition plan will bring together our financed emissions targets and climate strategy, with how we plan to embed this into our
processes, infrastructure, governance and engagement.
The next section provides further detail on how we are embedding net zero considerations into our customer engagement and unlocking
finance to support our customers on their transition to net zero and a sustainable future.
Reducing emissions in our assets under management
In July 2021, our asset management business, HSBC Asset Management, signed up to the Net Zero Asset Managers initiative, which
encourages investment firms to commit to manage assets in line with the attainment of net zero emissions by 2050.
In November 2022, HSBC Asset Management announced its ambition of reducing scope 1 and 2 carbon emissions by 58% by 2030 for 38% of
its total assets under management, consisting of listed equity and corporate fixed income, which amounted to $193.9bn at 31 December 2019.
A baseline year of 2019 was chosen for our calculations as it offered a more realistic picture of the level of carbon emissions intensity than the
period after the pandemic. Our baseline for the emission intensity of our portfolio in 2019 was 131tCo2e/M$ invested, which includes scope 1
and 2 emissions of companies in our portfolio.
Our baseline represents the emissions associated with our investing activities in terms of emissions per dollar invested relevant of the assets
under management in scope for this assessment. We will review our interim target at least every five years, with a view to increasing the
proportion of assets under management covered until 100% of assets are included. Implementation of our net zero targets remains subject to
consultation with our key stakeholders. We plan to stay actively engaged to help support our investors on their own decarbonisation goals, and
continue to apply resources in the development of climate solutions.
To support the development of HSBC Asset Management’s climate strategy and goal to deliver on its target, it has chosen to align to the
Institutional Investors Group on Climate Change’s net zero investment framework, which was created for investors to provide a common
approach around the actions, metrics and methodologies required to align portfolios to net zero.
The PCAF data quality score for our baseline emissions was 2.63. Data is subject to limited assurance by PwC in accordance with International
Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial
Information’, and with respect of the greenhouse emissions, in accordance with International Standard on Assurance Engagements 3410
‘Assurance Engagements on Greenhouse Gas Statements’, issued by the International Auditing and Assurance Standards Board. For the
methodology, PwC’s limited assurance report, and details on HSBC Asset Management’s net zero ambition, see
www.assetmanagement.hsbc.com/net-zero.
Backing green SMEs in the UK
Panthera Group, a family-run construction company, launched EnviroHoard, the UK’s first construction hoarding system to be verified as net
zero carbon. In March, we supported the firm with the first ever loan through our $500m Green SME Fund, which we announced at COP26 as
part of our commitment to supporting small and medium-sized businesses in their transition to net zero. Panthera will use the loan to grow its
business in the UK. In 2022, Panthera reduced 446 tonnes of carbon emissions through its installations, and set up a partnership with Circular
Ecology and Trees for Cities to help offset the carbon impact of its installations.

56 | HSBC Holdings plc Annual Report and Accounts 2022

Supporting customers through transition TCFD
We understand that financial institutions have a critical role to play in achieving the transition to a net zero global economy. We believe the most
significant contribution we can make is by mobilising finance to support our portfolio of customers in their transition to decarbonise.
Mobilising sustainable finance for our customers
Given our global presence and relationships with our customers across industries, we recognise the role we can play in catalysing the global
transition to net zero. We are well positioned to help finance the transition in developing and emerging economies, mobilising capital to help
enable sustainable business models and an inclusive, just and resilient transition.
In 2022, we continued to expand the horizons of sustainable finance through our products, services and partnerships to help enable emissions
reduction in the real economy:
–We launched a $5bn sustainable finance scheme to support businesses of all sizes to transition to low-carbon operations in China’s
Greater Bay Area, with successful loan applicants entitled to a range of additional services including training, subsidised third-party
assessments and assistance from a newly formed team with sustainable financing expertise.
–We created a sustainable supply chain finance programme for apparel company PVH Corp in the US to finance environmentally and
socially friendly production at its manufacturing facilities (see page 97).
–We supported Panthera Group, a family-run construction company, to finance and grow the UK’s first construction hoarding system to
be verified as zero carbon, (see page 56).
–We expanded our green mortgage offering to our retail customers in Hong Kong, mainland China, India and Türkiye, as well as electric
vehicle and energy efficiency loans to customers in Hong Kong, Egypt and Argentina.
–We committed to working collaboratively with the government of Egypt in its Nexus of Food, Water and Energy programme to
identify ways to use scarce public finances effectively and efficiently, and help raise private finance to support priority projects from
its national climate change strategy.
As part of the Just Energy Transition Partnership, which aims to mobilise capital towards emerging and developing economies to support their
national climate strategies, we agreed to support the facilitation of at least $10bn of private sector financing for projects in Indonesia and $7.8bn
for projects in Vietnam over the next three to five years.
In addition, we were also mandated to act on 12 ESG-related government bonds, including inaugural issuances for the governments of
Singapore, Canada and Uruguay. In 2022, we secured six awards at the Environmental Finance Bond Awards, revealing the high regard in the
market for our structuring and engagement work across green, social and sustainability bonds during 2021. In the IFR Awards 2022, we were
named ESG Financing House of the Year. We were also recognised by Euromoney as the Best Bank for Sustainable Finance in Asia for the fifth
consecutive year, and in the Middle East for the fourth.
Embedding net zero transition into our client engagement
In 2022, we requested and assessed transition plans for EU and OECD managed clients in scope of our thermal coal phase-out policy. We also
requested and are assessing transition plans for our major oil and gas clients. In 2023, we expect to complete assessments for remaining
clients in scope of our thermal coal phase-out policy. Similarly, we expect to complete assessments for major oil and gas and power and utilities
clients globally as well as other clients in EU and OECD markets in scope of our energy policy.
Our assessments consider historical emissions and disclosures, emissions reduction targets, details of transition plans to achieve targets, and
evidence of activities in line with these plans. Our assessment framework helps us to understand our clients’ transition plans, develop an
engagement strategy to help support them on their transition journey and help us achieve our net zero ambition. We acknowledge
that our assessment of client transition plans is in the initial stages and our engagement with clients on their plans and progress will need to
continue to be embedded.
Sustainable finance and investment
We define sustainable finance and investment as any form of financial service that integrates ESG criteria into business or investment
decisions. This includes financing, investing and advisory activities that support the achievement of UN Sustainable Development Goals
(‘SDGs’), including but not limited to the aims of the Paris Agreement on climate change.
The SDGs, also known as the Global Goals, were adopted by all UN member states in 2015 as a universal call to action to end poverty, achieve
gender equality, reduce inequality, protect the planet and ensure that all people enjoy peace and prosperity by 2030.
We have reviewed and updated these definitions to reflect our updated climate ambition, which is available at www.hsbc.com/who-we-are/esg-
and-responsible-business/esg-reporting-centre.
$210.7 bn
Cumulative progress since 2020 on our ambition to provide and facilitate sustainable finance and investment.
(Ambition: $750bn to $1tn by 2030)

57 | HSBC Holdings plc Annual Report and Accounts 2022

Supporting customers through transition continued
Financing the transition
We aim to help our customers transition to net zero and a sustainable future through providing and facilitating between $750bn and $1tn of
sustainable finance and investment by 2030. Our sustainable finance ambition has promoted green, sustainable and socially-focused business
alongside sustainable infrastructure and energy systems, and enhanced investor capital through sustainable investment.
Since 1 January 2020, we have provided and facilitated $185.3 bn of sustainable finance, $19.0 bn of sustainable investment and $6.4 bn of
sustainable infrastructure, as defined in our Sustainable Finance and Investment Data Dictionary 2022. This included 36% where the use of
proceeds were dedicated to green financing, 13% to social financing, and 15% to other sustainable financing. It also included 27% of
sustainability-linked financing and 9% of net new investments flows managed and distributed on behalf of investors.
In 2022, our underwriting of green, social, sustainability and sustainability-linked bonds for clients decreased in line with the overall market,
although remained at 15% of our total bond issuances. On-balance sheet sustainable lending transactions increased by 53%, compared with
2021. The outstanding sustainable finance on-balance sheet position was in excess of $24bn at 31 December 2022.
Sustainability-linked bonds are a recent innovation in the debt capital markets, which allow investors to manage their sustainability strategies by
linking targets, and progress towards them, to the issuers’ financing costs. These products do not require definitions of use-of-proceeds as they
are linked to issuers’ broader sustainability commitments.
Issuer commitments and strategies continue to develop and be included in medium- to long-term sustainability plans. We expect that
sustainability-linked bonds will become increasingly meaningful for transparency in issuer performance against science-based transition
pathways and other sustainability goals. We have supported customers within the high transition risk sectors to issue sustainability-linked bonds
which support the transition to the net zero economy and a sustainable future.
We are working closely with industry bodies, such as the International Capital Markets Association (‘ICMA’), to establish a robust set of
standards for the market. The ICMA Sustainability-Linked Bond Principles provide guidelines on what is core, material and relevant in terms of
key performance indicators, and provides advice on how targets should be assessed.
Our approach to financing net zero
In 2022, we started developing a strategy to help us orient how we allocate our financing solutions and capital to support our clients’ transition
to net zero and help deliver a significant decarbonisation impact to the global economy. The approach, based on the IEA’s Net Zero by 2050
scenario, identifies the infrastructure, technologies and new business models critical for industries to transition to net zero. We recognise that
we will need to adapt our capabilities in specific products and sectors to capture business opportunities and help finance the transition. In 2022,
we made several investments to play a catalytic role, including through Pentagreen Capital, an innovative financing vehicle set up in partnership
with Temasek, to accelerate sustainable infrastructure in south-east Asia, and with Breakthrough Energy Catalyst to gain expertise in nascent,
‘new-economy, sectors aligned with our clients’ net zero ambitions.
> Our data dictionary defining our sustainable finance and investments continues to evolve, and is reviewed annually to take into account the evolving standards,
taxonomies and practices we deem appropriate. Our review involves reviewing and strengthening our product definitions, where appropriate adding and deleting
qualifying products, making enhancements to our internal standards, and evolving reporting and governance. Our progress will be published each year, and we will
seek to continue for it to be independently assured.
> The detailed definitions of the contributing activities for sustainable finance and investment are available in our revised Sustainable Finance and Investment Data
Dictionary 2022. For our ESG Data Pack, Sustainable Finance and Investment Data Dictionary and third-party limited assurance report, see www.hsbc.com/who-we-
are/esg-and-responsible-business/esg-reporting-centre.
Sustainable finance summary 1

| 2022 | 2021 | 2020 | Cumulative progress since 2020
| ($bn) | ($bn) | ($bn) | ($bn)
Balance sheet-related transactions provided | 42.1 | 26.0 | 10.3 | 78.4
Capital markets/advisory (facilitated) | 34.6 | 48.7 | 30.0 | 113.3
Investments (assets under management – flows) | 7.5 | 7.7 | 3.7 | 19.0
Total contribution 2 | 84.2 | 82.4 | 44.1 | 210.7
Sustainable finance classification by theme |  |  |
Green use of proceeds 3 | 29.0 | 27.1 | 18.8 | 74.9
Social use of proceeds 3 | 6.7 | 11.3 | 9.7 | 27.8
Other sustainable use of proceeds 3,4 | 12.6 | 11.7 | 8.3 | 32.7
Sustainability-linked 5 | 28.4 | 24.6 | 3.5 | 56.5
Sustainable investments – Asset Management 6 | 7.5 | 7.7 | 3.7 | 19.0
Total contribution 2,7 | 84.2 | 82.4 | 44.1 | 210.7

1 This table has been prepared in accordance with our Sustainable Finance and Investment Data Dictionary 2022, which includes green, social and sustainability
activities. The amounts provided and facilitated include: the limits agreed for balance sheet-related transactions provided, the proportional share of facilitated capital
markets/advisory activities and the net new flows of sustainable investments within assets under management. In 2022, green liabilities were removed from the
data dictionary, which resulted in $0.3bn removed from the published 2021 cumulative total.
2 The $210.7bn cumulative progress since 2020 is subject to limited assurance by PwC in accordance with International Standard on Assurance Engagements 3000
(Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’. For our Sustainable Finance and Investment Data Dictionary
2022 and PwC’s limited assurance report, see www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre.
3 For green, social and other sustainable use of proceeds, our capital markets products are aligned to either ICMA’s Green Bond Principles, Social Bond Principles or
Sustainability Bond Guidelines. Our lending labelled products are aligned to the LMA’s Green Loan Principles, the LMA’s Social Loan Principles or our sustainable
trade instruments, which align the use of proceeds to the UN SDGs.
4 Sustainability use of proceeds can be used for green, social or a combination of green and social purposes.
5 Our sustainability-linked-labelled products are aligned to either the ICMA Sustainability-Linked Bond Principles or LMA Sustainability-Linked Loan Principles. The
coupon or interest rate is linked to sustainability key performance indicators and the funds can be used for general purposes. Of the cumulative total of $56.5bn,
$10.1bn relates to sustainability linked bonds and $46.4bn relates to sustainability linked loans. Within the sustainability linked loans, $13.1bn relates to lending to
customers within the six high transition risk sectors (i.e. automobiles, chemicals, construction and building materials, Metals and mining, oil and gas, and power and
utilities) as described on page 223.
6 Net flows of HSBC-owned sustainable investment funds that have been assessed against the Sustainable Finance and Investment Data Dictionary 2022.
7 Additional detailed information in relation to our sustainable finance and investment progress can be found in the ESG Data Pack.

58 | HSBC Holdings plc Annual Report and Accounts 2022

Supporting customers through transition continued
Responsible and sustainable investment
We offer a broad suite of ESG capabilities across asset management, global markets, wealth, private banking and securities services, enabling
institutional and individual investors to generate financial returns, manage risk and pursue ESG-related opportunities.
Our Asset Management business seeks to drive innovation at scale, and bring new propositions to the market for investors, including
sustainable exchange-traded funds and lower-carbon investment solutions. We are committed to further developing our sustainable product
range across asset classes and strategies, as well as enhancing our existing product set for ESG criteria where it is in the investors’ interests to
do so. In 2022, we launched 24 funds with a sustainable focus.
In our aim to support the transition to more sustainable ways of dealing with resources and waste, through the circular economy, HSBC Asset
Management launched the HSBC Global Investment Fund (’HGIF’) Global Equity Circular Economy fund.
To support its net zero ambition, HSBC Asset Management continued to add to the range of products aligned to Paris-aligned benchmarks,
launching two exchange-traded funds in 2022 that invest in emerging markets and Asia-Pacific. These benchmarks’ underlying assets are
selected in such a manner that the resulting benchmark portfolio's greenhouse gas emissions are aligned with the long-term global warming
target of the Paris Agreement.
In 2022, HSBC Asset Management’s fixed income, equity and stewardship teams held over 1,000 meetings with companies in our portfolios.
These included discussions on climate-related matters, with more than 60 of these having specific, targeted outcomes with climate objectives.
We continue to engage with issuers, encouraging the reporting of emissions data, the setting of emissions reduction targets, the assessment
of climate risk, and the development of robust transition strategies.
We expanded our investment offering for private banking and wealth clients with the launch of 22 sustainable investing mutual funds and
exchange-traded funds in 2022. We offer a range of sustainable investment products across other asset classes, including equities, fixed
income, discretionary and alternatives. We enhanced our ESG thematic products offering linked to indices. For example, we collaborated with
Euronext and Iceberg Datalab to design the first broad-based biodiversity screened equity index family.
At HSBC Life, our insurance business, we are focused on ensuring our customers have more access to ESG investment fund options aligned to
their ESG preferences. ESG funds invest only in companies with strong ESG credentials or in key ESG-related areas. We increased the
availability of ESG investment fund options within our investment-linked products. During 2022, we launched in Hong Kong a new protection-
linked plan with three ESG fund choices now available, and we launched our first ESG fund in Mexico.
Accelerating growth in geothermal and recovered energy
Ormat Technologies Inc., which has been operating in renewable energy production for more than 50 years, has developed expertise and global
experience in the supply and development of geothermal, recovered energy and energy storage solutions. We supported Ormat in June 2022
with the issuance of a $431m green convertible bond, the proceeds of which will support Ormat grow its business and develop its renewable
green energy projects.
Ormat now has a total generating portfolio of approximately 1.1 gigawatts, including a geothermal and solar generation portfolio across the US,
Kenya, Guatemala, Indonesia, Honduras and Guadeloupe, as well as holding an energy storage portfolio in the US.
First ESG underwriting guide for life and health insurance
Our insurance business, HSBC Life, co-sponsored and co-led the first ESG underwriting guide for the life and health insurance sector. The guide
was published by the United Nations Environment Programme Finance Initiative (‘UNEP FI’) Principles for Sustainable Insurance, a set of
principles endorsed by the United Nations and the insurance industry.
This guide, which was published in June 2022, provides a framework for life and health insurers to evaluate a range of ESG risks and factors on
the mortality, morbidity, longevity and hospitalisation risks when underwriting.
These include risk mitigation strategies alongside best practices for insurers to consider.
The guide was put together in collaboration with a global team of sustainability experts from 11 other member companies of the UNEP FI
Principles for Sustainable Insurance. Its purpose is to reinforce the key role insurers need to play in helping to solve the major ESG challenges of
our time, such as the spread of infectious diseases, biodiversity and nature loss, social inequality, and mental health and well-being.

59 | HSBC Holdings plc Annual Report and Accounts 2022

Unlocking climate solutions and innovations TCFD
We understand the need to find new solutions to increase the pace of change if the world is to achieve the Paris Agreement’s goal of being net
zero by 2050.
We are working closely with a range of partners to accelerate investment in natural resources, technology and sustainable infrastructure to help
reduce emissions and address climate change.
Sustainable infrastructure
Addressing climate change requires the rapid development of a new generation of sustainable infrastructure, particularly for emerging markets.
During 2022, we demonstrated our commitment to catalysing financing for sustainable infrastructure projects, with the launch of Pentagreen
Capital, a debt financing vehicle we set up in partnership with Temasek (see [below]).
We continue to take a leading role in the FAST-Infra initiative, which we helped conceive, working with the IFC, OECD, the World Bank’s Global
Infrastructure Facility and the Climate Policy Initiative, under the auspices of the One Planet Lab. Through the FAST-Infra initiative, we helped
launch in 2021 the Sustainable Infrastructure (SI) Label – a consistent, globally applicable labelling system designed to identify and evaluate
sustainable infrastructure assets. The initiative continues to grow, with the appointment in November 2022 of a consortium with global
expertise in sustainability standards, global finance, software and data platforms, to manage the secretariat of the SI Label, so the label
becomes an enduring and widely adopted standard.
Natural capital as an emerging asset class
Climate Asset Management, a joint venture we launched with Pollination in 2020, forms part of our goal to unlock new climate solutions.
Combining expertise in investment management and natural capital, Climate Asset Management offers investment solutions that generate
competitive risk-adjusted returns for investors, and nature-enhancing ecosystems to help protect biodiversity and accelerate the transition to net
zero.
In December 2022, Climate Asset Management announced it had received commitments of over $650m for its two strategies:
–the Natural Capital Strategy, which invests in agriculture, forestry and environmental assets, with the aim to deliver impact at scale
alongside long-term financial returns; and
–the Nature Based Carbon Strategy, which targets nature restoration and conservation projects in developing economies, prioritising
community benefits while generating high-quality carbon credits.
One of Climate Asset Management’s first investments was the Restore Africa Programme, in partnership with the Global EverGreening
Alliance, announced in November 2021. The programme, which is the world’s largest community-based land-restoration project, aims to benefit
1.5 million smallholder farmers and their communities through the restoration of up to 2 million hectares of degraded land across six sub-
Saharan countries. The programme has started being implemented in Kenya, Uganda and Malawi, with plans for Zambia, Tanzania and Ethiopia
to follow in 2023.
Climate Asset Management is a founding member of the Natural Capital Investment Alliance, whose 15-strong membership of investment firms
aims to have mobilised $10bn towards nature-based economic themes.
Backing new technology and innovation
Addressing climate change requires innovative ideas. By connecting financing with fresh thinking, we can help climate solutions to increase in
scale to support sustainable growth.
We continue to unlock new climate solutions, focusing on supporting innovation in critical areas such as green technologies. In January 2022,
we announced our investment of $100m as an anchor partner in Breakthrough Energy Catalyst, a programme that uses private-public capital to
accelerate the development of four critical climate technologies: direct air capture, clean hydrogen, long-duration energy storage and sustainable
aviation fuel.
Our philanthropic programme, Climate Solutions Partnership, aims to scale up climate innovation ventures and nature-based solutions, as well
as help the energy sector transition towards renewable sources in Asia (for further details, see page 84).
Our climate technology venture debt and venture capital platforms invest in companies that are developing innovative technological solutions
that help companies and governments understand, track and reduce their greenhouse gas emissions. We expanded our venture debt platform
to support climate technology hardware and software companies that are growing rapidly. In 2022, we achieved our initial goal to fund $100m to
climate technology companies through this platform, and consequently increased our commitment to $250m. In 2022, we committed an
additional $100m to fund women and minority entrepreneurs through our venture debt platform.
HSBC Asset Management also launched a venture capital strategy that invests in transformative early stage companies enabling
decarbonisation and de-pollution of industries. The strategy invests across four investment themes: power transformation, transport
electrification, supply chain sustainability and climate risk mitigation. We seeded the strategy with capital in November 2021, and it has since
invested in three start-up companies. HSBC Asset Management continues to actively fundraise for this strategy, aiming to raise additional funds
from institutional and private wealth clients over the course of 2023.
Accelerating sustainable infrastructure in Asia
In August 2022, we officially launched Pentagreen Capital, a sustainable infrastructure debt financing vehicle set up in partnership with
Temasek. Pentagreen’s goal is to accelerate the development of sustainable infrastructure in Asia by removing the barriers that can prevent
marginally bankable projects from accessing capital. With a combined $150m of seed capital committed by the founding partners, the
Singapore-based company aims to provide more than $1bn of loans over the next five years, targeting opportunities initially in south-east Asia.
Its primary focus will be on clean transport, renewable energy and energy storage, and water and waste management.

60 | HSBC Holdings plc Annual Report and Accounts 2022

Biodiversity and natural capital strategy
We recognise that achieving net zero goes hand in hand with halting and reversing nature loss. Nature loss, which refers to the decline of
natural capital, ecosystem services and biodiversity, is one of the greatest systemic risks to the global economy and the health of people and
the planet. According to The Nature Conservancy, natural climate solutions can provide up to 37% of the emission reductions needed by 2030.
At the same time climate change is accelerating nature loss, and consequently the ability for nature to mitigate climate change impacts.
We understand we need to do more to embed nature-related issues into our sustainability policies and climate transition plan, and we are
committed to strengthening our risk management approach and engaging with our customers.
Understanding our exposure
In 2022, we made progress with understanding how to assess and monitor nature-related risks, as well as how to create effective transition
plans with the aim of halting our contribution to nature loss from our business activities:
–We conducted analysis on how reliant our large corporate clients were on ecosystem services, including the nature-related benefits
crucial for the provision of food and drinking water, which demonstrated that our clients were highly dependent on water availability.
–To improve our understanding of the potential credit risks that nature-related risks pose to our customers, we worked with the
Cambridge Institute on Sustainability Leadership, by evaluating the impact of three months of water shortage on a sample of our
customer portfolio comprising heavy industry companies in east Asia.
–We participated in a pilot test of a draft version of the Taskforce on Nature-related Financial Disclosures (‘TNFD’) framework for risk
and opportunity management and disclosure, which helped us understand its implications and provide feedback ahead of its release in
September 2023.
–We intend to publish a new deforestation policy, informed by scientific and international guidance, in 2023. For further details of our
biodiversity and natural capital-related policies, see ‘Our approach to sustainability policies’ on page 65.
Reducing nature loss
We are making progress with the investment and financing of biodiversity and nature-based solutions through client products and services and
partnerships. In 2022, these included:
–In August 2022, our asset management business, HSBC Asset Management, launched a biodiversity exchange-traded fund that
enables investors to incorporate sustainable considerations within their portfolios (see below).
–Our Global Private Banking business launched a biodiversity strategy for our private bank clients in Hong Kong and Singapore, which
focuses on investing in companies that are well positioned to harness, regenerate and protect biodiversity through the circular and
bio-based economy.
–Through the Climate Solutions Partnership, our philanthropic collaboration with the World Resources Institute and WWF, we issued
two reports on the hurdles and success factors for scaling up nature-based solutions.
> For further details of our approach to nature and related initiatives, see our Statement on Nature in the ESG reporting centre at www.hsbc.com/who-we-are/esg-
and-responsible-business/esg-reporting-centre.
Our presence in environmentally sensitive areas
As a global organisation, our branches, offices and data centres may be located in – or near – areas of water stress and/or protected areas of
biodiversity, as we support our customers and communities in these locations.
Approximately 58.5% of our global offices, branches and data centres are located in areas identified as being subject to high and very high
water stress, accounting for 39.7% of our annual water consumption. These are predominantly urban or city centre locations with large,
concentrated populations. Our industry is a low user of potable water, and we have implemented measures to further reduce water
consumption through the installation of flow restrictors, auto-taps and low or zero flush sanitary fittings.
In addition, 1.6% of our global office, branch and data centre portfolio lies in protected areas and areas of biodiversity. We strive through our
design, construction and operational standards to ensure that, where possible, our premises do not adversely affect the environment or natural
resources in these areas.
Building biodiversity risk awareness into ETFs
Asset owners and managers have a role to play in addressing potential transition and physical risks. Our asset management business, HSBC
Asset Management, launched the first of its kind biodiversity screened exchange-traded fund, which provides investors with the opportunity to
consider biodiversity risk factors in their portfolios. This exchange-traded fund tracks the Euronext ESG Biodiversity Screened Index series,
which was jointly developed by HSBC, Euronext and Iceberg Data Lab. The Biodiversity Footprint Score excludes companies from the index that
do not sufficiently consider biodiversity impacts as well as those with poor ESG credentials and/or business activities deemed harmful towards
biodiversity.

61 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to our own operations TCFD
Part of our ambition to be a net zero bank is to achieve net zero carbon emissions in our operations and supply chain by 2030 or sooner.
Reduce, replace and remove
We have three elements to our strategy: reduce, replace and remove. We plan to first focus on reducing carbon emissions from consumption,
and then replacing remaining emissions with low-carbon alternatives in line with the Paris Agreement. We plan to remove the remaining
emissions that cannot be reduced or replaced by procuring, in accordance with prevailing regulatory requirements, high-quality offsets at a later
stage.
Our energy consumption
In October 2020, we announced our ambition to reduce our energy consumption by 50% by 2030, against a 2019 baseline, and in 2022 we
achieved 24%. We plan to do this by optimising the use of our real estate portfolio, and carrying out a strategic reduction in our office space and
data centres. We are using new technology and emerging products to make our spaces more energy efficient, such as in the UK, where an
additive to our boiler systems helped make heating in our branches 13% more efficient.
As part of our ambition to achieve 100% renewable power across our operations by 2030, we continue to look for opportunities to procure
green energy in each of our markets. A key challenge remains the limited opportunity to pursue power purchase agreements or green tariffs in
key markets due to regulations.
We are tracking the impact on our emissions from our colleagues working from home, as they continue to embrace more flexible ways of
working. We calculated the electricity used by our colleagues working from home was 5% of our total electricity consumption in 2022. This only
includes energy consumption from the IT equipment and lighting. We do not report employee home working emissions in our scope 1 and 2
performance data.
Business travel and employee commuting
In 2022, our travel emissions remained below 50% of pre-pandemic levels in 2019, with international travel restrictions remaining for much of
the year in key Asia markets, slowing the return to business travel. We are closely managing the gradual resumption of travel through internal
reporting and review of emissions, and through the introduction of internal carbon budgets, in line with our aim to halve travel emissions by
2030, compared with pre-pandemic levels. With hybrid working embedded across the organisation, the use of virtual working practices has
reduced the need for our colleagues to travel to meet with other colleagues and customers. We continue to focus on reducing the
environmental impact from the vehicles we use in our global markets, and accelerate the use of electric vehicles. In 2022, we reduced the
company car fleet size by 24%. We are now aiming to ensure that all new vehicles ordered are fully electric or hybrid vehicles where possible.
Engaging with our supply chain
Our supply chain is critical to achieving our net zero ambitions, and we are partnering with our suppliers on this journey. In 2020, we began the
three-year process of encouraging our largest suppliers to make their own carbon commitments, and to disclose their emissions via the CDP
(formerly the Carbon Disclosure Project) supply chain programme. The target for 2022 was for suppliers representing 60% of total supplier
spend to have completed the CDP questionnaire. In total, suppliers representing 63.5% of total supplier spend completed the CDP
questionnaire.
We will continue to engage with our supply chain through CDP, and through direct discussions with our suppliers on how they can further
support our transition to net zero.
In 2022, we also formalised our supply chain sustainability strategy through the update of our supplier code of conduct and the development of
our sustainable procurement procedures. The new procedures set out the minimum requirements and operational information required to help
ensure our sustainability objectives relating to climate change, the environment, human rights, and diversity and inclusion are clearly addressed
in the way that we operate and conduct business with suppliers.
Focus on natural resources
Alongside our net zero operations ambition, our aim is to be a responsible consumer of natural resources. Through design, construction and
operational standards, we strive to ensure that, wherever possible, our premises do not adversely affect the environment or natural resources.
We have identified specific focus areas including waste, paper and sustainable diets, and are exploring key opportunities to reduce our wider
environmental impact over the coming decade.
Our environmental and sustainability management policies
Our buildings policy recognises that regulatory and environmental requirements vary across geographies and may include environmental
certification. The policy is supported by Corporate Services procedures on environmental and sustainability management, ensuring HSBC’s
properties continually reduce their overall direct impact on the environment. Detailed design considerations documented in our Global
Engineering Standards aim to reduce or avoid depletion of critical resources like energy, water, land and raw materials. Suppliers are required to
adhere to strict environmental management principles and reduce their impact on the environment in which they operate.

62 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to our own operations continued
Emissions from our energy and travel in 2022
We report our emissions following the Greenhouse Gas Protocol, which incorporates the scope 2 market-based emissions methodology. We
report greenhouse gas emissions resulting from the energy used in our buildings and employees’ business travel. Due to the nature of our
primary business, carbon dioxide is the main type of greenhouse gas applicable to our operations. While the amount is immaterial, our current
reporting also incorporates methane and nitrous oxide for completeness. We do not report employee home working emissions in our scope 1
and 2 performance data. Our environmental data for our own operations is based on a 12-month period to 30 September.
In 2022, we continued to decrease our emissions from our energy consumption and travel, achieving a 58.5% reduction compared with our
2019 baseline. This was mainly attributed to travel restrictions and the reduction of usage of our buildings due to the Covid-19 pandemic. We
also implemented over 400 energy conservation measures that amounted to an estimated energy avoidance in excess of 11.9 million kWh and
increased our consumption of renewable electricity to 48.3%.
In 2022, we collected data on energy use and business travel for our operations in 28 countries and territories, which accounted for
approximately 92.4% of our FTEs. To estimate the emissions of our operations in entities where we have operational control and a small
presence, we scale up the emissions data from 92.4% to 100%. We then apply emission uplift rates to reflect uncertainty concerning the
quality and coverage of emission measurement and estimation. This is consistent with both the Intergovernmental Panel on Climate Change’s
Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories and our internal analysis of data coverage and
quality.
> For further details on our methodology and relevant environmental key facts, see the ESG Data Pack at www.hsbc.com/esg.

Energy and travel greenhouse gas emissions in tonnes CO2e |
|  | 2022 | 2021 |
Scope 1 1 | ↓ | 19,000 | 22,000 |
Scope 2 1 | ↓ | 224,000 | 307,000 |
Scope 3 (category 6) business travel 1 | ↑ | 42,000 | 12,000 |
Total | ↓ | 285,000 | 341,000 |
Included energy UK | ↓ | 9,000 | 10,000 |

Greenhouse gas emissions in tonnes CO2e per FTE
|  | 2022 | 2021
Total | ↓ | 1.30 | 1.52

Energy consumption in kWh in 000s
|  | 2022 | 2021
Total Group | ↓ | 797,000 | 833,000
UK only | ↓ | 222,000 | 227,000

1 Data in 2022 is subject to PwC’s limited assurance report in accordance with International Standard on Assurance engagements 3410 (Assurance Engagements on
Greenhouse Gas Statements). For further details, see GHG Reporting Guideline 2022 and third-party limited assurance report at www.hsbc.com/our-approach/esg-
information/esg-reporting-and-policies.
Emissions from our supply chain in 2022

Scope 3 categories | Year | Emissions (tonnes CO2e) | Data quality score 1
|  | Scope 1–2 | Scope 3 | Total | Scope 1–2 | Scope 3
Category 1 – Purchased goods and services 2, 3 | 2022 | 218,000 | 648,000 | 866,000 | 3.1 | 3.3
2021 | 252,000 | 617,000 | 869,000 | 3.0 | 3.3
Category 2 – Capital goods 2, 3 | 2022 | 30,000 | 114,000 | 144,000 | 3.1 | 3.4
2021 | 31,000 | 96,000 | 127,000 | 3.1 | 3.3

The data we receive through our engagement with CDP has enabled us to report our supply chain emissions for the first time. Our methodology
uses supplier emissions data where we have it from 500 of our largest suppliers, through CDP. Where we do not have emissions data for
suppliers, we use industry average carbon intensities and spend data to define the contribution to our supply chain emissions. As more of our
suppliers report their emissions, we should be able to include more accurate data and fewer industry averages in the calculation. We have
applied a data quality score to the sources of data we used to determine counterparty emissions. Our initial supply chain emission figures may
require updating as data availability changes over time and methodology and climate science evolve. For further details, see our GHG Reporting
Guidance.
In 2022, emissions from our supply chain increased by 16% compared with 2019, as a result of an increase in spend – particularly in IT services
– and a rise in the average carbon intensity of our suppliers. The CDP-provided industry averages rose, increasing the emissions for our
suppliers where we do not have emissions data. However, in 2022 there was a decrease in carbon intensity of suppliers who disclose their
emissions compared with 2021, particularly in servers and data centres. While the carbon intensity of our supply chain decreased, a rise in
spend on services in 2022 led to a 1% increase in emissions compared with 2021.
1 Data quality scores where 1 is high and 5 is low, based on the quality of emissions data. This is a weighted average score based on HSBC supplier spend and is in
line with HSBC’s financed emissions reporting methodology
2 Supply chain emissions calculated using a combination of supplier emissions data and industry averages.
3 Data in 2019, 2020, 2021 and 2022 for scope 3 (purchased goods and service) and scope 3 (capital goods) is subject to PwC’s limited assurance report in
accordance with International Standard on Assurance engagements 3410 (Assurance Engagements on Greenhouse Gas Statements). For further details, see GHG
Reporting Guideline 2022 and third-party limited assurance report at www.hsbc.com/our-approach/esg-information/esg-reporting-and-policies.

63 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to climate risk TCFD
Managing risk for our stakeholders
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy.
We manage climate risk across all our businesses and are incorporating climate considerations within our traditional risk types in line with our
Group-wide risk management framework. Our most material exposure to climate risk relates to corporate and retail client financing activity
within our banking portfolio. We also have significant responsibilities in relation to asset ownership by our insurance business, employee
pension plans and asset management business.
In the table below, we set out our duties to our stakeholders in our four most material roles.
> For further details of our approach to climate risk, see ‘ESG risk’ on page 139 and ‘Climate risk’ on page 221.

Banking We manage the climate risk in our banking portfolios through our risk appetite and policies for financial and non-financial risks. | Employee pensions Our pension plans manage climate risk in line with their fiduciary duties towards members and local regulatory requirements. | Asset management Climate risk management is a key feature of our investment decision making and portfolio management approach. | Insurance We consider climate risk in our portfolio of assets.
Climate risk
This helps enable us to identify opportunities to support our customers, while continuing to meet stakeholder expectations. (Stakeholders: Customers, Investors, Regulators) | We monitor climate risk exposure internally for our largest plans based on asset sector allocation and carbon emissions data where available. (Stakeholders: Employees, Regulators) | We also engage with companies on topics related to climate change. (Stakeholders: Customers, Investors, Regulators) | We have established an evolving ESG programme to meet changing external expectations and customer demands. (Stakeholders: Customers, Investors, Regulators)

Banking
Our banking business is well positioned to support our customers managing their own climate risk through financing. For our wholesale
customers, we use our transition and physical risk questionnaire as part of our risk framework to understand their climate strategies and risk.
We have set out a suite of policies to guide our management of climate risk, including our recently updated energy policy and thermal coal
phase-out policy (see page 65). We continue to develop our climate risk appetite and utilise metrics to help manage climate exposures in our
wholesale and retail portfolios. Climate scenario analysis is used as a risk assessment tool to provide insights on the long-term effects of
transition and physical risks across our corporate and retail banking portfolios, as well as our own operations (for further details, see page 67).
Asset management
HSBC Asset Management managed over $608bn assets at the end of 2022, of which more than $55bn were held in sustainable investments.
The majority of the remaining assets were invested in ESG-integrated strategies.
When assessing the impact of climate-related risk to our portfolios, we are increasingly considering both physical and transition risks. As a
result, we have integrated ESG and climate analysis to help ensure that risks faced by companies are considered throughout the investment
decision-making process. Investment teams through portfolio management tools assess, examine and determine the level of potential ESG
risks that could impact the current and future value of issuers.
One of our key approaches to manage climate risk is through engaging with the companies we invest in. Our HSBC Asset Management
Stewardship Plan outlines our approach to engaging with issuers, including on the topic of climate change.
Employee pensions
The Trustee of the HSBC Bank (UK) Pension Scheme, our largest plan with $33bn assets under management, aims to achieve net zero
greenhouse gas emissions across its defined benefit and defined contribution assets by 2050. To help achieve this, it is targeting an interim
emissions reduction of 50% by 2030, from 2019 levels, for its equity and corporate bond mandates. This commitment was made in the context
of wider efforts to manage the impact of climate change on the Scheme’s investments and the consequent impact on the financial interests of
members.
During 2022, a framework was put in place to assess progress towards the 2030 targets. The Scheme, which has reported emission reductions
for the equity and corporate bond mandates between 2019 and 2021, will continue to report against the 2030 targets, and aim to widen the
coverage of its assessment and reporting over time.
> For further details of the HSBC Bank (UK) Pension Scheme’s annual TCFD statements and climate action plan, see https://futurefocus.staff.hsbc.co.uk/active-dc/
information-centre/other-information.
Insurance
In 2022, our Insurance business, which has life insurance manufacturing subsidiaries in eight markets and total assets under management of
approximately $126bn, updated its sustainability policy to align with the Group’s new thermal coal phase-out policy. An ESG policy on corporate
underwriting was also introduced.
Risk appetite was reviewed relating to key ESG aspects. ESG standards were embedded into insurance product development processes and
operational capabilities.
In response to multiple and differing ESG regulatory initiatives and developments, HSBC’s insurance entities in the EU have implemented key
disclosure-related regulatory requirements. These requirements mainly impact insurance-based investment products manufactured by HSBC
entities in the EU. Related requirements for the UK and other jurisdictions are expected to be introduced in the near future.

64 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to sustainability policies TCFD
We recognise that businesses can have an impact on the environment, individuals and communities around them. We continue to develop,
implement and refine our approach to working with our business customers to understand and manage these issues. We have joined various
partnerships to support our role in this, including the World Economic Forum’s Principles for Financing a Just and Urgent Energy Transition.
Our policies
Our sustainability risk policies cover agricultural commodities, chemicals, energy, forestry, mining and metals, thermal coal, UNESCO World
Heritage Sites and Ramsar-designated wetlands. We also apply the Equator Principles when financing projects.
These policies define our appetite for business in these sectors and seek to encourage customers to meet good international standards of
practice. Where we identify activities that could cause material negative impacts, we will only provide finance if we can confirm clients are
managing these risks responsibly. Such customers are subject to greater due diligence and generally require additional approval by sustainability
risk specialists.
Our sustainability policies are aligned with our approach to climate risk, and our net zero ambition.
> For further details on how we manage sustainability risk, as well as our full policies, see www.hsbc.com/our-approach/risk-and-responsibility/sustainability-risk.
Supporting the transition
Reinforcing our ambition to support our clients’ transition to lower carbon through transition financing, we updated our thermal coal phase-out
policy, which we explain further on the following page, as well as our energy policy, which we set out below.
Governance and implementation
HSBC’s relationship managers are the primary point of contact for our customers and are responsible for checking whether our customers meet
applicable policies. Within our Group Risk and Compliance function, we have reputational and sustainability risk specialists who are responsible
for reviewing, implementing and managing our sustainability risk policies as well as our application of the Equator Principles. Our global network
of more than 75 sustainability risk managers is supported by regional reputational risk managers across the Group who have additional oversight
responsibilities for sustainability risk.
The Wholesale Reputational and Sustainability Risk team also became part of Risk Strategy, with expanded Group-wide responsibilities, to
strengthen the governance and oversight of sustainability risk policies, and to reflect the evolution of the sustainability agenda.
The Sustainability Risk Oversight Forum, made up of senior members of the Group Risk and Compliance function and global businesses,
continued to oversee the development and implementation of policies that seek to identify, manage and mitigate the Group’s sustainability risk.
As part of our oversight of sustainability risk policies, we operate an assurance framework that is designed to take a more holistic view of risks,
including by:
–ESG news screening, taking a risk-based approach, across the sustainability risk policies;
–overseeing clients considered to be of higher risk;
–reviewing client files across the sustainability risk policies; and
–monitoring of the sustainability risk client portfolio against a defined set of key control indicators overseen by the Sustainability Risk
Oversight Forum.
The framework is used to monitor the in-scope portfolio and keep track if there is a deterioration in the risk ratings. With the respective risk
rating assigned, our sustainability risk specialists will agree the necessary actions to help mitigate unacceptable risks with the business.
Where considered appropriate, a submission can be made to the Reputational Risk and Client Selection Committee to agree an appropriate
course of action.
Our energy policy
In December 2022, we published our updated policy covering the broader energy system, including upstream oil and gas, oil and gas power
generation, hydrogen, renewables and hydropower, nuclear, biomass and energy from waste. The policy seeks to balance three related
objectives: supporting the reduction of global greenhouse gas emissions; enabling an orderly transition that builds resilience in the longer term;
and supporting a just and affordable transition. Central to our approach is our commitment to supporting clients who are taking an active role in
the transition.
In line with the policy, we will no longer provide new finance or advisory services for the specific purpose of projects pertaining to new oil and
gas fields and related infrastructure whose primary use is in conjunction with new fields. Engagement on transition plans is a key part of our
approach. We will continue to provide finance or advisory services to energy sector clients at the corporate level, where clients’ transition plans
are consistent with our 2030 portfolio-level financed emissions targets and net zero by 2050 commitment. If a client’s transition plan is not
produced, or if, after repeated engagement, is not consistent with our targets and commitments, we will not provide new finance and may
withdraw existing financing.
The IEA’s 2021 Net Zero by 2050 report highlights that an orderly transition requires continued financing and investment in existing oil and gas
fields to maintain the necessary output. We will therefore continue to provide finance to maintain supplies of oil and gas in line with current and
future declining global oil and gas demand, while accelerating our activities to support clean energy deployment.
As part of our previously announced ambition to provide $750bn to $1tn in sustainable finance and investment by 2030 to support our
customers in all sectors, we will support critical areas such as renewable energy and clean infrastructure.

65 | HSBC Holdings plc Annual Report and Accounts 2022

Our thermal coal phase-out policy
In December 2021, we published a policy to phase out thermal coal financing in EU and OECD markets by 2030, and globally by 2040. This
incorporated project finance, direct lending, and arranging or underwriting of capital markets transactions to in-scope clients, as well as the
refinancing of existing finance facilities.
In line with our commitment to review our policy and targets each year, taking into account evolving science and internationally recognised
guidance, we expanded the policy in 2022. We committed to not provide new finance or advisory services for the specific purposes of the
conversion of existing coal-to-gas-fired power plants, unless the client demonstrates to us its intention to transition to abated power generation,
consistent with our targets and commitments; and the plants do not operate in environmentally or socially critical areas. We also committed to
not provide new finance or advisory services for new metallurgical coal mines. With the updated policy, we additionally committed to:
–reduce absolute on-balance sheet finance emissions by 70% in both the thermal coal power and thermal coal mining sectors by 2030;
–apply an amended definition of thermal coal expansion as it pertains to mergers and acquisitions activity; and
–decline new relationships with companies that operate thermal coal assets in environmentally and socially critical areas.
Biodiversity and natural capital-related policies
Our sustainability risk policies restrict financing activities that have material negative impacts on nature. While a number of our sectoral policies
have such restrictions, our forestry and agricultural commodities policies focus specifically on a key impact: deforestation. These policies require
customers involved with major deforestation-risk commodities to operate in accordance with sustainable business principles, as well as require
palm oil customers to obtain certification and commit to ‘No Deforestation, No Peat and No Exploitation’ (see ‘Our respect for human rights’ on
page 87). While we seek to work with our clients to help ensure their alignment with our policies, we have withdrawn banking services to
customers who have not engaged, for example, in meeting our certification requirements.
As part of our net zero commitment, we are reviewing our current policy protections in this area, and aim to release a revised policy, informed
by scientific and international guidance, in 2023.
> For further details of our approach to biodiversity and natural capital-related activities, see ‘Biodiversity and natural capital strategy’ on page 61.
Exposure to thermal coal
In our thermal coal policy published in December 2021, we disclosed our intention to reduce thermal coal financing exposure by at least 25% by
2025, and by 50% by 2030, using our 2020 Task Force on Climate-related Financial Disclosures (‘TCFD’) as our baseline. Using the same
methodology and data used in our baseline reporting as at 31 December 2020, we are making progress against these targets.
Our 2020 baseline comprised thermal coal power generation and mining exposures within the power and utilities, and metals and mining
sectors, as defined in our TCFD disclosures. We are in the process of expanding the on-balance sheet exposures that are in-scope for our
thermal coal policy to include those outside of these two TCFD sectors.
Our processes, systems, controls and governance are not yet designed to fully identify and disclose thermal coal exposures, particularly for
exposures within broader conglomerates. Until our systems, processes, controls and governance are enhanced, certain aspects of our reporting
will rely on manual sourcing and categorisation of data. We are reassessing the reliability of our data and reviewing our basis of preparation to
help ensure that we are reporting all relevant thermal coal exposures aligned to our thermal coal policy. As a result, we have not reported
thermal coal exposures in this Annual Report and Accounts 2022. We expect that our updated thermal coal exposures dating back to 31
December 2020 will be made available for reporting as soon as practicable in 2023, although this is dependent on availability and quality of data.
Thermal coal financed emissions targets
As mentioned earlier, our financed emissions target is a reduction of 70% in both the thermal coal power and thermal coal mining sectors by
2030, using a 2020 baseline. We now intend to publish our baseline financed emissions alongside our updated thermal coal exposures as
mentioned above.
Asset management policy
In September 2022, our asset management business, HSBC Asset Management, published its own policy on how a phase-out of thermal coal
would impact on investments it makes on behalf of clients.
The policy aligns with the commitment made by HSBC Asset Management under the Net Zero Asset Managers initiative to support investing
aligned with net zero greenhouse gas emissions by 2050, or sooner.
Under its policy, HSBC Asset Management will not hold listed securities of issuers with more than de minimis revenue exposure to thermal coal
in its actively managed portfolios beyond 2030 for EU and OECD markets, and 2040 for all other markets. The policy includes some restrictions
on investment exposure to thermal coal ahead of these deadlines, as well as commitments to undertake enhanced due diligence on the
transition plans of investee companies with thermal coal exposure. Companies held in investment portfolios that do not develop credible plans
to transition away from thermal coal could face voting sanctions, and ultimately a divestment of holdings.
> For further details of the policy, see www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/coal-policy-b2b-en-09162022.pdf.

66 | HSBC Holdings plc Annual Report and Accounts 2022

Insights from scenario analysis TCFD
Scenario analysis supports our strategy by assessing our position under a range of climate scenarios. It helps to build our awareness of climate
change, plan for the future and meet our growing regulatory requirements.
Having run our first Group-wide climate change scenario analysis exercise in 2021, we produced several climate stress tests for global
regulators in 2022, including the Monetary Authority of Singapore and the European Central Bank. We also conducted our first internal climate
scenario analysis.
We continue to develop how we produce our climate scenario analysis exercises so that we can have a more comprehensive understanding of
climate headwinds, risks and opportunities that will support our strategic planning and actions.
In climate scenario analysis, we consider, jointly:
–transition risk arising from the process of moving to a net zero economy, including changes in policy, technology, consumer behaviour
and stakeholder perception, which could each impact borrowers’ operating income, financing requirements and asset values; and
–physical risk arising from the increased frequency and severity of weather events, such as hurricanes and floods, or chronic shifts in
weather patterns, which could each impact property values, repair costs and lead to business interruptions.
We also analyse how these climate risks impact how we manage other risks within our organisation, including credit and market risks, and on
an exploratory basis, operational, liquidity, insurance, and pension risks.
Our climate scenarios
In our 2022 internal climate scenario analysis exercise, we used four scenarios that were designed to articulate our view of the range of
potential outcomes for global climate change.
These scenarios, which reflect different levels of physical and transition risk and are varied by severity and probability, were: the Net Zero
scenario, which aligns with our net zero strategy and is consistent with the Paris Agreement; the Current Commitments scenario, which
assumes that climate action is limited to the current governmental commitments and pledges; the Downside Transition Risk scenario, which
assumes that climate action is delayed until 2030; and the Downside Physical Risk scenario, which assumes climate action is limited to current
governmental policies.
For further details of these scenarios, and how they were designed to identify, measure and assess our material climate vulnerabilities, see
‘Insights from scenario analysis’ in the ‘Climate risk’ section on page 226.
Analysing the outputs
Climate scenario analysis allows us to model how different potential climate pathways may affect our customers and portfolios, particularly in
respect of credit losses. As the chart below shows, losses are influenced by their exposure to a variety of climate risks under different climate
scenarios.
Under the Current Commitments scenario, we expect moderate levels of losses relating to transition risks. However, the rise in global warming
will lead to increasing levels of physical risk losses in later years. A gradual transition towards net zero, as shown in the Net Zero scenario, still
requires fundamental shifts in our customers’ business models, and significant investments. This will have an impact on profitability, leading to
higher credit risk in the transition period. A delayed transition will be even more disruptive due to lower levels of innovation that limits the ability
to decarbonise effectively, and rising carbon prices that squeeze profit margins.
Overall, our scenario analysis shows that the level of credit losses can be mitigated if we support our customers in enhancing their climate
transition plans.
For the full internal climate scenario analysis, including our assessment of the impacts of climate change on our corporate lending, retail
mortgage and commercial real estate portfolios, see Insights from scenario analysis on page 226.
Use of climate scenario outputs
We are starting to consider climate scenario analysis in core decision-making processes, including strategic and financial planning, risk
management, capital assessment, business decision making, client engagement, and Group reporting. It helps to inform our strategy and
supports how we capture opportunities while minimising risks, and enabling HSBC to navigate through the climate transition.
We use the analysis to anticipate climate-related impacts for our customers by identifying new opportunities where possible, including targeted
financing to support their transition journey.
We have considered climate risk in our annual financial planning cycle. In order to do this, we reviewed the inclusion of ECL outcomes from our
internal climate scenario analysis using the Current Commitments scenario because we deem it the most likely to transpire over the planning
horizon.
Next steps
We plan to continue to enhance our capabilities for climate scenario analysis and use the results for decision making, particularly in respect of:
–our risk appetite, by identifying business-critical metrics and using scenario analysis to test, calibrate, and monitor against thresholds;
–client engagement, by identifying the climate opportunities – such as supporting the growth of renewables, biomass, electric vehicles
– and vulnerabilities by engaging with and supporting our customers; and
–strategy, by using the range of scenario analysis outcomes to shape our strategy across business and regions.
Modelled climate losses
1 The counterfactual scenario is modelled on a scenario where there will be no losses due to climate change.
2 The dotted lines in the chart show the impact of modelled expected credit losses following our strategic responses to reduce the effect of climate risks under the
Net Zero and Downside Transition Risk scenarios.

67 | HSBC Holdings plc Annual Report and Accounts 2022

Our approach to climate reporting (TCFD)
Task Force on Climate-related Financial Disclosures (‘TCFD’)
The table below sets out the 11 TCFD recommendations and summarises where additional information can be found.
We have considered our ‘comply or explain’ obligation under the UK’s Financial Conduct Authority’s Listing Rules, and confirm
that we have made disclosures consistent with the TCFD Recommendations and Recommended Disclosures, save for certain
items, which we summarise below and in the additional information section on page 423.

Recommendation | Response | Disclosure location
Governance |  |
a) Describe the Board’s oversight of climate-related risks and opportunities
Process, frequency and training | –The Board takes overall responsibility for ESG strategy, overseeing executive management in developing the approach, execution and associated reporting. It has enhanced its oversight of ESG matters, with a dedicated agenda item on this topic introduced for 2022. It considered ESG at seven meetings during the year. –Board members receive ESG-related training as part of their induction and ongoing development, and seek out further opportunities to build their skills and experience in this area. | Page 86 and 256 Page 86 and 252
Sub-committee accountability, processes and frequency | –The Group Risk Committee (‘GRC’) maintains oversight of delivery plans to ensure that the Group develops robust climate risk management capabilities. The GRC also has oversight over ESG-related initiatives and reviews these to assess the risk profile. It considered ESG risk at four meetings in 2022. –The Group Audit Committee (‘GAC’) reviews and challenges ESG and climate-related reporting, processes, systems and controls and considered these matters in detail at five meetings during the year. The GAC, supported by the executive-level ESG Committee and Group Disclosure and Controls Committee, provided close oversight of the disclosure risks in relation to ESG and climate reporting, amid rising stakeholder expectations. | Page 272 and 275 Page 263 and 268

Examples of the Board and relevant Board committees taking climate into account | –The Board considered whether to establish a Board committee dedicated to ESG issues, but instead decided that the best way to support the oversight and delivery of the Group’s climate ambition and ESG strategy was to retain governance at Board level. –In 2022, the Board oversaw the implementation of ESG strategy through regular dashboard reports and detailed updates including: reviews of net zero policies, financed emissions target setting and climate-aligned financing initiatives. –The Group Chairman and the Group Chief Executive met regularly with government officials globally to continue to foster strong international relations. In addition, certain Board members also continued to be actively involved in climate initiatives and attend global events such as the Group Chief Executive’s attendance at the COP27 Summit in Egypt. | Page 255 and 256 Page 255 Page 20
b) Describe management’s role in assessing and managing climate-related risks and opportunities
Who manages climate- related risks and opportunities | –The Group Executive Committee enhanced its governance model of ESG matters with the ESG Committee and supporting forums. These support senior management in the delivery of the Group’s ESG strategy, key policies and material commitments by providing oversight over – and management and coordination of – ESG commitments and activities. –The Group Company Secretary and Chief Governance Officer, and Group Chief Sustainability Officer hold joint responsibility for the ESG Committee. It oversees all areas of environmental, social and governance issues, with support from accountable senior management in relation to their particular areas of responsibilities. Key representatives from the functions and global businesses attend to provide insights on the implementation of the ESG strategy across the Group, allowing the ESG Committee to make recommendations to the Board in respect of ESG matters. –The Group Chief Risk and Compliance Officer and the chief risk officers of our PRA- regulated businesses are the senior managers responsible for climate financial risks under the UK Senior Managers Regime. | Page 86 and 255 Page 86 and 251 Page 86
How management reports to the Board | –The Board delegates day-to-day management of the business and implementation of strategy to the Group Chief Executive. The Group Chief Executive is supported in his management of the Group by recommendations and advice from the Group Executive Committee (’GEC’), an executive forum comprising members of senior management that include chief executive officers of the global businesses, regional chief executive officers and functional heads. –Key representatives from the functions and global businesses attend the ESG Committee to provide insights on the implementation of the ESG strategy across the Group, allowing the ESG Committee to make recommendations to the Board in respect of ESG matters. | Page 248 and 249 Page 251
Processes used to inform management | –The ESG Committee supports Group executives in the development and delivery of ESG strategy, key policies and material commitments by providing oversight, coordination and management of ESG commitments and activities. We also recognise that we require enhanced capabilities and new sources of data. –The Climate Risk Oversight Forum oversees all global risk activities relating to climate risk management, including physical and transition risks. Equivalent forums have been established at regional level. –The Sustainability Target Operating Model Steering Committee oversees the implementation of the Group’s organisational plan for the internal infrastructure, both within the Sustainability function and the wider Group, to help deliver our climate ambitions. | Page 86 and 251 Page 222 Page 86
68 | HSBC Holdings plc Annual Report and Accounts 2022 |
Strategy |  |
a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term

Processes used to determine material risks and opportunities | –To support the requirements for assessing the impacts of climate change, we have developed a set of capabilities to execute climate stress testing and scenario analysis. These are used to improve our understanding of our risk exposures for risk management and business decision making. Given the challenges on data sourcing and processes, there has been an impact on certain climate disclosures. –Climate scenario analysis was used as a risk assessment tool to provide insights on the long-term effects of transition and physical risks across our corporate and retail banking portfolios, as well as our own operations. –Our sustainable finance ambition has enabled sustainable infrastructure and energy systems, promoted decarbonisation efforts across the real economy, and enhanced investor capital through sustainable investment. | Page 38 and 47 Page 64 Page 58
Relevant short, medium, and long term time horizons | –We aim to achieve net zero in our financed emissions by 2050, and in our own operations and supply chain by 2030. –We aim to provide and facilitate $750bn to $1tn of sustainable finance and investment for our customers in their transition to net zero and a sustainable future. –We have taken these time horizons into our consideration. Our assessment of climate risks covers three distinct time periods: short term is up to 2025, medium term is 2026 to 2035; and long term is 2036 to 2050. | Page 49 Page 57 Page 139
Transition or physical climate- related issues identified | –We enhanced our transition and physical risk questionnaire and scoring tool, which helps us to assess and improve our understanding of the impact of transition and physical risk on our customers’ business models, and used it for our corporate clients in high climate transition risk sectors. –We are supporting our customers in their transition through our sustainable finance and investment ambition. Our sustainable finance data dictionary includes a detailed definition of contributing activities. –In the UK, in line with our retail portfolio, the main perils that drive potential credit losses relate to coastal, river and surface water flooding, although the impacts from these perils are not expected to cause significant damages. Around 20% of our financed properties are in London, and most are protected by the Thames Barrier. | Page 222 Page 58 Page 229

Task Force on Climate-related Financial Disclosures (‘TCFD’) continued

Recommendation | Response | Disclosure location
Risks and opportunities by sector and/or geography | –We identified six key sectors where our wholesale credit customers have the highest exposure to climate transition risk, based on their carbon emissions. These are automotive, chemicals, construction and building materials, metals and mining, oil and gas, and power and utilities. –We continued to improve our identification and assessment of climate risk within our retail mortgage portfolio, with increased investments in physical risk data and enhancements to our internal risk assessment capabilities and models. We completed detailed analysis for the UK, Hong Kong, Singapore and Australia, which together represent 73.8% of balances of the global mortgage portfolio. –Opportunities include sustainable finance, sustainable investment and sustainable infrastructure. For a detailed breakdown of our sustainable finance progress by geography, see the ESG Data Pack. | Page 223 Page 224 Page 58
Concentrations of credit exposure to carbon-related assets (supplemental guidance for banks) | –We report our exposure to the six high transition risk sectors in the wholesale portfolio. For details, see the ESG Data Pack. –Since 2020, we have rolled out the questionnaire so that it included our largest customers in the next highest climate transition risk sectors: agriculture, industrials, real estate, and transportation. This was done across a larger geographical scope. | Page 223
Climate-related risks (transition and physical) in lending and other financial intermediary business activities (supplemental guidance for banks) | –As a result of our climate scenario analysis, our largest and most impacted sectors – power and utilities, construction and building materials, and chemicals – are subject to increased levels of transition risks due to their ongoing exposure to higher carbon- emitting activities. –HSBC Asset Management is increasingly considering both physical and transition risks. As a result, it integrated ESG and climate analysis to help ensure that risks faced by companies are considered throughout the investment decision-making process. | Page 227 Page 64

b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning
Impact on strategy, business, and financial planning | –Transition to net zero represents one of our four strategic pillars. We aim to be net zero in our operations and supply chain by 2030 and in our financed emissions by 2050. –Scenario analysis supports our strategy by assessing our position under a range of climate scenarios. It helps to build our awareness of climate change, plan for the future and meet our growing regulatory requirements. We acknowledge that our systems, processes, controls and governance are developing. –We continue to develop how we produce our climate scenario analysis exercises so that we can have a more comprehensive understanding of climate headwinds, risks and opportunities that will support our strategic planning and actions. –We do not currently fully disclose the impacts of climate-related issues on financial planning, and particularly the impact of climate-related issues on our financial performance and financial position. In addition, we have considered the impact of climate-related issues on our businesses, strategy, and financial planning, but not specifically in relation to acquisitions/divestments. Due to transitional challenges such as process limitations, we do not disclose the climate-related impact in these areas. We expect to further enhance our disclosure and processes in relation to acquisitions/ divestments in the medium term. –We have considered the impact of climate-related issues on our businesses, strategy, and financial planning. Our access to capital may be impacted by reputational concerns as a result of climate action or inaction. In addition, if we are perceived to mislead stakeholders on our business activities or if we fail to achieve our stated net zero ambitions, we could face greenwashing risk resulting in significant reputational damage, impacting our revenue generating ability and potentially our access to capital. | Page 49 Page 48 and 67 Page 67 Page 423 Page 423
Impact on products and services | –We aim to help our customers’ transition to net zero and a sustainable future through providing and facilitating between $750bn and $1tn of sustainable finance and investment by 2030. | Page 58
69 | HSBC Holdings plc Annual Report and Accounts 2022
Impact on supply chain and/ or value chain | –We will continue to engage with our supply chain through CDP, and through direct discussions with our suppliers on how they can further support our transition to net zero. –We also have significant responsibilities in relation to asset ownership by our insurance business, employee pension plans and asset management business. | Page 62 Page 64
Impact on adaptation and mitigation activities | –In October 2020, we announced our ambition to reduce our energy consumption by 50% by 2030, against a 2019 baseline. As part of our ambition to achieve 100% renewable power across our operations by 2030, we continue to look for opportunities to procure green energy in each of our markets. A key challenge remains the limited opportunity to pursue power purchase agreements or green tariffs in key markets due to regulations. | Page 62
Impact on operations | –Climate change poses a physical risk to the buildings that we occupy as an organisation, including our offices, retail branches and data centres. –We use stress testing to evaluate the potential for impact to our owned or leased premises. Our scenario stress test, conducted in 2022, analysed how seven different climate change-related hazards – comprising coastal inundation, extreme heat, extreme winds, wildfires, riverine flooding, soil movement due to drought, and surface water flooding – could impact 500 of our critical and important buildings. | Page 229
Impact on investment in research and development | –Our Climate Solutions Partnership is a five-year $100m philanthropic initiative that aims to identify and remove barriers to scale for climate change solutions. Working with the World Resources Institute, WWF and over 50 local partners, our support focuses on start-up companies developing carbon-cutting technologies, nature-based solutions, renewable energy initiatives in Asia and the WWF-led Asia Sustainable Palm Oil Links programme. | Page 84

How we are striving to meet investor expectations | –During Board meetings, the Directors continued to balance discussions on the Group’s performance, emerging risks and duties to shareholders, while remaining conscious of responsibilities to support communities and help customers. –In 2022, the Board approved an update to the thermal coal phase-out policy. It also approved the publication of an updated energy policy. | Page 20 Page 23
Transition plan to a low- carbon economy | –We have committed to publish our own climate transition plan in 2023. This plan will outline, in one place, not only our commitments, targets and approach to net zero across the sectors and markets we serve, but how we are transforming our organisation to embed net zero and finance the transition. | Page 49
c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
Embedding climate into scenario analysis | –Scenario analysis supports our strategy by assessing our position under a range of climate scenarios. It helps to build our awareness of climate change, plan for the future and meet our growing regulatory requirements. –In 2022, we delivered our first internal climate scenario analysis exercise where we used four scenarios that were designed to articulate our view of the range of potential outcomes for global climate change. The analysis considered the key regions in which we operate, and assessed the impact on our balance sheet between the 2022 and 2050 time period. | Page 67 and 226
Key drivers of performance and how these have been taken into account | –Climate scenario analysis allows us to model how different potential climate pathways may affect our customers and portfolios, particularly in respect of credit losses. Under the Current Commitments scenario, we expect moderate levels of losses relating to transition risks. However, the rise in global warming will lead to increasing levels of physical risk losses in later years. | Page 67 and 226
Scenarios used and how they factored in government policies | –The scenario assumptions used for our climate stress testing exercise include varying levels of governmental climate policy changes, macroeconomic factors and technological developments. However, these scenarios rely on the development of technologies that are still unproven, such as global hydrogen production to decarbonise aviation and shipping. For details of the assumptions, see the ESG Data Pack. | Page 226
How our strategies may change and adapt | –The nature of the scenarios, our developing capabilities, and limitations of the analysis lead to outcomes that are indicative of climate change headwinds, although they are not a direct forecast. –Developments in climate science, data, methodology, and scenario analysis techniques will help us shape our approach further. We therefore expect this view of risk to change over time. –We plan to continue to enhance our capabilities for climate scenario analysis and use the results for decision making, particularly in respect of strategy, by using the range of scenario analysis outcomes to shape our strategy across business and regions. –We do not currently fully disclose the impacts of transition and physical risk quantitatively, due to transitional challenges including data limitations and evolving science and methodologies. | Page 67 and 226 Page 226 Page 67 Page 423
70 | HSBC Holdings plc Annual Report and Accounts 2022
Risk management |  |
a) Describe the organisation’s processes for identifying and assessing climate-related risks
Traditional banking risk types considered | –Our initial approach to managing climate risk was focused on understanding physical and transition impacts across five priority risk types: wholesale credit risk, retail credit risk, reputational risk, resilience risk and regulatory compliance risk. | Page 221

Task Force on Climate-related Financial Disclosures (‘TCFD’) continued

Recommendation | Response | Disclosure location
Process | –We have integrated climate risk into our existing risk taxonomy, and incorporated it within the risk management framework through the policies and controls for the existing risks where appropriate. We also recognise that we require enhanced capabilities and new sources of data. –We consider greenwashing to be an important emerging risk that is likely to increase over time, as we look to develop capabilities and products to achieve our net zero commitments, and work with our clients to help them transition to a low-carbon economy. We also recognise that green finance taxonomies are not consistent globally, and evolving taxonomies and practices could result in revisions in our sustainable finance reporting going forward. –We also use stress testing and scenario analysis to assess how these climate risks will impact our customers, business and infrastructure. | Page 47 and 221 Page 47 and 221 Page 46
Integration into policies and procedures | –In 2022, we incorporated climate considerations into our UK mortgage origination process for our retail mortgage business and new money request process for our key wholesale businesses. We also continued to enhance our climate risk scoring tool, which will enable us to assess our customers’ exposures to climate risk. We also published our updated energy policy, covering the oil and gas, power and utilities, hydrogen, renewables, nuclear and biomass sectors, as well as updated our thermal coal phase-out policy after its initial publication in 2021. –We are integrating climate risk into the policies, processes and controls across many areas of our organisation, and we will continue to update these as our climate risk management capabilities mature over time. | Page 223 Page 223
Consider climate-related risks in traditional banking industry risk categories (supplementary guidance for banks) | –In 2022, we expanded our scope to consider climate risk impacts on our other risk types (including treasury risk and traded risk) in our risk taxonomy. –We also analysed in our internal scenario analysis exercise how climate risks impact how we manage other risks within our organisation, including credit risk, and on an exploratory basis: market, operational, liquidity, insurance, and pension risks. | Page 221 and 226 Page 67
b) Describe the organisation’s processes for managing climate-related risks
Process and how we make decisions | –The Group Risk Management Meeting and the Group Risk Committee receive regular updates on our climate risk profile, top and emerging climate risks, and progress of our climate risk programme. –Our climate risk appetite supports the oversight and management of the financial and non-financial risks from climate change, and supports the business to deliver our climate ambition in a safe and sustainable way. We recognise that we require enhanced systems, processes, controls, governance and new sources of data. | Page 222 Page 47 and 223
c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management framework
How we have aligned and integrated our approach | –Our climate risk approach is aligned to our Group-wide risk management framework and three lines of defence model, which sets out how we identify, assess, and manage our risks. –In February 2022, we refreshed a high-level assessment of how climate risk may impact risk types within the HSBC taxonomy over a 12-month horizon, and how the level of risk may increase over longer time horizons. –We developed our first internal climate scenario exercise, where we used four bespoke scenarios that were designed to articulate our view of the range of potential outcomes for global climate change. | Page 221 Page 222 Page 222

How we take into account interconnections between entities and functions | –Through our dedicated climate risk programme, we continued to embed climate considerations throughout the organisation, including updating the scope of our programme to cover all risk types, expanding the scope of climate-related training, developing new climate risk metrics to monitor and manage exposures, and the development of our internal climate scenario exercise. –We updated our climate risk management approach to cover all risk types in our risk taxonomy. –We expanded the scope of climate-related training for employees to cover additional topics, such as greenwashing risk, and increased the availability of training to the broader workforce. | Page 135 Page 222 Page 222
Metrics and targets |  |
a) Disclose the metrics used by the organisation to assess climate-related risk and opportunities in line with its strategy and risk management process
Metrics used to assess the impact of climate-related risks on our loan portfolio | –We continue to disclose our wholesale loan exposure to the six high transition risk sectors, which are automotive, chemicals, construction and building materials, metals and mining, oil and gas, and power and utilities. The wholesale loan exposure is used as a metric to assess impact of climate risk and help inform risk management, together with our transition risk questionnaire results. –We continue to measure climate risk in our most material mortgage market, which is the UK, where the primary physical risk facing properties is flooding. We also continue to identify the current and potential EPC ratings for individual properties within the UK mortgage portfolio. For further details, see our ESG Data Pack. –Our climate risk management information dashboard includes metrics relating to our key climate risks, and is reported to the Global Climate Risk Oversight Forum. However, we do not fully disclose metrics used to assess the impact of climate- related risks on retail lending, parts of wholesale lending and other financial intermediary business activities. | Page 223 Page 224 Page 423
71 | HSBC Holdings plc Annual Report and Accounts 2022
Metrics used to assess progress against opportunities | –We continue to track our progress against our ambition to provide and facilitate $750bn to $1tn of sustainable finance and investment by 2030, aligned to our published data dictionary. The breakdown of our sustainable finance and investment progress is included in our ESG Data Pack. –We do not currently fully disclose the proportion of revenue or proportion of assets, capital deployment or other business activities aligned with climate-related opportunities, including revenue from products and services designed for a low- carbon economy, forward-looking metrics consistent with our business or strategic planning time horizons. In addition, we do not currently disclose internal carbon prices due to transitional challenges such as data challenges. We recognise that we require enhanced systems, processes, controls, governance and new sources of data. | Page 18 and 57 Page 47 and 423
Board or senior management incentives | –To help us achieve our ESG ambitions, a number of measures are included in the annual incentive and long-term incentive scorecards of the Group Chief Executive, Group Chief Financial Officer and Group Executives. | Page 16 Page 286
Metrics used to assess the impact of climate risk on lending and financial intermediary business (supplemental guidance for banks) | –As part of our internal climate scenario analysis, we carried out a detailed physical risk assessment of four of our most material retail mortgage markets – the UK, Hong Kong, Singapore and Australia – which represent 73.8% of balances in our retail mortgage portfolio. In 2022, we disclose our loan maturity within the UK mortgage portfolio. –We do not fully disclose metrics used to assess the impact of climate-related risks on retail lending, parts of wholesale lending and other financial intermediary business activities (specifically credit exposure, equity and debt holdings, or trading positions, each broken down by industry, geography, credit quality, average tenor). | Page 224 Page 423
b) Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas emissions and the related risks
Our own operations | –We reported our scope 1, 2 and part of scope 3 greenhouse gas emissions resulting from the energy used in our buildings and employees’ business travel. In 2022, we started to disclose our scope 3 supply chain emissions. | Page 18 and 63

Greenhouse gas emissions for lending and financial intermediary business (supplemental guidance for banks) | –We expanded our coverage of sectors for on-balance sheet financed emissions. We also set out the data and methodology limitations related to the calculation of scope 3 financed emissions. –In 2022, HSBC Asset Management started to measure scope 1 and 2 emissions of companies in its portfolio. –Future disclosure on financed emissions, and related risks is reliant on our customers publicly disclosing their carbon emissions and related risks. We aim to disclose financed emissions for additional sectors in our Annual Report and Accounts 2023 and related disclosures. | Page 18 and 50 Page 56 Page 423
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
Details of targets set and whether they are absolute or intensity based | –One of our strategic pillars is to support the transition to a net zero global economy. To support our ambition to align our financed emissions to achieve net zero by 2050 or sooner, we have set interim 2030 targets for on-balance sheet financed emissions for eight sectors. –For financed emissions we do not plan to set 2025 targets. We set targets in line with the Net-Zero Banking Alliance (‘NZBA‘) guidelines by setting 2030 targets. In 2022, we disclose interim 2030 targets for on-balance sheet financed emissions for [eight] sectors. –We do not currently disclose targets used to measure and manage physical risk, or internal carbon price targets. This is due to transitional challenges and data limitations. But we considered physical risk and carbon prices as an input in the climate scenario analysis exercise. We expect to further enhance the disclosure in the medium term as more data becomes available. In addition, we do not currently disclose a target for capital deployment. In 2022, we are internally reviewing and enhancing the green bond framework, with further refinement to be undertaken in 2023. Our continued monitoring of evolving taxonomies and practices over time could result in revisions in our reporting going forward and lead to differences year-on-year as compared with prior years. We do not consider water usage to be a material target for our business and therefore we have not included a target in this year’s disclosure. | Page 18 Page 423
Other key performance indicators used | –We also use other indicators to assess our progress including energy consumption and percentage of renewable electricity sourced. | Page 62

72 | HSBC Holdings plc Annual Report and Accounts 2022

Social
Building inclusion and resilience
We aim to play an active role in opening up a world of opportunity for our customers, colleagues
and communities as we bring the benefits of connectivity and global economy to more people
around the world.
At a glance
Our relationships
Our purpose is opening up a world of opportunity, and we aim to bring that purpose to our customers, colleagues and the communities in which
we operate.
Inclusion is key to opening up a world of opportunity. It involves a commitment to remove unnecessary barriers to our people, our customers
and our communities in realising their potential. Creating an inclusive environment for our colleagues enables them to flourish, and supports the
strong and purposeful delivery of our strategy.
We are committed to ensuring our colleagues – and particularly our leadership – are representative of the communities that we serve, and that
we support their well-being and development so they can learn and grow in their careers. We do this because we know that when we build an
inclusive, healthy and stimulating workplace for our people, the whole Group succeeds.
We are equally committed to ensuring there are no unnecessary barriers to finance for our customers. Customers should not find it more
difficult to access finance because of their gender, their sexual orientation, their neurodiversity or their disability. We have an ambition to create
a welcoming, inclusive and accessible banking experience that opens up a world of opportunity for our customers.
Inclusion goes hand-in-hand with resilience. We build resilience for our colleagues by supporting their physical, mental and financial well-being,
and by ensuring they are equipped with the skills and knowledge to further their careers during a period of significant economic transformation.
For our customers, we build resilience through education: by helping them to understand their finances and how to manage them effectively,
and by creating propositions that simplify the banking experience while helping wealth to grow. We also build resilience through products and
services that protect what our customers value – their health, their families, their homes and their belongings.
Building inclusion and resilience can also mean working to address gaps where we think we can make a difference. From working for fair pay
and representation for our colleagues, to opening up access to finance to underserved customer groups, to ensuring HSBC branches and offices
are safe spaces for everyone, we are committed to fairness and inclusivity.
Finally, we aim to give back by engaging with our communities through philanthropic giving, disaster relief and volunteering. We are focusing
these efforts on our priorities: the just transition to net zero and building inclusion and resilience.
We believe building inclusion and resilience helps us to create long-term value and growth. By removing unnecessary barriers and striving to be
a fair and equitable bank, we can attract and retain the best talent, support a wider customer base to achieve their goals over the long term, and
stimulate growth in our communities. This is how we open up a world of opportunity for our colleagues, our customers and our communities.

In this section |  |  |  |
Promoting diversity and fostering inclusion | Our approach to diversity and inclusion Creating a diverse environment Fostering an inclusive culture | We value diversity of thought and we are building an inclusive environment that reflects our customers and communities. | Page | 74
Building a healthy workplace | Listening to our colleagues | We run a Snapshot survey and report insights to our Group Executive Committee and the Board. | Page | 77
Being a great place to work | As the Covid-19 pandemic tested our colleagues, we expect the way we work to change as the workforce meets new demands. | Page | 79
Well-being | Our global well-being programme is a key enabler of our people strategy, especially as we move to a more hybrid way of working. | Page | 80
Developing skills, careers and opportunities | Learning and skills development | We aim to build a dynamic, inclusive culture where colleagues can develop skills and experiences that help them fulfil their potential. | Page | 81
Energising our colleagues for growth | We are committed to offering colleagues the chance to develop their skills while building pipelines of talented colleagues to support the achievement of our strategic priorities. | Page | 82
Building customer inclusion and resilience | Our approach to customer inclusion and resilience | We aim to support financial well-being and remove barriers people can face in accessing financial services. | Page | 83
Engaging with our communities | Building a more inclusive world | We focus on a number of priorities where we can make a difference to the community and support sustainable growth. | Page | 84

73 | HSBC Holdings plc Annual Report and Accounts 2022

Promoting diversity and fostering inclusion
Our approach to diversity and inclusion
Our purpose, ‘Opening up a world of opportunity’, explains why we exist as an organisation and is the foundation of our diversity and inclusion
strategy. Promoting diversity and fostering inclusion contributes to our ‘energise for growth’ priority. By valuing difference, we can make use of
the unique expertise, capabilities, breadth and perspectives of our colleagues for the benefit of our customers.
To achieve progress, we are focused on specific Group-wide priorities for which we hold senior executives accountable. Alongside Group
targets, some executives have local priorities, such as combating social inequality in the UK, and the promotion of Hispanic representation in the
US, to allow flexibility for a broader diversity and inclusion agenda that is contextually relevant.
Our approach extends beyond our colleagues and opens up a world of opportunity to our customers and the communities in which we operate.
As we set out on the following pages, we are pleased to report progress in 2022, although we acknowledge there is more work to be done.
How we hold ourselves to account
We set meaningful goals
Our executive Directors and Group Executives have goals within their annual performance scorecards that are tied to remuneration plans. In
2022, we continued to make progress against our three goals to:
–achieve a 35% representation of women in senior leadership roles by 2025;
–achieve a 3.4% representation of Black heritage colleagues in senior leadership roles in the UK and US combined by 2025, aligned to
our commitment to double the number of Black colleagues in leadership positions globally; and
–achieve a satisfaction score of at least 75% in our Inclusion index, which looks at the inclusivity of our culture by measuring our
colleagues’ feelings of belonging, trust and psychological safety, as recorded within our employee Snapshot survey.
We report and track progress
Data is critical and gives our Group Executive Committee regular progress checks against its goals. Our measures to track progress consist of:
–a quarterly inclusion dashboard, which tracks progress against goals with specific data on hiring, promotion and exit ratios;
–a formal assessment of the Group Executive Committee’s performance against its three goals, run by our executive compensation
team, at the half-year, third quarter and the end of the year, which is then reported to the Group Remuneration Committee; and
–semi-annual inclusion review meetings where our Head of Inclusion meets each Group Executive to review data and their progress
against their goals, and to discuss actions and provide recommendations to support further progress.
We benchmark our performance
We use external disclosures and benchmarks to measure the progress we are making, and to provide us with insight into what actions to
prioritise. In 2022, we achieved:
–the Parker Review target of having at least one Director from a minority ethnic group on its Board, with three Board members;
–Stonewall’s Gold standard and rank as a top global LGBTQ+ inclusion employer;
–a score of 87.2 in the Bloomberg Gender Equality Index, which tracks the performance of public companies committed to
transparency in gender data reporting. This was 13.1 percentage points above the financial sector average.
A data driven approach to inclusion
Our approach to collecting ethnicity data through colleagues’ self-identification underpins our ethnicity strategy to better reflect the communities
we serve. Allowing colleagues to self-identify helps us to set market representation goals. We have enabled 91% of our workforce to be able to
share their ethnic heritage with us. A total of 55% of our colleagues have now made disclosures on their ethnic background, where legally
permissible.
Strong self-declaration rates in the UK and US have enabled us to develop our ethnicity strategy with market-specific Black heritage
representation goals. We define Black heritage to include all colleagues in the UK who identify as Black or mixed race where one of the
ethnicities is stated as Black, and in the US for all colleagues who identify as Black or African-American.
Employees can also share their disability, gender identity and sexual orientation data where legally and culturally acceptable to do so. These self-
identification options are enabled for 90%, 81% and 70% of our workforce, respectively.
Engaging with diversity at the Board level
We have a designated non-executive Director responsible for workforce engagement, whose role is to bring the voice of the employee into the
boardroom. Our employee resource group leadership community is an important contributor and communicator related to workforce
engagement. Additionally, non-executive Directors are aligned to each of our employee resource groups.
In 2022, we continued our Bank Director Programme that invites a diverse group of senior leaders from across the Group to gain exposure to
boards and develop board skills. This programme is building an internal pool of diverse talent that we will be able to assign to roles with our
subsidiary boards.
For further details of Board diversity, see our Corporate governance report on page 247.

74 | HSBC Holdings plc Annual Report and Accounts 2022

Creating a diverse environment
Women in senior leadership
After achieving our ambition of having 30% of senior leadership positions held by women in 2020, we set a new goal to reach 35% by 2025.
We remain on track, with 33.3% of senior leadership roles held by women at the end of 2022, an increase of 1.6 percentage points since 2021.
A total 35.7% of all external appointments into senior positions were female, down from 37.8% in 2021, and 38.1% of all promotions into
senior leadership roles were female.
Talent programmes, including Accelerating Female Leaders, helped increase the visibility, sponsorship and network of our high-performing
senior women. Since starting the programme in 2017, 38% of participants have either been promoted or taken a lateral move to develop their
careers. We have also retained 87% of colleagues who have completed the programme.
In our Accelerating into Leadership programme, which prepares high potential, mid-level colleagues for future leadership roles, 44% of
participants in 2022 were women.
We also had more than 2,600 women participating in our Coaching Circles programme, which involves senior leaders advising and supporting
colleagues to develop their leadership skills and build their networks.
Our succession planning for key leadership roles includes an assessment of the diversity of our succession plans. We are improving the gender
diversity of those in roles deemed most critical to the organisation, and successors to those roles. In 2022, 36% of the succession pool for
these roles were women.
In our support of our people throughout the different stages of their lives and careers, and in our aim to enable equal participation at work, we
introduced gender neutral parental leave in the US and Australia, and improved paid maternity and paternity leave in Mexico and Argentina.
1 Combined Group Executives and direct reports includes HSBC Group Executives and their direct reports (excluding administrative staff) as at 31 December 2022.
2 Directors (or equivalent) of subsidiary companies that are included in the Group’s consolidated financial statements, excluding corporate directors.
3 In our leadership structure, we classify: senior leadership as those at career band 3 and above; middle management as those at global career band 4; and junior
management as those at global career bands 5 and 6.
Black colleagues in senior leadership
We are on track to double the number of Black colleagues in senior leadership roles globally by 2025, having increased the number of Black
senior leaders by 37% since 2020.
During 2022 we set a new Group-wide ethnicity strategy with the principle of better reflecting the communities we serve. We test this principle
by comparing our workforce to national census data and setting goals to narrow material representation gaps over time. Our analysis highlighted
Black heritage representation gaps in the UK and the US. We therefore set a goal of having 3.4% of Black heritage colleagues in senior
leadership roles in the UK and US combined by 2025. While we are on track to meet this, with 2.5% of leadership roles held by Black heritage
colleagues in 2022, we know there is more to be done to be representative of the societies we serve.
Our ethnicity strategy is overseen by a committee of senior leaders, led by our Group Chief Risk and Compliance Officer. The committee
provides strategic direction to the Global Ethnicity Inclusion Programme.
In 2022, we continued to focus on inclusive hiring, investing in talent and growing leadership effectiveness. We have launched programmes to
provide sponsorship and mentoring such as Solaris in the UK, which supports talented Black female colleagues, and a Black heritage
programme in Global Banking and Markets, where 25% of participants at Director level secured promotion within 12 months of commencing
the programme. In 2023, we will extend the programme to Commercial Banking colleagues and to colleagues in the US, with an additional
focus on Hispanic colleagues. To help us attract diverse talent, we partner with specialist recruitment organisations that engage ethnically
diverse talent. We also introduced reverse mentoring, which pairs Group Executives with Black heritage colleagues.
Representation and pay gaps
We have reported gender representation and pay gap data since 2017 for the UK, and extended this to include gender data for the UK, the US,
mainland China, Hong Kong, India and Mexico, alongside ethnicity data for the UK and US. In 2022, we extended this to include gender data for
Singapore and the UAE. This covers over 70% of our workforce.
In 2022, our mean aggregate UK-wide gender pay gap was 45.2%, compared with 44.9% in 2021, and the ethnicity pay gap was 0.4%,
compared with -0.8% in 2021. Our UK gender pay gap is driven by the shape of our workforce. There are more men than women in senior,
higher-paid roles and more women than men in junior roles. Given differences in variable pay levels across these roles, the increase in the 2021
variable pay pool contributed to the slight widening of our pay gap for 2022.
While we are confident in our approach to pay equity, until women and ethnically diverse colleagues are proportionately represented across all
areas and levels of the organisation we will continue to see gaps in average pay. We are committed to paying colleagues fairly regardless of
their gender or ethnic heritage and have processes to ensure that remuneration is free from bias. We review our pay practices and undertake a
pay equity review annually, including an independent third-party review of equal pay in major markets. If pay differences are identified that are
not due to objective, tangible reasons such as performance, skills or experience, we make adjustments.
For further details on our representation data, pay gap data, and actions, see www.hsbc.com/diversitycommitments and the ESG Data Pack at
www.hsbc.com/esg.

75 | HSBC Holdings plc Annual Report and Accounts 2022

Fostering an inclusive culture
In our annual Snapshot survey’s Inclusion index, which measures our colleagues’ sense of belonging, psychological safety, perception of
fairness and trust, we achieved a favourability score of 76% in 2022, one point higher than our goal, and four points above the financial services
industry benchmark.
There was a three-point increase in colleagues feeling able to speak up without fear of negative consequences. This was a positive indicator of
our strengthening culture of inclusion, which is a critical component of our ‘energise for growth’ strategy.
To educate our leaders and colleagues on driving an inclusive culture, we provided a number of inclusive leadership training programmes, and
enhanced our ‘Making HSBC more inclusive’ training. More than 10,500 colleagues also completed inclusive hiring training, which is aimed at
enabling fair and inclusive hiring decisions that are in line with our hiring principles.
Employee resource groups
Our employee resource groups foster an inclusive culture, and contribute significant value to tens of thousands of colleagues, with networks
focused on a range of issues, including: age, disability, parents and careers, ethnicity, gender and LGBTQ+.
Our employee resource groups celebrate key dates in the diversity calendar and hold events for colleagues to raise awareness, and build
empathy and allyship. These included Pride, our network for LGBTQ+ colleagues and allies, holding a global ‘24 hours of Pride’ campaign that
engaged our workforce to collectively celebrate our LGBTQ+ colleagues. Our Embrace network for ethnicity hosted its first global summit,
attended by over 1,300 colleagues, including senior leaders across three regions.
Looking to the future on disability
Our ambition is to become a leading disability confident employer and a digitally accessible financial services provider. In 2022, we continued to
focus on driving our digital accessibility programme so that our products and service can be accessible for all.
For our customers and colleagues, we improved the accessibility of our public websites, mobile applications and internal systems. AbilityNet,
the digital accessibility charity, benchmarked HSBC as having the most accessible website compared with other local competitor banks in 10 of
13 of our key Wealth and Personal Banking markets.
We are transforming our internal systems to be digitally accessible. In 2022, we engaged over 2,000 colleagues in digital accessibility
awareness and training, supported by the launch of a digital accessibility hub, which provides training and knowledge resources. The hub
achieved the best digital accessibility award at the 2022 Digital Impact Awards.
We are looking to extend our UK workplace adjustments process to other key markets, ensuring our colleagues have the right tools and
technologies to perform their roles. The programme will help colleagues with a physical or sensory disability, long-term mental health conditions
or neurodiversity needs to get advice and request additional equipment or software to enable them to do their work.
In 2022, HSBC UK was recognised as a Gold Standard employer, following an assessment by the Business Disability Forum, with a score of
95.8%, the highest score awarded. We were praised on our commitment, drive and innovation with regards to disability inclusion. In 2023, we
will continue to progress the execution of our disability confidence strategy with a particular focus on improving the experiences of colleagues
with a disability across the key stages of their career journeys.
Empowering diverse customers
Aligned to our purpose of opening up a world of opportunity, we are committed to identifying and removing the different barriers customers
face in accessing financial services. In 2022, we contributed to this through several initiatives, including the launch of a $1bn lending fund to
invest in female-owned businesses. We introduced new processes to support refugees fleeing the conflict in Ukraine so they can access the
financial services they need to set up a new life in the UK. We also sponsor the Hong Kong Lutheran Social Service to develop the ‘Health dollar
fun’ app to boost digital literacy among the elderly.
For further details of how we are making financial services more accessible and fair, see ‘Our approach to customer inclusion and resilience’ on
page 83.
Creating more equal communities
We partner with external organisations to open up opportunities for those groups who have historically been disadvantaged. In 2022, initiatives
included:
–working with the Indian Academy for Self-Employed Women to provide business training and support to access digital marketplaces;
–partnering with Rural Education and Development India to train 500 youths from migrant and rural families to equip them with skills
for the healthcare and apparel sector; and
–supporting the National Council of Social Service in Singapore to support employability services for persons who have recovered from
mental health issues.
Starting our journey on social mobility
We believe in the principle that the circumstances of someone’s birth should not define their future.
In 2022, we began to collect the socio-economic diversity data of our colleagues within the UK, with the aim to improve social mobility. We will
use this data to help us understand the representation and progression of colleagues from lower socio-economic backgrounds.
We also joined ProgressTogether, a membership body of firms aimed at addressing career progression and retention for those identifying with a
lower socio-economic background. We established our ‘Strive’ employee resource group, which will support and advocate for colleagues from
lower socio-economic backgrounds. We plan to expand Strive to other markets as our work matures.

76 | HSBC Holdings plc Annual Report and Accounts 2022

Building a healthy workplace
Listening to our colleagues
We were founded on the strength of different experiences, attributes and voices. We believe that seeking out and listening to the views of our
colleagues is a fundamental part of who we are and how we work. This has been especially important in 2022, as we looked to continue
defining the future of work and driving change in how we work.
Listening to colleague sentiment
In 2022, we changed how we run our all-employee Snapshot survey, reducing the frequency from once every six months to once a year, with a
focus on increasing participation to enable more granular reporting throughout the organisation. We received a record 167,668 responses to the
survey in September, with 78% of employees participating, surpassing the previous year’s record of 64%.
This increase has enabled us to put more data directly in the hands of our people managers to understand how their teams feel about life at
HSBC, with 5,000 managers given access to results, discussion guides and learning resources to help them engage with the feedback at a team
level. We continue to report insights to our Group Executive Committee and the Board, and local results are shared across the Group to provide
senior leaders across business areas with detailed insight to help plan and make decisions.
We complement this all-colleague survey with targeted listening activities throughout the year, with employee lifecycle surveys aimed at new
joiners, internal movers and voluntary leavers.
In May and June, we received more than 13,000 responses to our ‘Future of work’ survey, which explored how colleagues feel towards hybrid
working. For further details of the findings and our approach to hybrid working, see ‘Being a great place to work’ on page 79.
In 2022, we also held a global ‘employee jam’, where over 18,000 colleagues across 63 markets came together for a live online conversation
(see panel below). The Snapshot survey is also a key source of insight to inform our approaches to well-being. For further details of our
approach to well-being, see page 80.
Employee conduct and harassment
We expect our people to treat each other with dignity and respect, and do not tolerate bullying or harassment on any grounds. Over the past
few years, we have strengthened our approach to bullying and harassment, improving our collective understanding of, and response to, these
issues.
Our global anti-bullying and harassment code helps us to maintain consistent high standards of conduct across the Group, while accommodating
local cultural requirements. In 2022, we added further anti-bullying and harassment messages to our mandatory training for all our colleagues,
and continued our campaign to encourage colleagues to be ‘active bystanders’ and speak up when they see or experience poor behaviours or
things that do not seem right.
We have mandatory local procedures for handling employee concerns, including complaints of bullying and harassment. Where investigations
are required, we have a global framework setting the standards for those investigations, which we improved throughout 2022. We monitor
bullying and harassment cases to inform our response and the data is reported to management committees.
In 2022, 1,159 concerns were raised related to bullying, harassment, discrimination and retaliation. Of the 811 cases where an investigation has
concluded, 47% were substantiated. We take action where we see standards fall short of our expectation. In 2022, 591 colleagues were
dismissed in relation to misconduct, including 27 as a result of bullying, harassment or discrimination. We are not complacent and know that
there is more we can do. Our refreshed values will guide and inform our plans to continue creating and promoting an inclusive working
environment
Employee engagement
73%
Employee engagement score (2021: 72%)
68%
Of colleagues feel able to achieve their career objectives at this company (2021: 67%)
77%
Of colleagues who feel confident about this company’s future (2021: 74%)
Holding a live global online conversation
In April, we held a global ‘employee jam’, where over 18,000 colleagues came together digitally for a live conversation around three key themes:
embedding our purpose, values and strategy; enhancing the colleague experience; and enhancing the customer experience.
Mirroring what we have heard in Snapshot surveys, colleagues told us that they believe in our purpose, strategy and values, but want to have a
better understanding of their tangible impacts – both inside and outside HSBC – as well as their direct role in driving these.
Colleagues said that we have made progress in areas such as diversity, future skills and trust, but that the focus should now be placed on
building a culture of inclusion and empowerment, and on a more consistent approach to well-being. They also said the Group should focus on
simplifying internal processes.

77 | HSBC Holdings plc Annual Report and Accounts 2022

Listening to our colleagues continued
Employee engagement
We use eight Snapshot indices to measure key areas of focus and compare against peer institutions, including a new index focused on inclusion
that we introduced in 2022. The table below sets out how we performed.

Index | Score 1 | vs 2021 | HSBC vs benchmark 2 | Questions that make up the index
Employee engagement | 73% | +1 | +3 | I am proud to say I work for this company. I feel valued at this company. I would recommend this company as a great place to work.
Employee focus | 72% | +1 | +2 | I generally look forward to going to work. My work gives me a feeling of personal accomplishment. My work is challenging and interesting.
Strategy | 75% | +3 | +4 | I have a clear understanding of this company's strategic objectives. I am seeing the positive impact of our strategy. I feel confident about this company's future.
Change leadership | 76% | +2 | +2 | Leaders in my area set a positive example. My line manager does a good job of communicating reasons behind important changes that are made. Senior leaders in my area communicate openly and honestly about changes to the business.
Speak-up | 76% | +1 | +8 | My company is genuine in its commitment to encourage colleagues to speak up. I feel able to speak up when I see behaviour which I consider to be wrong. Where I work, people can state their opinion without the fear of negative consequences.
Trust | 77% | +1 | +3 | I trust my direct manager. I trust senior leadership in my area. Where I work, people are treated fairly.
Career | 68% | +1 | +4 | I feel able to achieve my career objectives at this company. I believe that we have fair processes for moving/promoting people into new roles. My line manager actively supports my career development.
Inclusion (new)3 | 76% | +1 | +4 | I feel a genuine sense of belonging to my team. I feel able to achieve my career objectives at this company. I feel able to be myself at work. I trust my direct manager. Where I work, people are treated fairly. Where I work, people can state their opinion without the fear of negative consequences.

1 Each index comprises constituent questions, with the average of these questions forming the index score.
2 We benchmark Snapshot results against a peer group of global financial services institutions, provided by our research partner, Karian and Box. Scores for each
question are calculated as the percentage of employees who agree to each statement. For further details on the constituent questions and past results, see the ESG
Data Pack at www.hsbc.com/esg.
3 The Inclusion index was introduced in 2022. It comprises questions that were asked in earlier surveys, so we are able to report a comparison with 2021.
For further details of well-being, see page 80, and for further details of inclusion, see page 76.
What we learned
All eight of our Snapshot indices improved slightly in 2022. Employee engagement, which is our headline measure, was three points above
benchmark and one point above 2021 levels, and exceeded our target to maintain engagement levels during the year. The Strategy index
continued to improve in relation to the financial services’ benchmark.
Our colleagues continued to cite our approach to hybrid and flexible working as a reason to recommend HSBC, a theme that has been
consistent since 2020. A greater proportion of colleagues also said they experienced a positive environment and culture, as well as saw training
and progression opportunities, helping to drive our Employee engagement score.
One of the other top five factors identified to influence the Employee engagement score is colleagues’ confidence in the company’s future.
Within the Strategy index, employees recorded feeling increasingly confident about the future of the company and understanding of our
strategic objectives.
With inflationary pressures and the rising cost of living around the world, pay and financial well-being are growing concerns among colleagues.
We saw an increase in comments relating to pay in the Snapshot survey, and self-reported financial well-being declined by four points, despite a
four-point increase in employees reporting that they know how to get support about their financial capability. For further details of our approach
to financial well-being, see page 80.
Our Snapshot survey showed 65% of colleagues reported they intend to stay with HSBC for five or more years, a one-point increase, while
19% said they intend to leave in the next two years, a two-point decrease. Despite this, involuntary turnover decreased to 3.3% and voluntary
turnover increased to 14.1%, as labour markets picked up globally. Both our Snapshot and voluntary leaver surveys tell us that career
development and pay and benefits continue to be key influencing factors for voluntary attrition, and they remain central to our people strategy.
For further details of how we help our people develop their careers, see ‘Developing skills, careers and opportunities’ on page 81.

78 | HSBC Holdings plc Annual Report and Accounts 2022

Being a great place to work
We continued to support our colleagues during the Covid-19 pandemic, and ensured their safe return to the office. In 2022, we made it a priority
to support even more colleagues to work flexibly, while ensuring we are there for our customers when and where they need us.
Hybrid working is a key part of our flexible working proposition and requires trust. We have empowered our people to find the right balance,
guided by the three principles of:
–customer focus, by delivering excellent outcomes for our customers;
–team commitment, by connecting with each other, building our community and collaborating; and
–two-way flexibility, by providing more choice on how, when and where we work, suitable for the roles we perform.
Our flexible working approach
Colleagues consistently tell us that our approach to flexible and hybrid working is a key reason to recommend HSBC as an employer. In June
2022, our ‘Future of work’ survey showed 81% of colleagues speak positively about our approach to flexible and hybrid working, and 80% feel it
improves their work-life balance.
In 2022, we refreshed our flexible working policies to provide more choice and make it easier to request a flexible working arrangement.
Choices include flexible and staggered hours, job sharing, reduced hours and hybrid working. These new policies are available to more than
90% of colleagues, including our branch network and non-permanent employees. We have encouraged teams to have open conversations
about flexible working opportunities.
More colleagues than ever are working in a hybrid way, where working time is split between the office and home or another location. According
to our Snapshot survey in September, 59% of our colleagues work in a hybrid way, compared with 37% in 2021.
Different markets are at different stages of embedding hybrid working, and in 2022 some continued to operate under Covid-19 conditions.
Getting the balance right
While working at home eliminates commuting time and provides more opportunities to balance work and life, some benefits of being together
in person cannot be recreated remotely.
Overall, we have seen that colleagues in hybrid roles feel more productive and engaged than those who are unable to work remotely. However,
nearly half of our colleagues told us that the networks of people they regularly interacted with decreased during the pandemic, and they missed
social connections.
As a result, we have equipped leaders to achieve the right balance of remote and in-person working for their teams. Our people managers have
access to in-person and on-demand learning to develop the skills needed to lead hybrid teams effectively. Nearly 8,000 hybrid working learning
curriculums were completed by our people leaders in 2022. In addition, we ran targeted events to stimulate a successful return to the office and
create new hybrid working habits.
With more colleagues adopting balanced hybrid working patterns, the Snapshot survey showed 77% of colleagues said they have enough
opportunities to connect and collaborate with people outside their immediate teams.
Our offices will continue to evolve to support increased collaboration. We are rolling out a digital app in several locations that will offer greater
visibility of who is in the office to support teams coming together.
86%
Of people managers are confident their teams have the right balance of remote and in-person working to meet customer and stakeholder
needs.
Greater front-line flexibility with far reaching benefits
Colleagues have embraced hybrid working across our eight global service centres that support our customer operations and services. Through a
‘Hello hybrid’ campaign, over 38,000 employees completed hybrid skills e-learning and nearly 850 colleagues took part in team dialogue
sessions. The campaign helped our colleagues identify the best of remote and office working for their differing customer needs, cultures and
regulatory requirements. As a result of the campaign, employee sentiment improved by 6% for the question ‘I generally look forward to my
work day.’ In our main contact centres, colleagues now spend up to 67% of their working time on customer-facing activities.
Our approach to fair pay and performance
As part of our approach to performance management, we ask colleagues to set goals with the support of their line managers, which are
regularly reviewed. We encourage people managers to hold regular performance and development conversations, incorporating feedback, and
discussing well-being and progress. In the Snapshot survey, 76% of colleagues indicated they were happy with the support their manager
provided for career development.
While our overall Career index, which measures employee sentiment towards career development, improved by one point, results from our
employee listening channels indicated that sentiment around pay and career opportunities were key factors in colleagues’ decisions to leave
HSBC. In 2023, we will review our approach to pay and performance to ensure we are able to motivate colleagues in a way that is authentic to
our culture and values. Our approach will help colleagues have clarity on performance expectations, awareness of development opportunities
and access to resources.
As part of this programme, we are proposing to simplify assessments of colleagues and shift the focus to conversations about performance and
growth, while improving transparency and structure in our fixed and variable pay design.
> For further details of our approach to colleague remuneration see page 281, and for details of our average standard entry level wages compared with local
minimum wage, see our ESG Data Pack at www.hsbc.com/esg.

79 | HSBC Holdings plc Annual Report and Accounts 2022

Well-being
We want our colleagues to be at their best at work, so we invest significantly in their well-being and will continue to seek new ways to provide
support. Guided by data and colleague feedback, the pillars of our well-being programme are mental, physical, financial and social well-being. In
our employee Snapshot survey carried out in September, 70% of our colleagues said they believe HSBC cares about their well-being.
Mental well-being
Supporting our colleagues’ mental health remains a top priority, with the Covid-19 pandemic still presenting mental health challenges in many
countries. Our Snapshot survey revealed an increase in mental well-being, with 84% of colleagues rating their mental health as positive,
compared with 82% in 2021. It also revealed that 73% of colleagues felt comfortable talking to their manager about their mental health, a slight
increase from 72% in 2021.
We have continued to make telephone counselling services and Headspace, a meditation app, available to all colleagues globally. Use of these
services increased by 3% and 28% in 2022, respectively.
More than 240,000 colleagues and contractors took part in mental health awareness training as part of global mandatory training. Our voluntary
mental health e-learning has now been completed by 30,000 employees, with people managers making up 17% of the completions. We also
provide an in-depth classroom course designed for line managers and those wanting to be mental health champions, which has been completed
by 800 colleagues.
To celebrate World Mental Health Day, we ran a global awareness campaign on alleviating stigma and encouraging colleagues to feel able to
speak up if they need help. Throughout October, we held over 100 virtual events, featuring internal and external experts providing advice on
mental health and well-being related topics.
Physical well-being
The Snapshot survey revealed a decrease in physical well-being, with 71% of colleagues rating their physical health as positive, compared with
75% in 2021.
In February, we ran a survey about our employee benefits, which showed 37% of colleagues wanted more support with physical activity and
exercise. In response, we ran a five-month pilot with 2,000 colleagues to test mobile apps that incentivise physical activity. The pilot showed
that the use of apps and community challenges helped up to 70% of users increase their physical activity, to varying degrees. As a result, we
are looking at expanding the initiative to more countries in 2023.
We have continued to provide access to private medical insurance in the majority of our countries and territories, covering 98% of permanent
employees. In certain countries we provide on-site medical centres that the majority of colleagues can access.
We have enhanced fertility, adoption, and surrogacy benefits for our colleagues in the US and Canada. We are also expanding our gender
dysphoria benefits for LGBTQ+ colleagues in the UK and Philippines from 2023.
Financial well-being
Our Snapshot survey revealed a decrease in financial well-being, with 60% of colleagues reporting positively, compared with 64% in 2021. We
believe this is an impact of rising inflation and cost of living in many countries.
However, colleagues felt more supported to manage their financial well-being, at 62%, an increase of four points from 2021. The same survey
revealed that 81% of colleagues felt they had the right skills and knowledge to manage their day-to-day finances, and 77% said they are well
prepared to meet their financial goals.
Our benefits survey showed that 31% of colleagues want more support around financial education. In response, we have continued to promote
our financial education programmes on healthy financial habits and saving strategies. Since their launch, over 2,400 colleagues have used these
programmes.
We review our approach to employee share ownership plans in line with country demand, operational capacity and local legislation. In 2022, we
expanded our global share plan to colleagues in Bahrain, Qatar and Kuwait, meaning that 90% of our people globally now have access to share
ownership plans. We continue to look to offer the plan in new locations.
In the UK, we introduced a green car scheme to encourage colleagues to transition to electric vehicles and benefit from reduced running costs
and CO2 emissions.
Social well-being
We introduced social well-being as a new pillar of our programme in 2022, to focus on social connections and work-life balance.
Snapshot surveys showed 75% of colleagues say they can integrate their work and personal life positively, a slight decrease compared with
76% in 2021. We will continue to facilitate this by enabling flexible working arrangements, including hybrid working, in line with our future of
work initiative (see page 76). Colleagues feel more confident talking to their manager about work-life balance, with 80% saying they do,
compared with 77% in 2021.
In 2021, we upgraded our At Our Best recognition online platform, which allows for real-time recognition and appreciation between colleagues.
The upgrade enables colleagues to record and send video messages to accompany recognitions. In 2022, there were more than 1.2 million
recognitions made, an 11% increase on 2021. We also enabled colleagues globally to donate their points directly to humanitarian relief agencies
supporting those impacted by the war in Ukraine. To date more than 1,100 colleagues have made personal donations to this cause.
Awards
CCLA Global 100 Mental Health Benchmark
Ranked number 1 global employer
Promoting a culture of well-being
In July 2022, we became a founding member of the World Wellbeing Movement, a coalition of global leaders from business, civil society and
academia. A key objective of the movement is to develop a simple and universally acceptable standard for measuring well-being that leads to
meaningful action. We believe that having a standard ESG indicator on well-being will improve transparency and enable organisations to better
target actions to create positive change.

80 | HSBC Holdings plc Annual Report and Accounts 2022

Developing skills, careers and opportunities
Learning and skills development
We aim to build a dynamic environment where our colleagues can develop skills and undertake experiences that help them fulfil their potential.
Our approach helps us to meet our strategic priorities and support our colleagues’ career goals.
Our resources
The way we work and the way we learn has changed, driven by the adoption of hybrid working styles and digital capabilities. We use a range of
resources to help colleagues take ownership of their development and career, including:
–HSBC University, which is our home for learning and skills accessed online and through a network of training centres. Learning is
organised through technical academies aligned to businesses and functions, complemented with enterprise-wide academies on
topics of strategic importance;
–My HSBC Career Portal, which offers career development information and resources to help colleagues manage the various stages of
their career, from joining through to career progression; and
–HSBC Talent Marketplace, which is our online platform that uses artificial intelligence (‘AI’) to match colleagues interested in
developing specific skills with opportunities that exist throughout our global network.
Learning foundations
We expect all colleagues, regardless of their contract type, to complete global mandatory training each year. This training plays a critical role in
shaping our culture, ensuring a focus on the issues that are fundamental to our work – such as sustainability, financial crime risk, and our
intolerance of bullying and harassment. New joiners attend our Global Discovery programme, which is designed to build their knowledge of the
organisation and engage them with our purpose, values and strategy.
As the risks and opportunities our business faces change, our technical academies adapt to offer general and targeted development. Our Risk
Academy provides learning for every employee in traditional areas of risk management such as financial crime risk, but also offers more specific
development for those in high-risk roles and for emerging issues, such as climate risk, or the ethics and conduct of AI and big data.
Preparing for the future
Our approach to learning is skills based. Our academy teams work with businesses and functions to identify the key skills and capabilities they
need now, and in the future. We use people analytics, strategic workforce planning, and learning needs analysis to identify current and future
skills demand, and to help colleagues develop in new areas that match their aspirations and support career growth.
Throughout 2022 we continued to run skills campaigns to create the impetus for individual-led learning, and have used our skills influencer
network of more than 1,800 colleagues to build engagement and enthusiasm around the Talent Marketplace, and opportunities for
development.
Evolving how we learn
During the Covid-19 pandemic, we strengthened our digital offering to enable colleagues to develop their skills in a hybrid environment. Our
colleagues can access HSBC University online via our Degreed learning platform, using it to identify, assess and develop skills through internal
and external courses and resources in a way which suits them.
Degreed materials range from short videos, articles or podcasts to packaged programmes or curated learning pathways that link content in a
logical structure. By December, more than 187,000 colleagues were registered on the platform. In 2022, overall training volumes were 28.8
hours per FTE, up from 26.7 hours per FTE in 2021.
However, we recognise that most development happens while our colleagues work, through regular coaching, feedback and performance
management. To enable even more opportunities for colleagues to grow in this way, our Talent Marketplace matches colleagues to projects and
new experiences based on their aspirations and career goals. In 2022, we rolled the platform out to an additional 83,000 colleagues across 18
countries and territories. Over 150,000 colleagues now have access to the platform, and to date over 3,000 projects and networking requests
have been facilitated, and over 70,000 hours of activity have taken place.
Identifying and retaining future talent
The starting point to identifying talent is having a fair and inclusive recruitment process. To help managers hire in line with our principles, we
have launched compulsory inclusive hiring training. In 2022, over 5,000 managers received the certification, in addition to 13,500 in 2021.
Our talent programmes have been designed to enable talented employees to make the successful transition into more complex roles and to
support participants in planning for a long-term career at HSBC. Our key programmes include:
–Accelerating Female Leaders, which increases the visibility, sponsorship and network of female participants. Colleagues are
supported with development plans to help them prepare for the next level of leadership, and matched with sponsors from our senior
leadership and external executive coaches;
–Accelerating into Leadership, which prepares participants for leadership roles through peer-based development activities, senior
sponsorship and executive coaches. Topics of focus include network building, developing resilience and navigating the organisation.
We measure the retention of colleagues post-programme to assess the success; and
–‘UGrow’, which is our programme that supports the retention and development of colleagues while strengthening our leadership
pipeline. The programme offers masterclasses focused on career planning, driving results and adaptability for aspiring colleagues.
Our global emerging talent programmes welcomed over 800 graduates and 600 interns to the organisation in 2022. Our programmes are a key
enabler of our broader diversity goals (see page 74). In 2022, our graduate intake was 48% female, and comprised graduates from 46
nationalities and over 30 ethnicities. We welcomed our graduates with a three-day induction programme, which introduced them to key topics
such as our purpose, values and strategy, as well as our role in delivering a sustainable future.
Training at HSBC
6.3 million
Training hours carried out by our colleagues in 2022. (2021: 5.9 million)
28.8 hours per FTE
Training hours carried out per FTE in 2022. (2021: 26.7 hours)

81 | HSBC Holdings plc Annual Report and Accounts 2022

Energising our colleagues for growth
We are committed to offering colleagues the chance to develop their skills while building pipelines of talented colleagues to support the
achievement of our strategic priorities.
It remains critical to our ability to energise for growth that we demonstrate the right leadership, and create the optimal conditions for our people
to perform. Our leadership and culture is guided by our purpose, values and delivering our strategy.
The Sustainability Academy
To support our ambitions to become net zero in our own operations by 2030, and to align our financed emissions to the Paris Agreement goal of
net zero by 2050, we launched the Sustainability Academy in 2022. The academy is available to all colleagues across the Group and serves as a
central point for colleagues to access learning plans and resources, and develop practical skills.
The academy has resources to help all colleagues understand broad topics such as climate change or biodiversity, and is supplemented with
more advanced content for key groups of colleagues who are supporting customers through their transition. We intend to align content to
support business outcomes by educating our colleagues on topics such as energy efficiency, renewable energy, sustainability and ESG
reporting.
As part of our strategy to align the provision of finance to the Paris Agreement, the Sustainability Academy is supporting our colleagues to build
their knowledge and capability in the sectors in which we have begun to measure and set financed emissions targets, including the oil and gas,
and power and utilities sectors.
We will continue to update the academy with new research and content related to ESG issues, including those related to social and governance
issues.
Supporting our Asia wealth strategy
At the heart of our ambition to offer best-in class international wealth management services to our customers is the accelerated expansion of
our offering in Asia. To achieve this, we are providing opportunities for our colleagues to reskill and build career resilience through our
Accelerating Wealth Programme. The programme offers a skills-based development plan for colleagues who are looking to pursue a career in
wealth management. Participants on the programme are allocated 20% of their working week to focus on learning and skills development. They
are then regularly assessed to ensure they are making progress with developing the right skills to meet our client needs.
We recognise the role that diverse experiences can bring to our customers, and have therefore ensured that the programme is open to
colleagues from all global businesses and functions based in Asia.
Building leadership capabilities
We have strengthened the training we give to leaders at all levels of the Group to ensure they are equipped with the skills and knowledge to
energise and develop our colleagues.
We have continued the executive leadership programme for our most senior leaders, creating a programme of high-quality modules that draws
on internal and external expertise. The programme focuses on the shifting expectations of leaders, embedding the clarity and alignment to
achieve our goals and tackling strategic change. We complemented this with educational resources focused on the opportunities presented by
Cloud, artificial intelligence, and blockchain technology.
Our Country Leadership Programme aims to prepare and develop future country CEOs and executives for highly complex roles. The programme
builds the confidence and competence of leaders across themes such as managing cyber risk, building regulatory relationships, representing
HSBC’s net zero ambitions and upholding customer-centricity. Participants learn through simulation exercises and coaching from seasoned
executives, subject matter experts and Board members.
Leadership development for our colleagues at managing director level includes new programmes that have been created in partnership with
business schools and industry practitioners. Topics focus on a range of issues, including critical skills areas such as influence, inclusion, and
Agile methodologies.
We recognise the importance of people managers in shaping the experience of our colleagues. We have revised our training for people
managers to better support living our purpose, values and strategy, and to reflect the challenges of retaining talent. Our core leadership
development programme is made up of four modules that are available in face-to-face and virtual formats. The programme is focused on the
role and expectations of managers, how to design and organise work, how to handle relationships with employees and how to nurture a
productive team environment.
Supporting UK emerging talent
In the UK, we have continued to broaden our emerging talent programmes beyond traditional graduate and internship schemes. Our
programmes support those from non-traditional education backgrounds, and are supportive of our social mobility ambitions, outlined on page 75.
In 2022, we provided over 180 apprenticeship opportunities for external and internal applicants. We have also provided over 600 structured
work placements for secondary school students, and developed partnerships with Brampton Manor, Generating Genius and the #merky
foundation to provide financial literacy support to over 6,400 14 to 16 year olds. We have recently launched a career accelerator programme, in
partnership with Zero Gravity, which involves over 120 of our graduates providing career coaching and mentorship to university students. HSBC
UK also uses its apprenticeship levy to support work opportunities at small and medium-sized business through a partnership with West
Midlands Combined Authority.

82 | HSBC Holdings plc Annual Report and Accounts 2022

Building customer inclusion and resilience
Our approach to customer inclusion and resilience
We believe that financial services, when accessible and fair, can reduce inequality and help more people access opportunities. We aim to play
an active role in opening up a world of opportunity for individuals by supporting their financial well-being, and removing the different barriers that
people can face in accessing financial services.
Access to products and services
We aim to provide innovative solutions that address the barriers people can face in accessing products and services. In 2022, we introduced a
new process to help refugees fleeing the conflict in Ukraine to access the financial services they need to set up a new life in the UK. Over 9,000
Ukrainian refugees have now opened a bank account with us.
As part of our efforts to help vulnerable customers access digital services, since 2021, HSBC UK has given over 1,500 vulnerable customers a
free tablet device. This allows customers who previously had no way of accessing our online or mobile banking services the ability to do so.
Making banking accessible
Number of no-cost accounts held for customers who do not qualify for a standard account or who might need additional support due to social or
financial vulnerability.1
1 The scope of this disclosure has expanded from 2021, where we only reported the number of accounts opened for homeless, refugees and survivors of human
trafficking.
Supporting financial knowledge and education
We continue to invest in financial education content and features across different channels to help customers, colleagues and communities be
confident users of financial services.
Between the beginning of 2020 and the end of 2022, we received over 4 million unique visitors to our global digital financial education content,
achieving our 2019 goal. We will continue to engage customers with financial education content and build their financial capabilities through the
introduction of personal financial management tools. Since launching a financial fitness score in the UK, 74,325 customers have used the tool to
understand the healthiness of their finances based on details about their spending, borrowing and saving habits.
We support programmes that deliver financial education to our local communities. HSBC Life is sponsoring the Hong Kong Lutheran Social
Service to develop the Health Dollar Fun App, to boost digital literacy among the elderly, enhance their physical well-being and encourage social
interaction. Throughout 2021 and 2022, we also partnered with Injaz Al-Arab, member of JA Worldwide, to deliver our ‘Saving for good’
programme, which focuses on building the financial capability of low-income workers in Bahrain, Egypt, Kuwait, Qatar and the UAE. We have
now supported over 1,700 individuals to grasp basic financial concepts such as budgeting, saving and investing through a combination of
customised training courses and mentorship.
We also understand the importance of building financial capability in young people to ensure future resilience. In Mexico, we offer a podcast
that covers a relevant financial educational theme in each episode. To date, the podcast has been downloaded more than 73,000 times.
In collaboration with BBC Children in Need, HSBC UK has worked with financial education charity Young Enterprise to adapt its award-winning
Money Heroes programme for children and young people experiencing a range of issues and challenges in their lives. The education resources
have been adapted to ensure they are accessible, with books available in braille and large-print, as well as British Sign Language signed videos,
audiobooks and a new early-reader e-book.
Creating an inclusive banking experience
We aim to ensure that our banking products and services are designed to be accessible for customers experiencing either temporary or
permanent challenging circumstances, such as disability, impairment or a major life event.
We are committed to becoming a digitally accessible bank so that our digital channels are usable by everyone, regardless of ability. We have
been recognised by the charity AbilityNet as having the most accessible website compared with other local competitor banks in 10 out of 13 of
our key Wealth and Personal Banking markets.
Support for customers extends beyond our digital channels. In recognition of the fact that not all disabilities are visible or immediately obvious to
others, we have now joined the Hidden Disabilities Sunflower Lanyard Scheme in the UK and Hong Kong. The lanyard indicates that an
individual may need additional support, help or a little more time. We also launched ‘quiet hours’ across all of our UK branches and ‘quiet
corners’ at designated branches in Hong Kong, to provide a calmer and more inclusive environment.
Supporting women and minority-led businesses
We aim to support our diverse customers by opening up a world of opportunity for women and minorities.
In May 2022, we launched a Female Entrepreneur Fund that aims to provide $1bn in lending to female-owned businesses.
Other programmes include our Mujeres Al Mundo (Women of the World) programme in Mexico, which supports the personal and professional
development of women as customers. Mujeres Al Mundo offers women exclusive benefits across financial products and services, discounts on
workshops and programmes taught by the University Anahuac Mexico.
We have also begun lending from the $100m that we allocated in 2021 for companies founded and led by women and minorities through HSBC
Ventures.

83 | HSBC Holdings plc Annual Report and Accounts 2022

Engaging with our communities
Building a more inclusive world
We have a long-standing commitment to support the communities in which we operate. We aim to provide people with the skills and
knowledge needed to thrive in the post-pandemic environment, and through the transition to a sustainable future.
We are empowering our people and those in our communities to develop skills for the future. Through our charitable partnerships and
volunteering opportunities, our people share their skills and create a positive impact in society.
Our global reach is our unique strength. Bringing together diverse people, ideas and perspectives helps us open up opportunities and build a
more inclusive world.
Building community and future skills
Our Future Skills strategy, launched in 2018, has supported over 6.6 million people through more than $197m in charitable donations. Current
projections from our charity partners indicate our support during 2022 reached more than 1.45 million people through donations of $41m.
In anticipation of global economies transitioning towards a low-carbon future, our colleagues and charity partners initiated programmes that help
people and communities respond to opportunities and challenges through building relevant skills:
•In the Middle East, we partner with the Posterity Institute and the Arab Youth Council for Climate Change to develop an open-source
curriculum for teaching sustainability skills in higher education institutions in the region.
•In Argentina, the Academia Solar programme aims to train students in design, installation and commissioning of photovoltaic solar
energy systems.
•In India, the Babuji Rural Enlightenment and Development Society teaches rural farmers sustainable farming practices, including soil
and water management, helping them to increase their income.
We also work with our charity partners around the world to promote employability and financial capabilities in disadvantaged communities, and
to respond to local needs:
•We support The Prince’s Trust Group to help marginalised young people in Australia, Canada, India, Malaysia, Malta and the UK to
develop employable skills.
•Our award-winning partnership with the Scouts has led to the creation of the first ever Money Skills Activity Badge for Beaver and
Cub groups in the UK.
•We support Feeding America to help users of food banks in the US get on-site job skill training.
•We work with the China Volunteer Service Foundation to improve the financial capability of elderly people in Beijing, Shanghai, and
Guangzhou.
Our support for Covid-19 relief efforts also continued in 2022, with a door-to-door vaccination programme in Hong Kong aiming to help 10,000
elderly or people with disabilities.
Climate Solutions Partnership
Our Climate Solutions Partnership is a five-year $100m philanthropic initiative that aims to identify and remove barriers to scale for climate
change solutions. Working with the World Resources Institute, WWF and over 50 local partners, our support focuses on start-up companies
developing carbon-cutting technologies, nature-based solutions, renewable energy initiatives in Asia and the WWF-led Asia Sustainable Palm Oil
Links programme.
Since 2020, we have committed $95.8m of our $100m funding target to non-governmental organisation (‘NGO’) partners, supporting projects
with the potential to make significant impacts in the mission to achieve a net zero, resilient and sustainable future.
Community engagement and volunteering
We offer paid volunteering days, and encourage our people to give time, skills and knowledge to causes within their communities. In 2022, our
colleagues gave over 67,000 hours to community activities during work time.
Engagement with pressure groups
We aim to maintain a constructive dialogue on important topics that are often raised by campaigning organisations and pressure groups.
Charitable giving in 2022
Social, including Future Skills: 50%
Environment, including the Climate Solutions Partnership: 20%
Local priorities: 16%
Disaster relief and other giving: 14%
Total cash giving towards charitable programmes
$116.8 m
Hours volunteered during work time
> 67,000
People reached through our Future Skills programme
1.45m
Awards
Investor and Financial Education Awards 2022
Hong Kong
•IFEA (Corporate) Gold Award

84 | HSBC Holdings plc Annual Report and Accounts 2022

Governance
Acting responsibly
We remain committed to high standards of governance. We work alongside our regulators and
recognise our contribution to building healthy and sustainable societies.
At a glance
Our relationship
We act on our responsibility to run our business in a way that upholds high standards of corporate governance.
Customer experience is at the heart of how we operate. It is imperative that we treat our customers well, that we listen, and that we act to
resolve complaints quickly and fairly. We measure customer satisfaction through net promoter scores across each of our business lines, listen
carefully to customer feedback so we know where we need to improve, and take steps to do this.
We are committed to working with our regulators to manage the safety of the financial system, adhering to the spirit and the letter of the rules
and regulations governing our industry.
We strive to meet our responsibilities to society, including through being transparent in our approach to paying taxes. We also seek to ensure
we respect global standards on human rights in our workplace and our supply chains, and continually work to improve our compliance
management capabilities.
For further details of our corporate governance, see our corporate governance report on page 239.

In this section |  |  |  |
Setting high standards of governance | How ESG is governed | We expect that our ESG governance approach is likely to continue to develop, in line with our evolving approach to ESG matters and stakeholder expectations. | Page | 86
Human rights | Our respect for human rights | As set out in our Human Rights Statement, we strive for continual improvement in our approach to human rights. | Page | 87
Customer experience | Customer satisfaction | While customer satisfaction improved during the year, we have work to do to improve our rank position against competitors. | Page | 89
How we listen | We aim to be open and transparent in how we track, record and manage complaints. | Page | 90
Integrity, conduct and fairness | Safeguarding the financial system | We have continued our efforts to combat financial crime and reduce its impact on our organisation, customers and communities that we serve. | Page | 92
Whistleblowing | Our global whistleblowing channel, HSBC Confidential, allows our colleagues and other stakeholders to raise concerns confidentially. | Page | 92
A responsible approach to tax | We seek to pay our fair share of tax in all jurisdictions in which we operate. | Page | 93
Acting with integrity | We aim to act with courageous integrity and learn from past events to prevent their recurrence. | Page | 93
Conduct: Our product responsibilities | Our conduct approach guides us to do the right thing and to focus on the impact we have on our customers and the geographies in which we operate. | Page | 94
Our approach with our suppliers | We require suppliers to meet our compliance and financial stability requirements, as well as to comply with our supplier code of conduct. | Page | 94
Safeguarding data | Data privacy | We are committed to protecting and respecting the data we hold and process, in accordance with the laws and regulations of the geographies in which we operate. | Page | 95
Cybersecurity | We invest in our business and technical controls to help prevent, detect and mitigate cyber threats. | Page | 96

85 | HSBC Holdings plc Annual Report and Accounts 2022

Setting high standards of governance (TCFD)
How ESG is governed
The Board takes overall responsibility for ESG strategy, overseeing executive management in developing the approach, execution and
associated reporting. Progress against our ESG ambitions is reviewed through Board discussion and review of key topics such as updates on
our climate ambition and transition, customer experience and employee sentiment. The Board is regularly provided with specific updates on
ESG matters, including the energy policy, human rights and employee well-being. Board members receive ESG-related training as part of their
induction and ongoing development, and seek out further opportunities to build their skills and experience in this area. For further details of
Board members’ ESG skills and experience, see page 240. For further details of their induction and training in 2022, see page 252.
Given the wide-ranging remit of ESG matters, the governance activities are managed through a combination of specialist governance
infrastructure and regular meetings and committees, where appropriate. These include the Group Disclosure and Controls Committee and
Group Audit Committee, which provide oversight for the scope and content of ESG disclosures, and the Group People Committee, which
provides oversight support for the Group’s approach to performance management. For some areas, such as climate where our approach is
more advanced, dedicated governance activities exist to support the wide range of activities, from sustainable finance solution development in
the Sustainability Execution Review Group to climate risk management in the Climate Risk Oversight Forum.
The Group Chief Risk and Compliance Officer and the chief risk officers of our PRA-regulated businesses are the senior managers responsible
for climate financial risks under the UK Senior Managers Regime. Climate risks are considered in the Group Risk Management Meeting and the
Group Risk Committee, with scheduled updates provided, as well as detailed reviews of material matters, such as climate-related stress testing
exercises.
The diagram on the right provides an illustration of our ESG governance process, including how the Board’s strategy on climate is cascaded and
implemented throughout the organisation. It identifies examples of forums that manage both climate-related opportunities and risks, along with
their responsibilities and the responsible chair. The structure of the process is similar for the escalation of problems, with issues either resolved
in a given forum or raised to the appropriate level of governance with appropriate scope and authority.
We expect that our ESG governance approach is likely to continue to develop, in line with our evolving approach to ESG matters and
stakeholder expectations.

How HSBC’s climate strategy is cascaded
Opportunities | Risks
Board level governance
HSBC Holdings Board
Group Executive Committee | Group Audit Committee | Group Risk Committee
Management level governance
ESG Committee Supports the development and delivery of the Group’s ESG strategy, key policies and material commitments by providing oversight, coordination and management of ESG commitments and initiatives. Co-Chairs: Group Company Secretary and Chief Governance Officer, and Group Chief Sustainability Officer | Group Risk Management Meeting Receives updates on climate risk, and reviews climate risk appetite and top and emerging climate risks. Chair: Group Chief Risk and Compliance Officer
Supporting governance
Sustainability Execution Review Group Oversees the delivery of our ambition to provide and facilitate $750bn to $1tn of sustainable finance and investment, and realisation of commercial opportunities. Chair: Group Chief Executive | Climate Risk Oversight Forum Oversees global risk activities relating to climate risk management, including physical and transition risks. Equivalent forums have been established at regional level. Chair: Group Head of Risk Strategy and Macroeconomic Risk
Regional, global business and global functions

Examples of ESG-related management governance
The following governance bodies support management in its delivery of ESG activities.

Digital Business Services Executive Committee Oversees the global delivery of ESG activities within our own operations, services and technology elements of our strategy. Chair: Group Chief Operating Officer
Group Reputational Risk Committee Oversees global executive support for identification, management and ongoing monitoring of reputational risks. Chair: Group Chief Risk and Compliance Officer
Sustainability Target Operating Model Steering Committee Oversees the implementation of the Group’s organisational plan for the internal infrastructure, both within the Sustainability function and the wider Group, to deliver our climate ambitions. Chair: Group Chief Sustainability Officer
Human Rights Steering Committee Oversees the Group’s evolving approach to human rights and provides enhanced governance. Chair: Group Chief Risk and Compliance Officer

86 | HSBC Holdings plc Annual Report and Accounts 2022

Human rights
Our respect for human rights
As set out in our Human Rights Statement, we recognise the role of business in respecting human rights. Our approach covers all aspects of
internationally recognised human rights and is guided by the UN Guiding Principles on Business and Human Rights (‘UNGPs’) and the OECD
Guidelines for Multinational Enterprises.
Refreshing our salient human rights issues
I n 2022, building on an earlier human rights review that had identified modern slavery and discrimination as priority issues, we reviewed our
salient human rights issues following the methodology set out in the UNGPs. These are the human rights at risk of the most severe potential
negative impact through our business activities and relationships. It is important to understand these as inherent risks, based on the nature of
our business. Identifying and regularly reviewing these risks helps us to validate and evolve our overall approach to human rights.
Through this review, we identified the following five human rights risks (salient human rights issues) inherent to HSBC’s business globally:
–Right to decent work: This covers freedom from forced labour including freedom from slavery and child labour and protection from
inhumane, harsh or degrading treatment or punishment. It also includes the right to just and favourable conditions of work including
the right to reasonable working hours, fair working conditions and pay. It also covers the right to health and safety at work, including
appropriate living conditions for workers as well as protection of their mental and physical health and safety while at work.
–Right to equality and freedom from discrimination: This covers the right to equal opportunity and freedom from discrimination on the
basis of protected characteristics.
–Right to privacy: This includes the right to protection against interference with privacy.
–Cultural and land rights: This includes self-determination and the enjoyment of culture, religion and language, and the rights of
indigenous people.
–Right to dignity and justice: This includes freedom of opinion and expression and freedom from arbitrary arrest, detention or exile.
The assessment also considered our business activities and relationships in the context of our roles: as an employer; as a buyer of goods and
services; as a provider of financial products and services to personal customers and, separately, to business customers; and as an investor,
including all investment activities.
We assessed how each of these five roles might intersect with our five salient human rights issues. The table above shows the areas where
we assessed severe negative impacts on human rights would be most likely to arise, in the absence of action to mitigate them. This additional
analysis allows us to focus our efforts as we review the range of measures already in place to manage risks, and consider enhancements.
Stakeholder engagement
As part of the process of validating our assessment of our salient human rights issues, we engaged with a range of internal and external
stakeholders. These included:
–drawing on the experience of our employee groups, which gave us valuable feedback on human rights challenges in the workplace;
–working with civil society groups with expertise in one or more of our salient human rights issues, who could represent the views of
potentially impacted people;
–interviewing of our largest investors to hear their assessments of the potential human rights impacts associated with the financial
services industry, and we listened to their expectations of us in responding to the risks; and
–discussing our salient human rights issues with some of our key suppliers, our large business customers and the companies in which
we invest, to understand their views of human rights impacts in different parts of the world and to develop collaborative approaches
to addressing those impacts.
These stakeholder engagements and input from external human rights experts led us to alter or extend our initial assessments in several ways.
For example, our discussions with civil society groups helped us understand the potential impact of our investments on all five of our salient
human rights issues. Engagement with investors in HSBC informed our assessment of the way in which our salient human rights issues overlap
with our approach to climate change and our commitment to a just transition (see next page).
Our salient human rights issues
Illustration of HSBC Group’s inherent human rights risks mapped to business activities.

Inherent human rights risks | HSBC activities
Employer | Buyer | Provider of products and services | Investor 1
Personal customers | Business customers
Right to decent work | Freedom from forced labour |  | ● |  | ● | ●
Just and favourable conditions of work | ● | ● |  | ● | ●
Right to health and safety at work | ● | ● | ● | ● | ●
Right to equality and freedom from discrimination | ● | ● | ● | ● | ●
Right to privacy | ● |  | ● |  | ●
Cultural and land rights |  | ● |  | ● | ●
Right to dignity and justice | ● | ● | ● | ● | ●

1 Investor includes our activities in HSBC Asset Management.
Our respect for human rights continued
Managing risks to human rights
In 2022, we began the process of adapting our risk management procedures to reflect what we learned from the work on salient human rights
issues described above. This included the development of Group guidance on human rights, which incorporates the salient human rights issues
assessment and provides colleagues with practical advice, including case studies, on how to identify, prevent, mitigate and account for how we
address our impacts on human rights.
We incorporated additional human rights elements into our existing procurement processes and supplier code of conduct, and we extended
existing human rights due diligence processes for suppliers and business customers. We continued to develop our in-house capability on human
rights, including by launching online resources for all staff and delivering bespoke human rights training for 520 employees across our network.

87 | HSBC Holdings plc Annual Report and Accounts 2022

The actions we are taking to address these salient human rights issues are consistent with our values, and will help us to meet our
commitments on diversity and inclusion, and those we have made under the UN Global Compact and the World Economic Forum metrics on
risk for incidents of child, forced or compulsory labour.
For further details of the actions we have taken to respect the right to decent work, see our Annual Statement under the UK Modern Slavery Act at www.hsbc.com/
modernslaveryact.
For further details of the actions taken to respect the right to equality and freedom from discrimination, see ’Our approach to diversity and inclusion’ on page 74.
Sector policies
Some of our business customers operate in sectors in which the risk of adverse human rights impact is greater. Our sector policies for
agricultural commodities, energy, forestry, mining and metals cover human rights issues such as forced labour, harmful or exploitative child
labour, land rights, the rights of indigenous peoples, including ‘free prior and informed consent’, workers’ rights, and the health and safety of
communities.
Through our membership of international certification schemes such as the Forestry Stewardship Council, the Roundtable on Sustainable Palm
Oil and the Equator Principles, we actively support the continual improvement of standards aimed at respecting human rights.
Our sector policies are reviewed periodically to ensure they reflect our priorities.
For further details of our policy prohibitions and other financing restrictions, see our sector-specific sustainability risk policies at www.hsbc.com/who-we-are/esg-
and-responsible-business/managing-risk/sustainability-risk.
Financial crime controls
The risk of us causing, contributing or being linked to adverse human rights impacts is also mitigated by our financial crime risk management
framework, which includes our global policies and associated controls.
For further details of how we fight financial crime, see www.hsbc.com/who-we-are/esg-and-responsible-business/fighting-financial-crime.
Other policies
HSBC’s Principles for the Ethical Use of Data and Artificial Intelligence describe how we seek to respect rights to privacy while making use of
these technologies.
Driving change
We continued to be active participants in industry forums, including the Thun Group of Banks, which is an informal group that seeks to promote
understanding of the UNGPs within the sector.
HSBC has been an active member of the Mekong Club since 2016. We are a regular participant in its monthly financial services working group
and use its informative typological toolkits, infographics, and other multimedia resources covering current and emerging human trafficking and
modern slavery issues. Our Compliance teams regularly collaborate and engage with the Mekong Club in designing bank-wide knowledge
sharing and training sessions.
Supporting those impacted and those potentially at risk
We continued to expand our Survivor Bank programme, which has now benefited over 2,000 survivors of modern slavery and human trafficking
in the UK, and is a model for making financial services more accessible to vulnerable communities worldwide.
We built on this experience in developing access to banking services for customers in the UK and in Hong Kong with no fixed abode, providing
over 4,000 accounts under these programmes.
We also responded to the devastating effects of the conflict in Ukraine by introducing a new process to help refugees to access the financial
services they need to set up a new life in the UK. Over 9,000 people fleeing the conflict have opened a bank account with us.
For further details of our work to support vulnerable communities, see page 83.
Effectiveness
The table below includes indicative metrics we use to measure year-on-year continual improvement to our human rights processes.

Contracted suppliers who had either confirmed adherence to the code of conduct or provided their own alternative that was accepted by our Global Procurement function (%) | 93%
No-cost accounts held for customers who do not qualify for a standard account or who might need additional support due to social or financial vulnerability | 716,957
Employees who have received bespoke training on human rights | 520
Votes against management for reasons including human rights 1 | 87
Concerns raised related to bullying, harassment, discrimination and retaliation | 1,159

1 The figure represents the number of resolutions at investee company shareholder meetings (including AGMs) where votes were cast against management for
reasons related to human rights.
Working for a just transition
We aim to play a leading role in mobilising the transition to a global net zero economy, not just by financing it, but by helping to shape and
influence the global policy agenda. When designing and implementing low-carbon pathways it is important to consider the communities and
areas of the economy that will be facing the greatest challenges. This aligns closely with our commitments on human rights more broadly. This
was demonstrated in June 2022 when HSBC and US fashion group PVH Corp. announced the first sustainable supply chain finance programme
that includes human rights performance standards.
For further details on this programme, see page 58. See also our paper on Just and Inclusive Climate Transition for investors at
www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/news-and-articles/articles/campaign-2022-11-02-hsbc-responsible-investment-insights-
q4-2022.pdf.

88 | HSBC Holdings plc Annual Report and Accounts 2022

Customer experience
We remain committed to improving customers’ experiences. In 2022, we gathered feedback from over one million customers across our three
global businesses to help us understand our strengths and the areas of focus. Our recommendation scores improved in more than 66% of our
markets, although we still have work to do to improve our rank position against competitors.
Customer satisfaction
Listening to drive continual improvement
In 2022, we continued to embed our feedback system so we can better listen, learn and act on our customers’ feedback. We use the net
promoter score (‘NPS’) to provide a consistent measure of our performance. NPS is measured by subtracting the percentage of ‘Detractors’
from the percentage of ‘Promoters’. ‘Detractors’ are customers who provide a score of 0 to 6, and ‘promoters’ are customers who provide a
score of 9 to 10 to the question: ‘On a scale on 0 to 10, how likely is it that you would recommend HSBC to a friend or colleague’.
We run studies that allow us to benchmark ourselves against other banks. In 2022, we expanded our surveys to 14 markets to cover India,
France and Germany. We try to make it as easy as possible for customers to give us feedback, accelerating our use of digital real-time surveys
to capture insight. By sharing this and other feedback with our front-line teams, and allowing them to respond directly to customers, we are
improving how we address issues and realising opportunities.
Our WPB ‘Customer in the room’ programme launched in 2022 to bring our senior leadership closer to customers by providing them with direct
access to customer feedback. The programme helps to demonstrate the impact of our decisions on our customers, and helps ensure we use
customer feedback in all aspects of how we run our business.
How we fared
In WPB, our NPS increased in four of our six key markets, which were the UK, Hong Kong, mainland China and Singapore. Our NPS in Mexico
remained unchanged, while our NPS in India saw a small decline. In Hong Kong, we were ranked in first place, with improved scores in wealth
advisory, life insurance and investment products. Our PayMe payments app was also ranked in second place for digital wallets.
Our ranks in mainland China and India remained in the top three, while our rank in India declined to third place. Our NPS in India declined across
the mobile app, branch and call centre channels. Our overall rank in Singapore improved, and we remained in the top three among our mass
affluent and high net worth customers. Our rank in the UK remained unchanged, with improvements in our loan products and wealth advisory
scores. However, customers told us we needed to focus more on making digital platforms more accessible; making payments easier; improving
our account opening experience; and helping customers better monitor their spending. We have made a commitment to invest in making
improvements in these areas.
In our private bank, our global NPS decreased to 25, compared with 31 in 2021. This was largely due to a decrease in our scores in Hong Kong,
the US and Luxembourg, with mainland China and Taiwan now included in the overall score.
In CMB, our NPS increased in four of our six key markets, which were Hong Kong, mainland China, Singapore and Mexico. Our NPS declined in
the UK and India. Our rank positions in Hong Kong, India, mainland China, Singapore and Mexico either improved compared with 2021, or were
in the top three against competitors. However, our rank in India declined to third place. This was driven by a decline in NPS among our Business
Banking customers. In the UK, our overall rank remained unchanged. We were ranked in the top three among our large corporate and mid-
market enterprise customers in the UK, and we saw a small decline in NPS among our Business Banking customers. We continue to see some
challenges in service delivery, particularly for our Business Banking customers. Among other initiatives, we have been working hard to resolve
telephony resourcing, which has impacted our responsiveness.
In GBM, our global NPS improved from 13 to 17 points. Our global rank position remained in fifth place. We continued to be ranked in the top
three against competitors in MENA, while our US rank improved. Our digital satisfaction score fell marginally by one point. We remained ranked
first for the quality of our digital trade finance platforms.

Number of markets in top three or improving rank 1
| 2022
WPB | 4 out of 6
CMB | 5 out of 6

1 In 2022, we updated the markets we measure our rank positions for both our WPB and CMB businesses to align with executive incentive scorecards. They
comprise: the UK, Hong Kong, Mexico, mainland China, India and Singapore. Rank positions are provided using data gathered through third-party research agencies
Acting on feedback
We continued to focus on improving our products and services to enable better customer experiences.
Across WPB, we launched our Global Money proposition, initially in the UK, which allows customers to open a multi-currency account and be
able to use it within minutes. We also introduced a new mobile account opening journey in Singapore in response to preferences for mobile-first
experiences.
In CMB, we deployed digital onboarding solutions to 12 markets in 2022, using external data sourcing to streamline client and colleague
journeys. These deliveries increased our digital penetration by 14% from 2021, extending our digital products and services to more customers
globally. Through using technology to digitise our operations, there was close to a 6% increase in 2022 in trade transactions initiated digitally by
our customers, and nearly a 62% increase in payments completed using the HSBCnet mobile app.
In response to client feedback, we made a number of changes to our client coverage model in GBM during 2022. We reshaped our Institutional
Client Group, particularly our approach to financial sponsors, sovereign wealth funds and global investors. We enhanced our corporate
multinational model to focus on our largest relationships through regional account managers. We also launched a series of transaction banking
solutions to improve the experience for our clients, and created a new digital collaboration layer to drive clearer accountability and coordination
of global teams when delivering these solutions.

89 | HSBC Holdings plc Annual Report and Accounts 2022

How we listen
To improve how we serve our customers, we must be open to feedback and acknowledge when things go wrong. We have adapted quickly to
support our customers facing new challenges and new ways of working, especially as a result of Covid-19-related lockdown restrictions.
We aim to be open and consistent in how we track, record and manage complaints, although as we serve a wide range of customers – from
personal banking and wealth customers to large corporates, institutions and governments – we tailor our approach in each of our global
businesses. As the table on the right demonstrates, we have a consistent set of principles that enable us to remain customer-focused
throughout the complaints process.
For further details on complaints volumes by geography, see our ESG Data Pack at www.hsbc.com/esg.

How we handle complaints
Our principles | Our actions
Making it easy for customers to complain | Customers can complain via the channel that best suits them. We provide a point of contact along with clear information on next steps and timescales.
Acknowledging complaints | All colleagues welcome complaints as opportunities and exercise empathy to acknowledge our customers’ issues. Complaints are escalated if they cannot be resolved at first point of contact.
Keeping the customer up to date | We set clear expectations and keep customers informed throughout the complaint resolution process via their preferred channel.
Ensuring fair resolution | We thoroughly investigate all complaints to address concerns and ensure the right outcome for our customers.
Providing available rights | We provide customers with information on their rights and the appeal process if they are not satisfied with the outcome of the complaint.
Undertaking root cause analysis | Complaint causes are analysed on a regular basis to identify and address any systemic issues and to inform process improvements.

Wealth and Personal Banking (‘WPB’)
In 2022, we received approximately 1.2 million complaints from customers. The ratio of complaints per 1,000 customers per month in our large
markets decreased slightly from 2.4 to 2.3.
In the UK, complaints fell 8% partly due to a decline in transaction disputes, which had risen during the Covid-19 pandemic. The reduction in
these complaint volumes can also be attributed to journey improvements we made to deal with these disputes more quickly. We continue to be
focused on improving the customer experience to reduce complaint volumes further during 2023.
The increase in complaints in Hong Kong was mainly related to reduced operations in our branches during Covid-19-related restrictions, an
increase in fraudulent activities, and the migration by customers towards new ways of accessing and using our digital platforms. We are
addressing these by seeking to improve our digital capabilities, timely staff reinforcement, enhanced guidance of how to use our digital
platforms and improved customer journeys.
The decrease in complaints in Mexico was driven by improvements in fraud detection, as our fraud teams took actions to protect customers,
including carrying out an upgrade to a monitoring tool for credit and debit cards and making adjustments to fraud rules.
In our private bank in 2022, we received 331 complaints, a 23% decrease on 2021, largely due to the reduction in administration and service
issues. Within this category a high proportion were attributable to processing or client reporting delays/errors. In 2022, the private bank resolved
344 complaints.
WPB complaint volumes 1 (per 1,000 customers per month)

|  | 2022 | 2021
Total 2 |  | 2.3 | 2.4
UK 3 | → | 1.4 | 1.4
Hong Kong 3 | ↑ | 1.0 | 0.7
Mexico 3 | ↓ | 5.1 | 5.5

1 A complaint is any expression of dissatisfaction about WPB’s activities, products or services where a response or resolution is explicitly or implicitly expected.
2 Markets included: Hong Kong, mainland China, France, the UK, UAE, Mexico, Canada and the US.
3 The UK, Mexico and Hong Kong make up 86% of total complaints.
Acting on feedback
In 2022, we launched a Group-wide plan to deliver an improved experience for our customers around the world. The plan will strengthen our
capabilities to hear, understand and act on what our customers are telling us on a regular basis. Across markets we enhanced our measurement
and tracking capabilities, and developed the skills and tools our colleagues need to improve their customer experience each day. We also sought
to standardise our customer-focused approach in our processes.
For our colleagues focused on improving our customers’ experiences, we enhanced and launched regular forums in 15 of our key markets to
ensure systematic reviews are carried out to prioritise feedback and implement improvements quickly regarding our customers’ online and
offline experiences. This allows us to have a structured approach to manage feedback.
In Hong Kong, we analyse customer feedback and detect their pain points at an early stage through a feedback mechanism. Our colleagues are
now able to reach out to our customers with unhappy experiences proactively to resolve their outstanding issues.

90 | HSBC Holdings plc Annual Report and Accounts 2022

How we listen continued
Commercial Banking (‘CMB’)
In 2022, we received 62,995 customer complaints, a decrease of 23.4% from 2021. Of the overall volumes, 78.1% came from the UK and
12.9% from Hong Kong. The most common complaint related to operations, namely payment processing errors and delays.
The reduced volume of received complaints in the UK was largely as a result of a reduction in Covid-19-related complaints. This was mainly due
to the fact we received fewer complaints related to the Bounce Back Loan scheme, and we also resolved the under-resourcing in UK servicing
centres, which had led to delays in customer support in 2021 and into the first half of 2022.
In Hong Kong, volumes were higher in the first half of the year due to the consequences of Covid-19-related restrictions that placed stress on
servicing centre capacity. Additional recruiting of servicing staff, improvements in the customer due diligence policy and the payment
investigations process helped to reduce complaints volumes in the second half of the year, resulting in annual volumes that were in line with
2021.
We resolved 65,018 complaints globally in 2022. The average resolution time for complaints reduced by 23% to an average of 5.7 days, which is
within our global target of 20 days.
CMB complaint volumes 1 (000s)

|  | 2022 | 2021
Total |  | 63 | 82.2
UK | ↓ | 49.2 | 67.1
Hong Kong | ↓ | 8.1 | 8.2

Acting on feedback
In 2022, we continued to invest in our client feedback tool, moving our products and local operations onto the platform. The Global Payments
Solutions business adopted the tool during the year, and CMB staff in Hong Kong and India are due to begin logging and managing complaints in
early 2023.
In late 2022, we also introduced new reporting functionality for complaints logged on the tool, which will update complaints on a daily basis, and
enable colleagues responsible for managing complaints within markets and product teams to more closely manage volumes and operations.
We seek to ensure that we treat customers fairly when managing complaints, especially those who may be considered vulnerable or who have
enhanced care needs. In 2022, we reported 865 complaints associated with such customers and have managed these closely to ensure fair
outcomes for the customer.
Global Banking and Markets (‘GBM’)
In 2022, we received 2,127 customer complaints in Global Banking, a decrease of 8% from 2021.
Of the overall Global Banking complaints volumes, 45.6% were from complaints in Europe and 28.0% came from the MENA region. With
regard to the types of complaint, 82% for Global Banking related to servicing and payment processing, which is in line with previous years.
In the Markets and Securities Services business, complaint volumes decreased by 6% from 2021. Of the overall Markets and Securities
Services complaint volumes, 48% were in Asia and 43% in Europe. Our Markets and Securities Services business remains focused on providing
a high standard of client service and commitment to resolving issues in a timely manner, with 93% closed within our service standards.
GBM complaint volumes 1

|  | 2022 | 2021
Total |  | 2,419 | 2,619
Global Banking 2 | ↓ | 2,127 | 2,310
Global Markets and Securities Services | ↓ | 292 | 309

Acting on feedback
We have continued to invest in our client feedback tool to create a consistent and streamlined experience for front-line staff in Global Banking
and Markets and the wholesale businesses globally. In the fourth quarter, we launched a new reporting module driven from our client feedback
tool, which will provide real-time complaints volumes, complaint details and operational metrics for our complaints users. This additional
information will enable management to respond to complaints volumes.
1 Globally, a complaint is any expression of dissatisfaction, whether justified or not, relating to the provision of, or failure to provide, a specific product or service or
service activity. Within the UK, a complaint is any expression of dissatisfaction – whether justified or not – about our products, services or activities which suggests
we have caused (or might cause) financial loss, or material distress or material inconvenience.
2 Global Banking also includes Global Payments Solutions (previously known as Global Liquidity and Cash Management) and complaints relating to payment
operations, which is part of Digital Business Services.

91 | HSBC Holdings plc Annual Report and Accounts 2022

Integrity, conduct and fairness
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 a financial crime risk management framework that is applicable across all global businesses
and functions, and all countries and territories in which we operate. The financial crime risk framework, which is overseen by the 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 monitoring and testing 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. These new technologies should enhance our ability to respond effectively to unusual
activity and be more granular in our risk assessments. This helps us to protect our customers, the organisation and the integrity of the global
financial system against financial crime.
Our anti-bribery and corruption policy
Our global anti-bribery and corruption 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. Our global anti-bribery and corruption policy requires that we identify and mitigate the risk of
our customers and third parties committing bribery or corruption. Among other controls, we use customer due diligence and transaction
monitoring to identify and help mitigate the risk that our customers are involved in bribery or corruption. We perform anti-bribery and corruption
risk assessments on third parties that expose us to this risk.
The scale of our work
Each month, on average, we monitor over 1.2 billion transactions for signs of financial crime. During 2022, we filed over 73,000 suspicious
activity reports to law enforcement and regulatory authorities where we identified potential financial crime. In addition, we screen approximately
117 million customer records monthly for sanctions exposure.
99%
Total percentage of employees who have received financial crime training, including on anti-bribery and corruption.
Whistleblowing
We want colleagues and stakeholders to have confidence in speaking up when they observe unlawful or unethical behaviour. We offer a range
of speak-up channels to listen to the concerns of individuals and have a zero tolerance for acts of retaliation.
Listening through whistleblowing channels
Our global whistleblowing channel, HSBC Confidential, is one of our speak-up channels, which allows our colleagues and other stakeholders to
raise concerns confidentially and, if preferred, anonymously (subject to local laws). In most of our markets, HSBC Confidential concerns are
raised through an independent third party, offering 24/7 hotlines and a web portal in multiple languages. We also provide and monitor an
external email address for concerns about accounting, internal financial controls or auditing matters (accountingdisclosures@hsbc.com).
Concerns are investigated proportionately and independently, with action taken where appropriate. This can include disciplinary action,
dismissal, and adjustments to variable pay and performance ratings.
We promote our full range of speak-up channels to colleagues to help ensure their concerns are handled through the most effective route. In
2022, 18% fewer concerns were raised through HSBC Confidential compared with 2021. Of the concerns investigated through the HSBC
Confidential channel in 2022, 83% related to behaviour and conduct, 11% to security and fraud risks, 6% to compliance risks and less than 1%
to other categories.
The Group Audit Committee has overall oversight of the Group’s whistleblowing arrangements, and the chair of the Group Audit Committee
acts as HSBC’s whistleblowers’ champion with responsibility for ensuring and overseeing the integrity, independence and effectiveness of the
organisation’s policies and procedures.
Compliance sets the whistleblowing policy and procedures, and provides the Group Audit Committee with periodic updates on their
effectiveness. Specialist Compliance teams and investigation functions own whistleblowing controls, with monitoring in place to determine
control effectiveness.
For further details of the role of the Group Audit Committee in relation to whistleblowing, see page 266.
HSBC Confidential concerns raised in 2022:
1,817
(2021: 2,224)
Substantiation rate of concerns investigated through HSBC Confidential in 2022:
41%
(2021: 42%)

92 | HSBC Holdings plc Annual Report and Accounts 2022

A responsible approach to tax
We seek to pay our fair share of tax in all jurisdictions in which we operate and to minimise the likelihood of customers using our products and
services to evade or inappropriately avoid tax. We also abide by international protocols that affect our organisation. Our approach to tax and
governance processes is designed to achieve these goals.
Through adoption of the Group’s risk management framework, we seek to ensure that we do not adopt inappropriately tax-motivated
transactions or products, and that tax planning is scrutinised and supported by genuine commercial activity. HSBC has no appetite for using
aggressive tax structures.
With respect to our own taxes, we are guided by the following principles:
•We are committed to applying both the letter and spirit of the law. This includes adherence to a variety of measures arising from the
OECD Base Erosion and Profit Shifting initiative.
•We seek to have open and transparent relationships with all tax authorities. Given the size and complexity of our organisation, which
operates across over 60 jurisdictions, a number of areas of differing interpretation or disputes with tax authorities exist at any point in
time. We cooperate with the relevant local tax authorities to mutually agree and resolve these in a timely manner.
•We have applied the OECD/G20 Inclusive Framework Pillar 2 guidance to identify those jurisdictions in which we operate that have nil
or low tax rates (15% or below). We have identified seven such jurisdictions in which we operated during 2022 that may be impacted
by adjustments required under the Pillar 2 Framework. We continually monitor the number of active subsidiaries within each
jurisdiction as part of our ongoing entity rationalisation programme. We seek to ensure that our entities active in nil or low tax
jurisdictions have clear business rationale for why they are based in these locations and appropriate transparency over their activities.
With respect to our customers’ taxes, we are guided by the following principles:
•We have made considerable investments to support external tax transparency initiatives and reduce the risk of banking services being
used to facilitate customer tax evasion. Initiatives include the US Foreign Account Tax Compliance Act, the OECD Standard for
Automatic Exchange of Financial Account Information (‘Common Reporting Standard’), and the UK legislation on the corporate
criminal offence of failing to prevent the facilitation of tax evasion.
•We implement processes that aim to ensure that inappropriately tax-motivated products and services are not provided to our
customers.
Our tax contributions
The effective tax rate for the year of 4.9% was reduced by 14.3% by the recognition of previously unrecognised deferred tax assets in the UK
and France in light of improvements in forecast profits in these jurisdictions. Further details are provided on page 357. The UK bank levy charge
for 2022 of $13m is lower than the charge of $116m for 2021 as it includes adjustments made to prior period UK bank levy charges recognised
in the current year.
As highlighted below, in addition to paying $5.5bn of our own tax liabilities during 2022, we collected taxes of $10.2bn on behalf of
governments around the world. A more detailed geographical breakdown of the taxes paid in 2022 is provided in the ESG Data Pack.

$2,429m Tax on profits 2021: $2,711m | $361m Withholding taxes 2021: $366m
$1,041m Employer taxes 2021: $1,125m | $314m Bank levy 2021: $479m
$1,152m Irrecoverable VAT 2021: $1,315m | $232m Other duties and levies 1 2021: $278m

1 Other duties and levies includes property taxes of $94m (2021: $126m)

$2,745m Europe 2021: $3,170m | $1,894m Asia-Pacific 2021: $2,077m
$259m Middle East and North Africa 2021: $236m | $207m North America 2021: $469m
$424m Latin America 2021: $322m |

$4,197m Europe 2021: $3,177m | $3,274m Asia-Pacific 2021: $3,584m
$67m Middle East and North Africa 2021: $78m | $1,129m North America 2021: $1,081m
$1,493m Latin America 2021: $1,343m |

Acting with integrity
We aim to act with courageous integrity and learn from past events to prevent their recurrence. We recognise that restoration of trust in our
industry remains a significant challenge, but it is a challenge we must continue to pursue. We owe this not just to our customers and to society
at large, but to our colleagues to ensure they can be rightly proud of the organisation where they work. We aim to make decisions based on
doing the right thing for our customers and never compromising our ethical standards or integrity.
Further information regarding the measures that we have taken to prevent the recurrence of past mistakes can be found at www.hsbc.com/
who-we-are/esg-and-responsible-business/esg-reporting-and-policies.

93 | HSBC Holdings plc Annual Report and Accounts 2022

Conduct: Our product responsibilities
Our conduct approach guides us to do the right thing and to focus on the impact we have for our customers and the financial markets in which
we operate. It is embedded into the way we design, approve, market and manage products and services, with a focus on five clear outcomes:
–We understand our customers’ needs.
–We provide products and services that offer a fair exchange of value.
–We service customers’ ongoing needs, and put it right if we make a mistake.
–We act with integrity in the financial markets we operate in.
–We operate resiliently and securely to avoid harm to customers and markets.
We train all our staff on our approach to conduct, helping to ensure our conduct outcomes are part of everything we do.
Designing products and services
Our approach to product development is set out in our policies, and provides a clear basis on which informed decisions can be made. Our
policies require that products must be fit-for-purpose throughout their existence, meeting regulatory requirements and associated conduct
outcomes.
Our approach includes:
–designing products to meet identified customer needs;
–managing products through governance processes, helping to ensure they meet customers’ needs and deliver a fair exchange of
value;
–periodically reviewing products to help ensure they remain relevant and perform in line with expectations we have set; and
–improving, or withdrawing from sale, products which do not meet our customers’ needs or no longer meet our high standards.
Meeting our customers’ needs
Our policies and procedures set standards to ensure that we consider and meet customer needs. These include:
–enabling customers to understand the key features of products and services;
–enabling customers to make informed decisions before purchasing a product or service; and
–ensuring processes are in place for the provision of advice to customers.
They help us provide the right outcomes for customers, including those with enhanced care needs. This helps us to support customers who are
more vulnerable to external impacts, including the current cost of living crisis (see ‘Supporting our customers facing a rising cost of living’ on
page 15).
Product governance
Our product governance arrangements cover the entire lifecycle of the product. This helps ensure that our products meet our policy
requirements before we sell them. It also allows continued risk-based oversight of product performance against the intended customer
outcomes.
When we decide to withdraw a product from sale, we aim to consider the implications for our existing customers, and agree actions to help
them achieve a fair outcome where appropriate.
Financial promotion
Our policies help to ensure that in the sale of products and services, we use marketing and product materials that support customer
understanding and fair customer outcomes. This includes providing information on products and services that is clear, fair and not misleading.
We also have controls in place to ensure our cross-border marketing complies with relevant regulatory requirements.
Our approach with our suppliers
We maintain global standards and procedures for the onboarding and use of third-party suppliers. We require suppliers to meet our compliance
and financial stability requirements, and to comply with our supplier code of conduct.
Sustainable procurement
In October 2022, we introduced an internal sustainable procurement procedure to set out the minimum sustainability requirements for
procurement activity. This helps us to manage the risks related to sustainability in our supply chain, and balance the social, environmental and
economic considerations in procurement decisions.
Supplier code of conduct
We have a supplier code of conduct, revised in 2022, which sets out our commitments to the environment, diversity and human rights, and
which outlines the minimum commitments we expect of our suppliers on these issues.
We formalise commitment to the code with clauses in our supplier contracts, which support the right to audit and act if a breach is discovered.
At the end of 2022, 93% of approximately 9,600 contracted suppliers had either confirmed adherence to the supplier code of conduct or
provided their own alternative that was accepted by our Global Procurement function.
Managing environmental and social risk
In 2022, we updated our ESG reputational risk assessment tool to identify the environmental and social risks for suppliers that are considered to
be in sectors with high ESG risk. Previously, the assessment was applied to suppliers with higher value contracts only. The tool provides an
ESG reputational risk score for the supplier. A high-risk score results in a further review to establish whether we are able to mitigate the risk and
onboard the supplier.
For further details of the number of suppliers by geographical region, see the ESG Data Pack at www.hsbc.com/esg.

94 | HSBC Holdings plc Annual Report and Accounts 2022

Safeguarding data
Data privacy
We are committed to protecting and respecting the data we hold and process, in accordance with the laws and regulations of the markets in
which we operate.
Our approach rests on having the right talent, technology, systems, controls, policies and processes to help ensure appropriate management of
privacy risk. Our Group-wide privacy policy and principles aim to provide a consistent global approach to managing data privacy risk, and must be
applied by all of our global businesses and global functions. Our privacy principles are available at www.hsbc.com/who-we-are/esg-and-
responsible-business/managing-risk/operational-risk.
We conduct regular employee training and awareness sessions on data privacy and security issues throughout the year. This includes global
mandatory training for all our colleagues, with additional training sessions, where needed, to keep up to date with new developments in this
space.
We provide transparency to our customers and stakeholders on how we collect, use and manage their personal data, and their associated
rights. Where relevant, we work with third parties to help ensure adequate protections are provided, in line with our data privacy policy and as
required under data privacy law. We offer a broad range of channels in the markets where we operate, through which customers and
stakeholders can raise concerns on the privacy of their data.
Our dedicated privacy teams report to the highest level of management on data privacy risks and issues, and oversee our global data privacy
programmes. We review data privacy regularly at multiple governance forums, including at Board level, to help ensure appropriate challenge and
visibility for senior executives. Data privacy laws and regulations continue to evolve globally. We continually monitor the regulatory environment
to ensure we respond appropriately to any changes.
As part of our three lines of defence model, our Global Internal Audit function provides independent assurance as to whether our data privacy
risk management approaches and processes are designed and operating effectively. In addition, we have established data privacy governance
structures, and continue to embed accountability across all businesses and functions.
We continue to implement industry practices for data privacy and security. Our privacy teams work closely with our data protection officers,
industry bodies and research institutions to drive the design, implementation and monitoring of privacy solutions. We conduct regular reviews
and privacy risk assessments, and continue to develop solutions to strengthen our data privacy controls.
We continue to enhance our internal data privacy tools to improve accountability for data privacy. We have procedures to articulate the actions
needed to deal with data privacy considerations. These include notifying regulators, customers or other data subjects, as required under
applicable privacy laws and regulations, in the event of a reportable incident occurring.
Intellectual property rights practices
We have policies, controls and guidance to manage risk relating to intellectual property. This is to help ensure that intellectual property is
identified, maintained and protected appropriately, and to help ensure we do not infringe third-party intellectual property rights during the course
of business and/or operation.
These policies and controls support our management of intellectual property risk, and operate to help ensure that intellectual property risk is
controlled consistently and effectively in line with our risk appetite.
Data Privacy Da y
In January 2022, we hosted an internal global data privacy event for our colleagues to mark International Data Privacy Day. The event, which
was broadcast online, was hosted by our Global Head of Data Privacy Legal and the Global Data Risk Steward. The President and CEO of the
International Association of Privacy Professionals was a guest speaker at the event.
Key themes included an exploration of developments in US state and federal data privacy legislation and regulations, developments in the
implementation and embedding of existing data privacy laws, key challenges to organisations such as cross-border data transfers and data
localisation requirements, and the evolving enforcement environment within which we operate.
The ethical use of data and AI
Artificial intelligence and other emerging technologies give us the ability to process and analyse data at a depth and breadth not previously
possible. While these technologies offer significant potential benefits for our customers, they also pose potential ethical risks for the financial
services industry and society as a whole. We have developed a set of principles to help us consider and address the ethical issues that could
arise. HSBC’s Principles for the Ethical Use of Data and Artificial Intelligence are available at www.hsbc.com/who-we-are/esg-and-responsible-
business/our-conduct.

95 | HSBC Holdings plc Annual Report and Accounts 2022

Cybersecurity
The threat of cyber-attacks remains a concern for our organisation, as it does across the financial sector. As cyber-attacks continue to evolve,
failure to protect our operations may result in disruption for customers, manipulation of data or financial loss. This could have a negative impact
on our customers and our reputation.
We continue to monitor ongoing geopolitical events and changes to the cyber threat landscape, and take necessary proactive measures with
the aim to reduce any impact to our customers.
Prevent, detect and mitigate
We invest in business and technical controls to help prevent, detect and mitigate cyber threats. We apply a ’defence in depth’ approach to cyber
controls, recognising the complexity of our environment. Our ability to detect and respond to attacks through round-the-clock security
operations centre capabilities helps to reduce the impact of attacks.
We continually evaluate threat levels for the most prevalent attack types and their potential outcomes. We have a cyber intelligence and threat
analysis capability, which proactively collects and analyses external cyber information. We input into the broader cyber intelligence community
through technical expertise in investigations and contributions to the cyber-sharing ecosystem in the financial services industry, alongside
government agencies around the world.
In 2022, we further strengthened our cyber defences and enhanced our cybersecurity capabilities 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.
Policy and governance
We have a comprehensive range of cybersecurity policies and systems designed to help ensure that the organisation is well managed, with
oversight and control.
We operate a three lines of defence model, aligned to the operational 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 the cyber risk. They work with control owners to apply the appropriate risk treatment in line with our
risk appetite. Our controls are executed in line with policies produced by our Resilience Risk teams, and are reviewed and challenged by the
second line of defence. They are overseen by the Global Internal Audit function, the third line of defence.
We regularly report and review cyber risk and control effectiveness at relevant governance forums, including to the Board and across global
businesses, functions and regions. In addition, we work with our third parties to help reduce the threat of cyber-attacks impacting our business
processes. We have an assessment capability to review third parties’ compliance with our information security policies and standards.
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 all our people, ranging from our top executives to IT developers to front-line relationship managers around the world.
Over 92% of our IT developers hold at least one of our enhanced security certifications to help ensure we build secure systems and products.
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 regular programmes to our
colleagues and customers. We provide a wide range of education and guidance to both customers and our colleagues about how to spot and
prevent online fraud.
Over 97%
Employees completed mandatory cybersecurity training on time.
Over 92%
IT developers who hold at least one of our internal secure developer certifications.
Over 140
Cybersecurity education events held globally.
Over 97%
Survey respondents to cybersecurity education events who said they have a better understanding of cybersecurity following these events.
Educating customers online
Our Fraud and Cyber Awareness app, which launched in the UK in May 2021, has been enhanced and extended to eight markets in the Middle
East and North Africa as a pilot to improve the financial education of our customers. The app is available free of charge for both personal and
business customers, and is designed to keep customers and non-customers up to date with the latest trends concerning fraud, scams and
cyber-attacks. It enables users to subscribe to real-time notifications about emerging fraud and cybercrime trends. Since May 2021, the app has
been downloaded approximately 28,000 times and has a 4.8 rating on Google Play and iOS app store. We plan to roll out the app to further
markets in 2023.

96 | HSBC Holdings plc Annual Report and Accounts 2022

Financial review
The financial review gives detailed reporting of our financial performance at Group level as well as across our different global businesses and
geographical regions.
98 Financial summary
109 Global businesses and geographical regions
128 Reconciliation of alternative performance measures
Pioneering a sustainable supply chain finance programme
In June 2022, we worked closely with US-based fashion group PVH
Corp. to launch the first sustainable supply chain finance programme
tied to environmental and social objectives, and based on suppliers’
sustainability ratings.
The programme provides the company’s global suppliers with access
to critical funding based on a set of science-based environmental
targets, as well as a series of social elements, including a healthy and
safe working environment, compensation and benefits, and
employment issues, such as forced labour, child labour, and
harassment and abuse.
Sustainable supply chain finance supports leading companies and key
sectors like the apparel industry to help ensure progress is made
towards their targets and commitments.

HSBC Holdings plc Annual Report and Accounts 2022 | 97

Financial summary

Contents

98 | Use of alternative performance measures
98 | Changes to presentation from 1 January 2022
98 | Changes to presentation from 1 January 2023
99 | Future accounting developments
99 | Critical accounting estimates and judgements
100 | Consolidated income statement
101 | Income statement commentary
105 | Consolidated balance sheet

Use of alternative performance
measures
Our reported results are prepared in accordance with IFRSs
as detailed in the financial statements starting on page 324.
To measure our performance, we supplement our IFRSs figures with
non-IFRSs measures, which constitute alternative performance
measures under European Securities and Markets Authority guidance
and non-GAAP financial measures defined in and presented in
accordance with US Securities and Exchange Commission rules and
regulations. These measures include those derived from our reported
results that eliminate factors that distort year-on-year comparisons.
The ‘adjusted performance’ measure used throughout this report is
described below. Definitions and calculations of other alternative
performance measures are included in our ‘Reconciliation of
alternative performance measures’ on page 128. All alternative
performance measures are reconciled to the closest reported
performance measure.
The global business segmental results are presented on an adjusted
basis in accordance with IFRS 8 ‘Operating Segments’ as detailed in
Note 10 ‘Segmental analysis’ on page 360.
Adjusted performance
Adjusted performance is computed by adjusting reported results for
the effects of foreign currency translation differences and significant
items, which both distort year-on-year comparisons.
We consider that adjusted performance provides useful information
for investors by aligning internal and external reporting, identifying and
quantifying items management believes to be significant, and
providing insight into how management assesses year-on-year
performance.
Management does not assess forward-looking reported operating
expenses as a target of the business, and therefore a reconciliation of
the adjusted operating expenses target to an equivalent IFRS
measure is not available without unreasonable efforts.
Significant items
‘Significant items’ refers collectively to the items that management
and investors would ordinarily identify and consider separately to
improve the understanding of the underlying trends in the business.
The tables on pages 109 to 112 and pages 119 to 124 detail the
effects of significant items on each of our global business segments,
geographical regions and selected countries/territories in 2022, 2021
and 2020.
Foreign currency translation differences
Foreign currency translation differences reflect the movements of the
US dollar against most major currencies during 2022.
We exclude them to derive constant currency data, allowing us to
assess balance sheet and income statement performance on a like-
for-like basis and to better understand the underlying trends in the
business.

Foreign currency translation differences Foreign currency translation differences for 2022 are computed by retranslating into US dollars for non-US dollar branches, subsidiaries, joint ventures and associates: •the income statements for 2021 and 2020 at the average rates of exchange for 2022; and •the balance sheets at 31 December 2021 and 31 December 2020 at the prevailing rates of exchange on 31 December 2022. No adjustment has been made to the exchange rates used to translate foreign currency-denominated assets and liabilities into the functional currencies of any HSBC branches, subsidiaries, joint ventures or associates. The constant currency data of HSBC’s Argentina subsidiaries has not been adjusted further for the impacts of hyperinflation. Since 1 June 2022, Türkiye has been deemed a hyperinflationary economy for accounting purposes. HSBC has an operating entity in Türkiye and the constant currency data has not been adjusted further for the impacts of hyperinflation. When reference is made to foreign currency translation differences in tables or commentaries, comparative data reported in the functional currencies of HSBC’s operations have been translated at the appropriate exchange rates applied in the current period on the basis described above.

Changes to presentation from
1 January 2022
Application of IAS 29 ‘Financial Reporting in
Hyperinflationary Economies’
Since 1 June 2022, Türkiye has been deemed a hyperinflationary
economy for accounting purposes. The results of HSBC’s operations
with a functional currency of the Turkish lira have been prepared in
accordance with IAS 29 ‘Financial Reporting in Hyperinflationary
Economies’ as if the economy had always been hyperinflationary. The
results of those operations for the 12-month period ended
31 December 2022 are stated in terms of current purchasing power
using the Türkiye Consumer Price Index (’CPI’) at 31 December 2022
with the corresponding adjustment presented in the consolidated
statement of comprehensive income. In accordance with IAS 21 ‘The
Effects of Changes in Foreign Exchange Rates’, the results have been
translated and presented in US dollars at the prevailing rates of
exchange on 31 December 2022. The Group’s comparative
information presented in US dollars with respect to the 12-month
periods ended 31 December 2021 and 31 December 2020 has not
been restated. Argentina remains a hyperinflationary economy for
accounting purposes. The impact of applying IAS 29 and the
hyperinflation provisions of IAS 21 in the current period for both
Türkiye and Argentina was a decrease in the Group’s profit before tax
of $548m, comprising a decrease in revenue of $541m (including a
loss of net monetary position of $543 m) and an increase in ECL and
operating expenses of $7m. The CPI at 31 December 2022 for Türkiye
was 1,047 (movement 2022: 359.94) and for Argentina was 1,147
(movement 2022: 563.92, 2021: 197.47).
Changes to presentation from
1 January 2023
Foreign currency and notable items
From 1 January 2023, ‘adjusted performance’ will no longer exclude
the impact of significant items. Rather it will be computed by
adjusting reported results only for the effects of foreign currency
translation differences between periods to enable users to
understand the impact this has had on the Group’s performance. We
will separately disclose ‘notable items‘, which are components of our
income statement which management and investors would consider
as outside the normal course of business and generally non-recurring
in nature. We will recalibrate applicable targets and guidance to reflect
the impact of these changes, as well as the impact on our targets
following the implementation of IFRS 17 ‘Insurance Contracts’, and
Financial summary

98 | HSBC Holdings plc Annual Report and Accounts 2022

intend to communicate these as part of our first quarter results in
May 2023.
Reporting by legal entity
From 1 January 2023, the Group will no longer present results by
geographical regions. We will instead report performance by our main
legal entities to better reflect the Group’s structure.
Future accounting developments
IFRS 17 ‘Insurance Contracts’
IFRS 17 ‘Insurance Contracts’ was issued in May 2017, with
amendments to the standard issued in June 2020 and December
2021. Following the amendments, IFRS 17 is effective for annual
reporting periods beginning on or after 1 January 2023 and is applied
retrospectively, with comparatives restated from 1 January 2022.
On the basis of the implementation work performed to date, our
current assumption remains that the accounting changes will result in
a reduction in the earnings of our insurance business by
approximately two thirds on transition to IFRS 17, albeit within a
range of expected outcomes and before the effect of market impacts
in specific periods. Unlike current accounting where market impacts
and changes in assumptions are reported immediately in profit or
loss, under IFRS 17 these are primarily accumulated with the
contractual service margin (‘CSM’) and recognised in profit or loss
over the remaining life of the contracts. While IFRS 17 changes the
timing of profit recognition, there is no impact to the underlying
economics of the insurance business, including solvency, capital and
cash generation.
Results of work performed to date on the half-year to 30 June 2022
IFRS17 comparatives indicate there would be a likely reduction to
reported profit before tax for our insurance manufacturing operations
from $0.6bn under IFRS 4, to approximately $0.3bn under IFRS 17.
IFRS 4 based profit before tax included negative market impacts of
$0.7bn and a $0.3bn specific pricing update for policyholder funds
held on deposit with us in Hong Kong. The consolidated Group
insurance accounting considers the effect of eliminating intra-group
distribution fees between insurance manufacturing and non-insurance
Group entities, and instead includes the costs of selling insurance
contracts incurred by such entities within the Group CSM. These
factors generate a further impact on the 30 June 2022 Group IFRS 17
profit before tax of negative $0.1bn, in addition to the impact on
insurance manufacturing operations.
We also anticipate some impact on selected key Group metrics. We
expect an estimated reduction of approximately $1.1bn to the first
half of 2022 Group net interest income due to the reclassification of
assets supporting policyholder liabilities from amortised cost to fair
value through profit and loss classification, following which the
associated interest income will be included within the ‘net income/
(expense) from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through profit or
loss’ line item. Group operating expenses are expected to reduce by
approximately $0.3bn as a result of the IFRS 17 requirement for
directly attributable costs to be included in the CSM and recognised
within the insurance service result line, within revenue.
These estimates are based on accounting policies, assumptions,
judgements and estimation techniques that remain subject to change.
Critical accounting estimates and
judgements
The results of HSBC reflect the choice of accounting policies,
assumptions and estimates that underlie the preparation of HSBC’s
consolidated financial statements. The significant accounting policies,
including the policies which include critical accounting estimates and
judgements, are described in Note 1.2 on the financial statements.
The accounting policies listed below are highlighted as they involve a
high degree of uncertainty and have a material impact on the financial
statements:
•Impairment of amortised cost financial assets and financial assets
measured at fair value through other comprehensive income
(‘FVOCI’): The most significant judgements relate to defining what
is considered to be a significant increase in credit risk, determining
the lifetime and point of initial recognition of revolving facilities,
selecting and calibrating the probability of default (‘PD’), the loss
given default (‘LGD’) and the exposure at default (‘EAD’) models,
as well as selecting model inputs and economic forecasts, and
making assumptions and estimates to incorporate relevant
information about late-breaking and past events, current conditions
and forecasts of economic conditions. A high degree of
uncertainty is involved in making estimations using assumptions
that are highly subjective and very sensitive to the risk factors.
See Note 1.2(i) on page 341.
•Deferred tax assets: The most significant judgements relate to
those made in respect of recoverability, which is based on
expected future profitability. See Note 1.2(l) on page 346.
•Valuation of financial instruments: In determining the fair value of
financial instruments a variety of valuation techniques are used,
some of which feature significant unobservable inputs and are
subject to substantial uncertainty. See Note 1.2(c) on page 339.
•Impairment of investment in subsidiaries: Impairment testing
involves significant judgement in determining the value in use, and
in particular estimating the present values of cash flows expected
to arise from continuing to hold the investment, based on a
number of management assumptions. The most significant
judgements relate to the impairment testing of HSBC Holdings’
investment in HSBC North America Holdings Limited and HSBC
Bank Bermuda Limited. See Note 1.2(a) on page 337.
•Impairment of interests in associates: Impairment testing involves
significant judgement in determining the value in use, and in
particular estimating the present values of cash flows expected to
arise from continuing to hold the investment, based on a number
of management assumptions. The most significant judgements
relate to the impairment testing of our investment in Bank of
Communications Co., Limited (‘BoCom’). See Note 1.2(a) on
page 337.
•Impairment of goodwill and non-financial assets: A high degree of
uncertainty is involved in estimating the future cash flows of the
cash-generating units (‘CGUs’) and the rates used to discount
these cash flows. See Note 1.2(a) on page 337.
•Provisions: Significant judgement may be required due to 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. See Note 1.2(m) on
page 346.
•Post-employment benefit plans: The calculation of the defined
benefit pension obligation involves the determination of key
assumptions including discount rate, inflation rate, pension
payments and deferred pensions, pay and mortality. See
Note 1.2(k) on page 345.
•Non-current assets and disposal groups held for sale:
Management judgement is required on determining the likelihood
of the sale to occur, and the anticipated timing in assessing
whether the held for sale criteria have been met. See Note 1.2(o)
on page 347.
Given the inherent uncertainties and the high level of subjectivity
involved in the recognition or measurement of the items above, it is
possible that the outcomes in the next financial year could differ from
the expectations on which management’s estimates are based,
resulting in the recognition and measurement of materially different
amounts from those estimated by management in these financial
statements.

HSBC Holdings plc Annual Report and Accounts 2022 | 99

Consolidated income statement

Summary consolidated income statement
| 2022 | 2021 | 2020 | 2019 | 2018
| $m | $m | $m | $m | $m
Net interest income | 32,610 | 26,489 | 27,578 | 30,462 | 30,489
Net fee income | 11,451 | 13,097 | 11,874 | 12,023 | 12,620
Net income from financial instruments held for trading or managed on a fair value basis | 10,469 | 7,744 | 9,582 | 10,231 | 9,531
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | (3,394) | 4,053 | 2,081 | 3,478 | (1,488)
Change in fair value of designated debt and related derivatives 1 | (77) | (182) | 231 | 90 | (97)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 226 | 798 | 455 | 812 | 695
Gains less losses from financial investments | (3) | 569 | 653 | 335 | 218
Net insurance premium income | 12,825 | 10,870 | 10,093 | 10,636 | 10,659
Impairment loss relating to the planned sale of our retail banking operations in France 2 | (2,378) | — | — | — | —
Other operating income/(loss) | (133) | 502 | 527 | 2,957 | 960
Total operating income | 61,596 | 63,940 | 63,074 | 71,024 | 63,587
Net insurance claims and benefits paid and movement in liabilities to policyholders | (9,869) | (14,388) | (12,645) | (14,926) | (9,807)
Net operating income before change in expected credit losses and other credit impairment charges 3 | 51,727 | 49,552 | 50,429 | 56,098 | 53,780
Change in expected credit losses and other credit impairment charges | (3,592) | 928 | (8,817) | (2,756) | (1,767)
Net operating income | 48,135 | 50,480 | 41,612 | 53,342 | 52,013
Total operating expenses excluding impairment of goodwill and other intangible assets | (33,183) | (33,887) | (33,044) | (34,955) | (34,622)
Impairment of goodwill and other intangible assets | (147) | (733) | (1,388) | (7,394) | (37)
Operating profit | 14,805 | 15,860 | 7,180 | 10,993 | 17,354
Share of profit in associates and joint ventures | 2,723 | 3,046 | 1,597 | 2,354 | 2,536
Profit before tax | 17,528 | 18,906 | 8,777 | 13,347 | 19,890
Tax expense | (858) | (4,213) | (2,678) | (4,639) | (4,865)
Profit for the year | 16,670 | 14,693 | 6,099 | 8,708 | 15,025
Attributable to: |  |  |  |  |
– ordinary shareholders of the parent company | 14,822 | 12,607 | 3,898 | 5,969 | 12,608
– preference shareholders of the parent company | — | 7 | 90 | 90 | 90
– other equity holders | 1,213 | 1,303 | 1,241 | 1,324 | 1,029
– non-controlling interests | 635 | 776 | 870 | 1,325 | 1,298
Profit for the year | 16,670 | 14,693 | 6,099 | 8,708 | 15,025

Five-year financial information
| 2022 | 2021 | 2020 | 2019 | 2018
| $ | $ | $ | $ | $
Basic earnings per share | 0.75 | 0.62 | 0.19 | 0.30 | 0.63
Diluted earnings per share | 0.74 | 0.62 | 0.19 | 0.30 | 0.63
Dividends per ordinary share (paid in the period)4 | 0.27 | 0.22 | — | 0.51 | 0.51
| % | % | % | % | %
Dividend payout ratio 5 | 44 | 40 | 79 | 100 | 81
Post-tax return on average total assets | 0.6 | 0.5 | 0.2 | 0.3 | 0.6
Return on average ordinary shareholders’ equity | 8.7 | 7.1 | 2.3 | 3.6 | 7.7
Return on average tangible equity | 9.9 | 8.3 | 3.1 | 8.4 | 8.6
Effective tax rate | 4.9 | 22.3 | 30.5 | 34.8 | 24.5

1 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
2 Includes impairment of goodwill of $425m.
3 Net operating income before change in expected credit losses and other credit impairment charges also referred to as revenue.
4 Includes an interim dividend of $0.09 per ordinary share in respect of the financial year ending 31 December 2022, paid in September 2022, and an
interim dividend of $0.18 per ordinary share in respect of the financial year ending 31 December 2021, paid in April 2022.
5 Dividend per share, in respect of the period, as a percentage of earnings per share adjusted for certain items (recognition of certain deferred tax
assets: $0.11 reduction in EPS; planned sales of the retail banking operations in France and banking business in Canada: $0.09 increase in EPS). No
items were adjusted in 2021, 2020, 2019 or 2018.
Unless stated otherwise, all tables in the Annual Report and Accounts 2022 are presented on a reported basis.
For a summary of our financial performance in 2022, see page 28.
For further financial performance data for each global business and geographical region, see pages 109 to 112 and 117 to 127 respectively. The
global business segmental results are presented on an adjusted basis in accordance with IFRS 8 ‘Operating Segments’, in Note 10: Segmental
analysis on page 360.
Financial summary

100 | HSBC Holdings plc Annual Report and Accounts 2022

Income statement commentary
The following commentary compares Group financial performance for the year ended 2022 with 2021.
Net interest income

| Year ended | Quarter ended
| 31 Dec | 31 Dec | 31 Dec | 31 Dec | 30 Sep | 31 Dec
| 2022 | 2021 | 2020 | 2022 | 2022 | 2021
| $m | $m | $m | $m | $m | $m
Interest income | 55,059 | 36,188 | 41,756 | 19,548 | 14,656 | 9,219
Interest expense | (22,449) | (9,699) | (14,178) | (9,970) | (6,075) | (2,438)
Net interest income | 32,610 | 26,489 | 27,578 | 9,578 | 8,581 | 6,781
Average interest-earning assets | 2,203,639 | 2,209,513 | 2,092,900 | 2,178,281 | 2,170,599 | 2,251,433
| % | % | % | % | % | %
Gross interest yield 1 | 2.50 | 1.64 | 2.00 | 3.56 | 2.68 | 1.62
Less: gross interest payable 1 | (1.24) | (0.53) | (0.81) | (2.21) | (1.36) | (0.52)
Net interest spread 2 | 1.26 | 1.11 | 1.19 | 1.35 | 1.32 | 1.10
Net interest margin 3 | 1.48 | 1.20 | 1.32 | 1.74 | 1.57 | 1.19

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

Summary of interest income by type of asset
| 2022 | 2021 | 2020
| Average balance | Interest income | Yield | Average balance | Interest income | Yield | Average balance | Interest income | Yield
| $m | $m | % | $m | $m | % | $m | $m | %
Short-term funds and loans and advances to banks | 446,178 | 5,596 | 1.25 | 450,678 | 1,105 | 0.25 | 298,255 | 1,264 | 0.42
Loans and advances to customers | 1,023,606 | 32,607 | 3.19 | 1,060,658 | 26,071 | 2.46 | 1,046,795 | 29,391 | 2.81
Reverse repurchase agreements – non-trading | 231,052 | 4,886 | 2.11 | 206,246 | 1,019 | 0.49 | 221,901 | 1,819 | 0.82
Financial investments | 430,327 | 9,836 | 2.29 | 438,840 | 6,729 | 1.53 | 463,542 | 8,143 | 1.76
Other interest-earning assets | 72,476 | 2,134 | 2.94 | 53,091 | 1,264 | 2.38 | 62,407 | 1,139 | 1.83
Total interest-earning assets | 2,203,639 | 55,059 | 2.50 | 2,209,513 | 36,188 | 1.64 | 2,092,900 | 41,756 | 2.00

Summary of interest expense by type of liability
| 2022 | 2021 | 2020
| Average balance | Interest expense | Cost | Average balance | Interest expense | Cost | Average balance | Interest expense | Cost
| $m | $m | % | $m | $m | % | $m | $m | %
Deposits by banks 1 | 75,739 | 770 | 1.02 | 75,671 | 198 | 0.26 | 65,536 | 330 | 0.50
Customer accounts 2 | 1,342,342 | 10,903 | 0.81 | 1,362,580 | 4,099 | 0.30 | 1,254,249 | 6,478 | 0.52
Repurchase agreements – non-trading | 118,309 | 3,085 | 2.61 | 114,201 | 363 | 0.32 | 125,376 | 963 | 0.77
Debt securities in issue – non-trading | 179,814 | 5,608 | 3.12 | 193,137 | 3,603 | 1.87 | 219,610 | 4,944 | 2.25
Other interest-bearing liabilities | 87,719 | 2,083 | 2.37 | 70,929 | 1,436 | 2.02 | 76,395 | 1,463 | 1.92
Total interest-bearing liabilities | 1,803,923 | 22,449 | 1.24 | 1,816,518 | 9,699 | 0.53 | 1,741,166 | 14,178 | 0.81

1 Including interest-bearing bank deposits only.
2 Including interest-bearing customer accounts only.
Net interest income (‘NII’) for 2022 was $32.6bn, an increase of
$6.1bn or 23% compared with 2021. The increase reflected the
benefit of rising global interest rates, while actively managing our
pricing strategy and funding requirements, with growth in all regions,
notably in Asia and the UK.
Excluding the unfavourable impact of foreign currency translation
differences, net interest income increased by $7.7bn or 31%.
NII for the fourth quarter was $9.6bn, up 41% compared with the
previous year, and 12% compared with the previous quarter. This was
driven by higher interest rates and management of our funding costs,
with growth in all regions, notably in Asia and the UK.
Net interest margin (‘NIM’) for 2022 of 1.48% was up 28 basis
points (‘bps’) compared with 2021, as the gross yield on AIEA
improved by 86bps in the high interest rate environment. This was
partly offset by the rise in the funding cost of average interest-bearing
liabilities of 71bps. Excluding the adverse impact of foreign currency
translation differences, net interest income increased by 29bps.
NIM for the fourth quarter of 2022 was 1.74%, up 55bps year on
year, and up 17bps compared with the previous quarter,
predominantly driven by the impact of higher market interest rates.
Interest income for 2022 of $55.1bn increased by $18.9bn or 52%,
primarily due to higher average interest rates compared with 2021, as
the yield on AIEA rose by 86bps, mainly driven by loans and advances
to customers, short-term funds, loans and advances to banks, and
reverse repurchase agreements. However, mortgage yields rose
more modestly due to competitive pressures and market factors in
the UK and Hong Kong. The increase in interest income included
adverse effects of foreign currency translation differences of $2.2bn.
Excluding this, interest income increased by $21.1bn.
Interest income of $19.5bn in the fourth quarter was up $10.3bn year
on year, and up $4.9bn from the previous quarter. The increase was
driven by the impact of higher interest rates, resulting in improved
yields on loans and advances to customers and reverse repurchase
agreements.

HSBC Holdings plc Annual Report and Accounts 2022 | 101

Interest expense for 2022 of $22.4bn increased by $12.8bn or 131%
compared with 2021. This reflected the increase in funding cost of
71bps, mainly arising from higher interest rates paid on interest-
bearing customer accounts, repurchase agreements and debt
securities in issue. The increase in interest expense included the
favourable effects of foreign currency translation differences of
$0.6bn. Excluding this, interest expense increased by $13.4bn.
Included within net interest income in 2022 is a $2.5bn interest
expense representing a component of centrally allocated funding
costs associated with generating ‘net income from financial
instruments held for trading or managed on a fair value basis’. This
compared with an interest expense of $0.4bn in 2021.
Interest expense of $10.0bn in the fourth quarter of 2022 was up
$7.5bn year on year, and up $3.9bn compared with the previous
quarter. The steep rise in interest expense was mainly driven by
higher funding cost on customer accounts as interest rates increased,
particularly in Asia and Europe.
Net fee income of $11.5bn was $1.6bn lower than in 2021, and
included an adverse impact from foreign currency translation
differences of $0.6bn. Net fee income fell in WPB and GBM, although
it increased in CMB.
In WPB, net fee income decreased by $0.9bn. The reduction was
mainly in Wealth, as adverse market sentiment resulted in lower
customer demand, mainly in Hong Kong. Fee income fell due to lower
sales of unit trusts and from subdued customer demand in funds
under management, as well as from lower broking income. Cards
income grew as spending increased compared with 2021. This also
resulted in higher fee expense.
In GBM, net fee income decreased by $0.8bn. This was driven by
lower fee income from underwriting, in line with the reduction in the
global fee pool. Fee income also decreased in credit facilities and in
corporate finance, reflecting subdued client demand.
In CMB, net fee income increased by $0.1bn. Fee income grew in
cards, as spending increased compared with 2021, and in account
services, reflecting greater client activity in transaction banking,
notably Global Payments Solutions (‘GPS’).
Net income from financial instruments held for trading or
managed on a fair value basis of $10.5bn was $2.7bn higher
compared with 2021. This primarily reflected a strong trading
performance in Global Foreign Exchange due to increased client
activity, driven by elevated levels of market volatility.
This was partly offset by adverse fair value movements on non-
qualifying hedges of $0.5bn.
Net expense from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through
profit or loss of $3.4bn compared with a net income of $4.1bn in
2021. This reduction primarily reflected unfavourable equity market
performances in Hong Kong and France. This compared with 2021,
which benefited from favourable equity markets.
This adverse movement resulted in a corresponding movement in
liabilities to policyholders and the present value of in-force long-term
insurance business (‘PVIF’) (see ‘Other operating income/expense’).
This reflected the extent to which the policyholders and shareholders
respectively participate in the investment performance of the
associated assets.
Changes in fair value of other financial instruments mandatorily
measured at fair value through profit or loss of $0.2bn was $0.6bn
lower compared with 2021. This primarily reflected lower revaluation
gains in our Principal Investments business in GBM.
Gains less losses from financial investments of $3m were $0.6bn
lower compared with 2021, reflecting lower gains on the disposal of
debt securities.
Net insurance premium income of $12.8bn was $2.0bn higher than
in 2021, primarily reflecting higher sales volumes, particularly in Hong
Kong, which had a higher proportion of single premium products in its
product mix, as well as in Singapore following our acquisition of AXA
Insurance Pte Limited.
Impairment loss relating to the sale of the retail banking
operations in France was $2.4bn. In accordance with IFRS 5 ‘Non-
current Assets Held for Sale and Discontinued Operations’, the
disposal group was classified as held for sale on 30 September 2022,
at which point the Group recognised the estimated impairment of
$2.4bn, which included impairment of goodwill of $0.4bn and related
transaction costs.
Other operating income/expense was an expense of $0.1bn
compared with an income of $0.5bn in 2021, and included an adverse
impact from foreign currency translation differences of $0.4 bn. The
reduction also reflected losses of $0.4bn related to the planned sales
of our branch operations in Greece and our business in Russia, as well
as the non-recurrence of a prior year gain on the sale of a property in
Germany. These reductions were partly offset by a gain of $0.1bn on
the completion of our acquisition of AXA Singapore and a favourable
change in PVIF of $0.2bn.
The favourable change in PVIF included a $0.2bn increase in the value
of new business, notably in Hong Kong, a $0.5bn favourable impact
from sharing lower investment returns with policyholders, and a
$0.3bn gain following a pricing update for our policyholders’ funds
held on deposit with us in Hong Kong to reflect the cost to provide
this service. These factors were partly offset by a $0.7bn reduction
from assumption changes, primarily reflecting the impact of higher
interest rates in Hong Kong.
PVIF is presented in accordance with IFRS 4 ‘Insurance Contracts’. As
set out on page 335, IFRS 17 ‘Insurance Contracts’ is effective from
1 January 2023. Under IFRS 17, there will be no PVIF asset
recognised. Instead, the estimated future profit will be included in the
measurement of the insurance contract liability as the contractual
service margin and gradually recognised in revenue as services are
provided over the duration of the insurance contract.
Net insurance claims and benefits paid and movement in
liabilities to policyholders was $4.5bn lower, primarily in France and
Hong Kong due to a reduction in returns on financial assets
supporting contracts where the policyholder is subject to part or all of
the investment risk. This was in part mitigated by higher sales
volumes in Hong Kong.
Change in expected credit losses and other credit impairment
charges (‘ECL’) were a charge of $3.6bn, compared with a net
release of $0.9bn in 2021.
The charges in 2022 reflected stage 3 charges of $2.2bn, in part
relating to exposures to the commercial real estate sector in mainland
China. We also recognised stage 1 and stage 2 charges in all global
businesses, reflecting a deterioration in the macroeconomic
environment, with many markets experiencing increased interest
rates, continued inflation, supply chain risks and heightened
recessionary risks. These economic conditions also contributed to the
increase in stage 3 charges, mainly in CMB and GBM. These
increases were in part mitigated by the release of most of our
remaining Covid-19-related allowances.
The charge in 2022 compared with a net release in 2021, primarily
relating to Covid-19-related allowances previously built up in 2020.
For further details on the calculation of ECL, including the
measurement uncertainties and significant judgements applied to
such calculations, the impact of the economic scenarios and
management judgemental adjustments, see pages 153 to 162.
Financial summary

102 | HSBC Holdings plc Annual Report and Accounts 2022

Operating expenses – currency translation and significant items
| Year ended
| 2022 | 2021
| $m | $m
Significant items | 2,864 | 2,335
– customer redress programmes | (31) | 49
– disposals, acquisitions and investment in new businesses | 18 | —
– impairment of goodwill and other intangibles | (4) | 587
– restructuring and other related costs | 2,881 | 1,836
– currency translation on significant items |  | (137)
Currency translation |  | 2,181
Year ended 31 Dec | 2,864 | 4,516

Operating expenses |
| Year ended |
| 2022 | 2021 |
| $m | $m |
Gross employee compensation and benefits | 19,288 | 19,612 |
Capitalised wages and salaries | (922) | (870) |
Goodwill impairment | — | 587 |
Property and equipment | 5,005 | 5,145 |
Amortisation and impairment of intangibles | 1,716 | 1,438 |
UK bank levy 1 | 13 | 116 |
Legal proceedings and regulatory matters | 246 | 106 |
Other operating expenses 2 | 7,984 | 8,486 |
Total operating expenses (reported) | 33,330 | 34,620 |
Total significant items (including currency translation on significant items) | (2,864) | (2,335) |
Currency translation |  | (2,181) |
Total operating expenses (adjusted) | 30,466 | 30,104 |

1 The UK bank levy charge for the year ended 2022 includes adjustments made to prior period UK bank levy charges recognised in the current year.
2 Other operating expenses includes professional fees, contractor costs, transaction taxes, marketing and travel. The decrease was driven by favourable
currency translation movements, partly offset by higher costs related to our cost reduction programme.

Staff numbers (full-time equivalents)1
| 2022 | 2021 | 2020
Global businesses |  |  |
Wealth and Personal Banking | 128,764 | 130,185 | 135,727
Commercial Banking | 43,640 | 42,969 | 43,221
Global Banking and Markets | 46,435 | 46,166 | 46,729
Corporate Centre | 360 | 377 | 382
At 31 Dec | 219,199 | 219,697 | 226,059

1 Represents the number of full-time equivalent people with contracts of service with the Group who are being paid at the reporting date.

HSBC Holdings plc Annual Report and Accounts 2022 | 103

Operating expenses of $33.3bn were $1.3bn or 4% lower than in
2021, primarily as foreign currency translation differences resulted in
a favourable impact of $2.2bn, and due to the non-recurrence of a
2021 goodwill impairment of $0.6bn related to our WPB business in
Latin America.
Reported operating expenses also reflected the impact of ongoing
cost discipline across the Group. This helped mitigate growth from
increased investment in technology of $0.5bn, which included
investments in our digital capabilities, the impact of business volume
growth, and inflation. Restructuring and other related costs increased
by $1.0bn.
In 2022, cost to achieve spend, included within restructuring and
other related costs, was $2.9 bn. This three-year programme ended on
31 December 2022 with a total spend of $6.5 bn and cumulative gross
saves realised of $5.6 bn. We expect additional gross cost savings of
approximately $1bn to be delivered in 2023 due to actions taken in
2022.
The number of employees expressed in full-time equivalent staff
(‘FTE’) at 31 December 2022 was 219,199, a decrease of 498
compared with 31 December 2021. The number of contractors at
31 December 2022 was 6,047, a decrease of 145.
Share of profit in associates and joint ventures of $2.7bn was
$0.3bn lower, primarily as 2021 included a higher share of profit from
Business Growth Fund in the UK due to the recovery in asset
valuations. This was partly offset by an increase in the share of profit
from The Saudi British Bank.
In relation to Bank of Communications Co., Limited (‘BoCom’), we
continue to be subject to a risk of impairment in the carrying value of
our investment. We have performed an impairment test on the
carrying amount of our investment and confirmed there was no
impairment at 31 December 2022.
For more information, see Note 18: Interests in associates and joint
ventures on page 379.

Tax expense
| Year ended
| 2022 | 2021
| $m | $m
Reported tax charge | 858 | 4,213
Currency translation |  | (279)
Tax significant items | 3,429 | 307
– tax credit on significant items | 1,118 | 328
– recognition of losses | 2,330 | (4)
– uncertain tax positions | (19) | —
– currency translation |  | (17)
Adjusted tax charge | 4,287 | 4,241

Tax expense
The effective tax rate for 2022 of 4.9% was lower than the 22.3% in
2021. Tax in 2022 included a $2.2bn credit arising from the
recognition of a deferred tax asset from historical tax losses in HSBC
Holdings, which was recognised as a significant item. This was a
result of improved profit forecasts for the UK tax group, which
accelerated the expected utilisation of these losses and reduced
uncertainty regarding their recoverability. We also benefited from
other deferred tax asset reassessments during 2022. Excluding these,
the effective tax rate for 2022 was 19.2%, which was 3.1 percentage
points lower than in 2021. The effective tax rate for 2022 was also
decreased by the remeasurement of deferred tax balances following
the substantive enactment in the first quarter of 2022 of legislation to
reduce the rate of the UK banking surcharge from 8% to 3% from
1 April 2023.
Supplementary table for planned
disposals
The income statements and selected balance sheet metrics for the
year ended 31 December 2022 of our banking business in Canada and
our retail banking operations in France are shown below.
The asset and liability balances relating to these planned disposals are
reported on the Group balance sheet within ‘Assets held for sale’ and
‘Liabilities of disposal groups held for sale’, respectively, as at
31 December 2022.

Income statement and selected balance sheet metrics of disposal groups held for sale
| Year ended 2022
| Canada 1 | France retail 2
| $bn | $bn
Revenue | 1.9 | 0.6
ECL | (0.1) | —
Operating expenses 3 | (1.0) | (0.5)
Profit before tax | 0.8 | 0.1
Loans and advances to customers | 55.2 | 25.0
Customer accounts | 60.6 | 22.3
RWA 4 | 31.9 | 5.0

1 Under the terms of the sale agreement, the pre-tax profit on the sale
will be recognised through a combination of the consolidation of HSBC
Canada’s results into the Group’s financial statements from 30 June
2022 until completion, and the remaining gain on sale recognised at
completion.
2 France retail includes the transferring retail banking business, HSBC
SFH and associated supporting services. For more information, see
Note 23: Assets held for sale and liabilities of disposal groups held for
sale on page 389.
3 Includes $0.3bn in Canada and $0.1bn in France retail in respect of
Group recharges and other costs not transferring as part of the planned
transactions.
4 Includes $3.0bn in Canada and $0.9bn in France retail in respect of
operational risk RWAs.
Financial summary

104 | HSBC Holdings plc Annual Report and Accounts 2022

Consolidated balance sheet

Five-year summary consolidated balance sheet
| 2022 | 2021 | 2020 | 2019 | 2018
| $m | $m | $m | $m | $m
Assets |  |  |  |  |
Cash and balances at central banks | 327,002 | 403,018 | 304,481 | 154,099 | 162,843
Trading assets | 218,093 | 248,842 | 231,990 | 254,271 | 238,130
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 45,063 | 49,804 | 45,553 | 43,627 | 41,111
Derivatives | 284,146 | 196,882 | 307,726 | 242,995 | 207,825
Loans and advances to banks | 104,882 | 83,136 | 81,616 | 69,203 | 72,167
Loans and advances to customers | 924,854 | 1,045,814 | 1,037,987 | 1,036,743 | 981,696
Reverse repurchase agreements – non-trading | 253,754 | 241,648 | 230,628 | 240,862 | 242,804
Financial investments | 425,564 | 446,274 | 490,693 | 443,312 | 407,433
Assets held for sale 1 | 115,919 | 3,411 | 299 | 123 | 735
Other assets | 267,253 | 239,110 | 253,191 | 229,917 | 203,380
Total assets at 31 Dec | 2,966,530 | 2,957,939 | 2,984,164 | 2,715,152 | 2,558,124
Liabilities and equity |  |  |  |  |
Liabilities |  |  |  |  |
Deposits by banks | 66,722 | 101,152 | 82,080 | 59,022 | 56,331
Customer accounts | 1,570,303 | 1,710,574 | 1,642,780 | 1,439,115 | 1,362,643
Repurchase agreements – non-trading | 127,747 | 126,670 | 111,901 | 140,344 | 165,884
Trading liabilities | 72,353 | 84,904 | 75,266 | 83,170 | 84,431
Financial liabilities designated at fair value | 127,327 | 145,502 | 157,439 | 164,466 | 148,505
Derivatives | 285,764 | 191,064 | 303,001 | 239,497 | 205,835
Debt securities in issue | 78,149 | 78,557 | 95,492 | 104,555 | 85,342
Liabilities of disposal groups held for sale 1 | 114,597 | 9,005 | — | — | 313
Liabilities under insurance contracts | 114,844 | 112,745 | 107,191 | 97,439 | 87,330
Other liabilities | 212,696 | 190,989 | 204,019 | 194,876 | 167,261
Total liabilities at 31 Dec | 2,770,502 | 2,751,162 | 2,779,169 | 2,522,484 | 2,363,875
Equity |  |  |  |  |
Total shareholders’ equity | 187,484 | 198,250 | 196,443 | 183,955 | 186,253
Non-controlling interests | 8,544 | 8,527 | 8,552 | 8,713 | 7,996
Total equity at 31 Dec | 196,028 | 206,777 | 204,995 | 192,668 | 194,249
Total liabilities and equity at 31 Dec | 2,966,530 | 2,957,939 | 2,984,164 | 2,715,152 | 2,558,124

1 ‘Assets held for sale’ in 2021, including $2.4bn of loans and advances to customers in relation to our exit of mass market retail banking business in the
US, were reported within ‘Other assets’ in the Annual Report and Accounts 2021. Similarly, $8.8bn of customer accounts classified as ‘Liabilities of
disposal groups’ were previously presented within ‘Other liabilities’.
A more detailed consolidated balance sheet is contained in the financial statements on page 326.

HSBC Holdings plc Annual Report and Accounts 2022 | 105

Five-year selected financial information
| 2022 | 2021 | 2020 | 2019 | 2018
| $m | $m | $m | $m | $m
Called up share capital | 10,147 | 10,316 | 10,347 | 10,319 | 10,180
Capital resources 1 | 162,423 | 177,786 | 184,423 | 172,150 | 173,238
Undated subordinated loan capital | 1,967 | 1,968 | 1,970 | 1,968 | 1,969
Preferred securities and dated subordinated loan capital 2 | 29,921 | 28,568 | 30,721 | 33,063 | 35,014
Risk-weighted assets | 839,720 | 838,263 | 857,520 | 843,395 | 865,318
Total shareholders’ equity | 187,484 | 198,250 | 196,443 | 183,955 | 186,253
Less: preference shares and other equity instruments | (19,746) | (22,414) | (22,414) | (22,276) | (23,772)
Total ordinary shareholders’ equity | 167,738 | 175,836 | 174,029 | 161,679 | 162,481
Less: goodwill and intangible assets (net of tax) | (18,383) | (17,643) | (17,606) | (17,535) | (22,425)
Tangible ordinary shareholders’ equity | 149,355 | 158,193 | 156,423 | 144,144 | 140,056
Financial statistics |  |  |  |  |
Loans and advances to customers as a percentage of customer accounts | 58.9% | 61.1% | 63.2% | 72.0% | 72.0%
Average total shareholders’ equity to average total assets | 6.34% | 6.62% | 6.46% | 6.97% | 7.16%
Net asset value per ordinary share at year-end ($)3 | 8.50 | 8.76 | 8.62 | 8.00 | 8.13
Tangible net asset value per ordinary share at year-end ($)4 | 7.57 | 7.88 | 7.75 | 7.13 | 7.01
Tangible net asset value per fully diluted share at year-end ($) | 7.51 | 7.84 | 7.72 | 7.11 | 6.98
Number of $0.50 ordinary shares in issue (millions) | 20,294 | 20,632 | 20,694 | 20,639 | 20,361
Basic number of $0.50 ordinary shares outstanding (millions) | 19,739 | 20,073 | 20,184 | 20,206 | 19,981
Basic number of $0.50 ordinary shares outstanding and dilutive potential ordinary shares (millions) | 19,876 | 20,189 | 20,272 | 20,280 | 20,059
Closing foreign exchange translation rates to $: |  |  |  |  |
$1: £ | 0.830 | 0.739 | 0.732 | 0.756 | 0.783
$1: € | 0.937 | 0.880 | 0.816 | 0.890 | 0.873

1 Capital resources are regulatory total capital, the calculation of which is set out on page 205.
2 Including perpetual preferred securities, details of which can be found in Note 29: Subordinated liabilities on page 393.
3 The definition of net asset value per ordinary share is total shareholders’ equity, less non-cumulative preference shares and capital securities, divided
by the number of ordinary shares in issue, excluding own shares held by the company, including those purchased and held in treasury.
4 The definition of tangible net asset value per ordinary share is total ordinary shareholders’ equity excluding goodwill, PVIF and other intangible assets
(net of deferred tax), divided by the number of basic ordinary shares in issue, excluding own shares held by the company, including those purchased
and held in treasury.

Combined view of customer lending and customer deposits
| 2022 | 2021
| $m | $m
Combined customer lending |  |
Loans and advances to customers | 924,854 | 1,045,814
Loans and advances to customers of disposal groups reported in ‘Assets held for sale’ | 80,576 | 2,385
–Canada | 55,197 |
–France retail banking operations | 25,029 |
–other 1 | 350 | 2,385
At 31 Dec | 1,005,430 | 1,048,199
Combined customer deposits |  |
Customer accounts | 1,570,303 | 1,710,574
Customer accounts reported in ‘Liabilities of disposal groups held for sale’ | 85,274 | 8,750
–Canada | 60,606 |
–France retail banking operations | 22,348 |
–other 1 | 2,320 | 8,750
At 31 Dec | 1,655,577 | 1,719,324

1 At 31 December 2021, ‘other’ included loans and advances and
customer accounts relating to the disposal of the US mass market
retail banking business. This sale completed in February 2022.
Balance sheet commentary compared with
31 December 2021
At 31 December 2022, total assets of $3.0tn, were broadly
unchanged on a reported basis and increased by $161bn or 6% on a
constant currency basis.
During the period, asset and liability balances mainly relating to the
planned sales of our retail banking operations in France and our
banking business in Canada were reclassified to ‘Assets held for sale’
and ‘Liabilities of disposal groups held for sale’.
Reported loans and advances to customers as a percentage of
customer accounts was 58.9%, compared with 61.1% at
31 December 2021. The movement in this ratio reflected the
reclassifications to held for sale mentioned above.
Assets
Cash and balances at central banks decreased by $76bn or 19%,
which included a $32bn adverse impact of foreign currency translation
differences. The decrease was mainly in the US, reflecting the
redeployment of liquidity into reverse repurchase agreements, and
also due to a reduction in customer accounts. In addition, lower
balances in the UK primarily reflected growth in lending to customers
and banks, on a constant currency basis.
Trading assets decreased by $31bn or 12%, reflecting a reduction in
equity and debt securities held, particularly in Hong Kong and the UK,
reflecting weaker client demand.
Derivative assets increased by $87bn or 44%, mainly in Europe,
reflecting favourable revaluation movements on interest rate
contracts due to movements in long-term yield curve rates in most
major markets. Foreign exchange contracts also increased, primarily
in the UK, as a result of foreign exchange rate movements. The
increase in derivative assets was consistent with the increase in
derivative liabilities, as the underlying risk is broadly matched.
Loans and advances to banks increased by $22bn or 26%, primarily
reflecting increases in the UK and Hong Kong.
Loans and advances to customers of $925bn decreased by $121bn
or 12% on a reported basis. This included the following items:
•adverse impacts of foreign currency translation differences of
$55bn; and
•the reclassification of $81bn to ‘Assets held for sale’ primarily
relating to the planned sales of our retail banking operations in
France and our banking business in Canada in 2022, and $2bn in
2021 primarily associated with the US mass market retail banking
business sales which were disposed of during 2022.
On a constant currency basis and i ncluding balances classified as held
for sale, loans and advances to customers increased by $12bn. This
included the impact of the subsequent sale of US mass market retail
balances that were held for sale at 31 December 2021 of $2bn with
the remaining growth of $14bn reflecting the following movements.
Financial summary

106 | HSBC Holdings plc Annual Report and Accounts 2022

In WPB, customer lending increased by $15bn, reflecting growth in
mortgage balances, notably in the UK (up $9bn), Hong Kong (up $3bn)
and Australia (up $2bn).
In CMB, customer lending was $3bn higher from term lending
increases in India, Australia and the US. Lending also increased in the
UK, primarily in trade lending. This was partly offset by a reduction in
term lending of $8bn in Hong Kong as customer demand for lending
softened in the second half of 2022.
In GBM, lending fell by $3bn due to a reduction in Global Banking
term lending in the fourth quarter of 2022, primarily in Hong Kong,
partly offset by a growth in overdrafts balances in the UK.
Financial investments decreased by $21bn or 5%, mainly in Europe
from the adverse impact of foreign currency translation differences
since 31 December 2021. The reduction included adverse fair value
movements recorded in ‘other comprehensive income’ in equity on
debt securities, treasury and other eligible bills as a result of higher
yield curves and wider macroeconomic pressures. It also included
reductions due to disposals and maturity of these securities. The
reductions were partly offset by increases in debt instruments
measured at amortised cost, as we repositioned our portfolio to
reduce capital volatility.
Assets held for sale of $116bn primarily comprised the assets
relating to the planned sales of our retail banking operations in France
and our banking business in Canada.
Other assets increased by $28bn, reflecting growth in cash collateral
of $21bn due to an increase in the fair value of derivative liabilities.
Liabilities
Deposits by banks decreased by $34bn or 34%, primarily in Europe,
Hong Kong and the US.
Customer accounts of $1.6tn decreased by $140bn or 8% on a
reported basis. This included the following items:
•adverse impacts of foreign currency translation differences of
$88bn; and
•the reclassification of $85bn to ‘Liabilities of disposal groups held
for sale’ primarily relating to the planned sales of our retail banking
operations in France and our banking business in Canada in 2022,
and $9bn in 2021 primarily associated with the US mass market
retail banking business which was disposed of during 2022.
On a constant currency basis and including balances classified as held
for sale, customer accounts increased by $24bn. This included the
impact of the subsequent sale of US mass market retail balances that
were held for sale at 31 December 2021 of $9bn with the remaining
growth of $33bn reflecting the following movements.
In GBM, customer accounts rose by $16bn. This was driven by
growth in interest-bearing and term deposit balances as customers
demonstrated a preference for higher yielding accounts as interest
rates rose, notably in Europe.
In WPB, customer accounts grew by $17bn, reflecting higher interest-
bearing and term deposit balances, as interest rates rose, primarily in
the UK and Asia.
In CMB, customer accounts remained broadly stable, with reductions
in Hong Kong, the US, and the UK, mitigated by growth in other Asia
markets.
Derivative liabilities increased by $95bn or 50%, which is consistent
with the increase in derivative assets, since the underlying risk is
broadly matched.
Liabilities of disposal groups held for sale of $115bn primarily
comprised the liabilities relating to the planned sales of our retail
banking operations in France and our banking business in Canada.
Other liabilities increased by $22bn, notably from growth in cash
collateral of $20bn, mainly due to the increase in fair value of
derivative assets.
Equity
Total shareholders’ equity, including non-controlling interests,
decreased by $11bn or 5% compared with 31 December 2021.
Profits generated of $17bn were offset by net losses through other
comprehensive income (‘OCI’) of $17bn. In addition, shareholders’
equity fell as a result of dividends paid of $7bn, the redemption of
perpetual subordinated contingent convertible capital securities of
$3bn and the impact of our $1bn share buy-back announced at our
2021 results in February 2022.
The net losses in OCI of $17bn included adverse movements of $5bn
on financial instruments designated as hold-to-collect-and-sell, which
are held as hedges to our exposure to interest rate movements, as a
result of the increase in term market yield curves in 2022. The net
loss also included an adverse impact from foreign exchange
differences of $10bn and losses of $4bn on cash flow hedges. These
losses were partly offset by fair value gains on liabilities related to
changes in own credit risk of $2bn.
In the earlier stages of a rising interest rate environment, the Group is
positively exposed to rising interest rates through net interest income,
although there is an impact on our capital base due to the fair value of
hold-to-collect-and-sell instruments. These instruments are reported
within ‘financial investments’. There is an initial negative effect
materialising through reserves, after which the net interest income is
expected to result in a net benefit for the Group over time, provided
policy rates follow market implied rates.
Over time, these adverse OCI movements will unwind as the
instruments reach maturity, although not all will necessarily be held to
maturity.
Risk-weighted assets
Risk-weighted assets (‘RWAs’) totalled $839.7 bn at 31 December
2022, a $1.4 bn increase since 2021. Excluding foreign currency
translation differences of $41.9bn, RWAs rose by $43.3 bn in 2022.
This was mainly due to the following movements:
•a $20.9 bn asset size increase, mostly caused by CMB and WPB
lending growth in Europe and Asia, offset by reduced lending in
GBM; and
•a $24.2 bn increase in RWAs due to changes in methodology and
policy. This was mostly due to regulatory changes, data
enhancements driven by internal and external reviews of our
regulatory reporting processes and the reversal of the beneficial
changes to the treatment of software assets.

HSBC Holdings plc Annual Report and Accounts 2022 | 107

Customer accounts by country/territory
| 2022 | 2021
| $m | $m
Europe | 601,473 | 667,769
– UK | 493,028 | 535,797
– France 1 | 33,726 | 56,841
– Germany | 28,949 | 22,509
– Switzerland | 5,167 | 10,680
– other | 40,603 | 41,942
Asia | 784,236 | 792,098
– Hong Kong | 542,543 | 549,429
– Singapore | 61,475 | 57,572
– mainland China | 56,948 | 59,266
– Australia | 28,506 | 28,240
– India | 22,636 | 24,507
– Malaysia | 16,008 | 16,500
– Taiwan | 15,316 | 15,483
– Indonesia | 5,840 | 6,019
– other | 34,964 | 35,082
Middle East and North Africa (excluding Saudi Arabia) | 43,933 | 42,629
– United Arab Emirates | 23,331 | 20,943
– Türkiye | 3,497 | 4,258
– Egypt | 6,045 | 6,699
– other | 11,060 | 10,729
North America | 109,093 | 178,565
– US | 100,404 | 111,921
– Canada 1 | — | 58,071
– other | 8,689 | 8,573
Latin America | 31,568 | 29,513
– Mexico | 25,531 | 23,583
– other | 6,037 | 5,930
At 31 Dec | 1,570,303 | 1,710,574

1 At 31 December 2022, customer accounts of $85bn met the criteria to be classified as held for sale and are reported within ‘Liabilities of disposal
groups held for sale’ on the balance sheet, of which $61bn and $22bn belongs to the planned sales of the banking business in Canada and retail
banking operations in France, respectively. Refer to Note 23 on page 389 for further details.

Loans and advances, deposits by currency
| At
| 31 Dec 2022
$m | USD | GBP | HKD | EUR | CNY | Others 1 | Total
Loans and advances to banks | 34,495 | 12,292 | 5,188 | 6,328 | 7,833 | 38,746 | 104,882
Loans and advances to customers | 182,719 | 265,988 | 221,150 | 57,077 | 49,036 | 148,884 | 924,854
Total loans and advances | 217,214 | 278,280 | 226,338 | 63,405 | 56,869 | 187,630 | 1,029,736
Deposits by banks | 23,133 | 16,963 | 4,002 | 8,830 | 4,707 | 9,087 | 66,722
Customer accounts | 430,866 | 422,087 | 312,052 | 112,399 | 63,032 | 229,867 | 1,570,303
Total deposits | 453,999 | 439,050 | 316,054 | 121,229 | 67,739 | 238,954 | 1,637,025
| At
| 31 Dec 2021
$m | USD | GBP | HKD | EUR | CNY | Others 1 | Total
Loans and advances to banks | 21,474 | 3,991 | 524 | 3,970 | 6,545 | 46,632 | 83,136
Loans and advances to customers | 169,055 | 280,909 | 223,714 | 83,457 | 44,093 | 244,586 | 1,045,814
Total loans and advances | 190,529 | 284,900 | 224,238 | 87,427 | 50,638 | 291,218 | 1,128,950
Deposits by banks | 37,962 | 20,909 | 2,757 | 24,393 | 5,049 | 10,082 | 101,152
Customer accounts | 453,864 | 463,232 | 318,702 | 133,604 | 65,052 | 276,120 | 1,710,574
Total deposits | 491,826 | 484,141 | 321,459 | 157,997 | 70,101 | 286,202 | 1,811,726

1 ‘Others’ includes items with no currency information available ($1,519 m for loans to banks (2021: $11,028 m), $3,405 m for loans to customers (2021:
$64,491 m), $13 m for deposits by banks (2021: $23 m) and $6 m for customer accounts (2021: $5 m)).

RWAs by currency
| At
| 31 Dec 2022
$m | USD | GBP | HKD | EUR | CNY | Others | Total
RWAs 1 | 223,657 | 143,474 | 152,804 | 60,843 | 49,867 | 209,075 | 839,720
| At
| 31 Dec 2021
$m | USD | GBP | HKD | EUR | CNY | Others | Total
RWAs | 216,664 | 150,130 | 145,851 | 67,934 | 55,343 | 202,341 | 838,263

1 RWAs of $840bn includes credit risk, market risk and operational risk RWAs.
Financial summary

108 | HSBC Holdings plc Annual Report and Accounts 2022

Global businesses and geographical regions

Contents

109 | Summary
109 | Reconciliation of reported and adjusted items – global businesses
112 | Reconciliation of reported and adjusted risk-weighted assets
112 | Supplementary tables for WPB and GBM
117 | Analysis of reported results by geographical regions
119 | Reconciliation of reported and adjusted items – geographical regions
125 | Analysis by country

.
Summary
The Group Chief Executive, supported by the rest of the Group
Executive Committee (‘GEC‘), reviews operating activity on a number
of bases, including by global business and geographical region. Our
global businesses – Wealth and Personal Banking, Commercial
Banking, and Global Banking and Markets – along with Corporate
Centre are our reportable segments under IFRS 8 ‘Operating
Segments’ and are presented below and in Note 10: Segmental
analysis on page 360.
Geographical information is classified by the location of the principal
operations of the subsidiary or, for The Hongkong and Shanghai
Banking Corporation Limited, HSBC Bank plc, HSBC UK Bank plc,
HSBC Bank Middle East Limited and HSBC Bank USA, by the location
of the branch responsible for reporting the results or providing
funding.
The expense of the UK bank levy is included in the Europe
geographical region as HSBC regards the levy as a cost of being
headquartered in the UK. From 2021, the UK bank levy was partially
allocated to global businesses, which was previously retained in
Corporate Centre. Comparative periods have not been re-presented.
The results of geographical regions are presented on a reported basis
on page 117 and an adjusted basis on page 119.
Reconciliation of reported and adjusted items – global businesses
Supplementary unaudited analysis of significant items by global business is presented below.

| 2022
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 22,197 | 16,197 | 15,267 | (1,934) | 51,727
Significant items | 2,170 | 18 | 92 | 1,338 | 3,618
– customer redress programmes | (10) | 2 | — | — | (8)
– disposals, acquisitions and investment in new businesses 2 | 2,274 | — | — | 525 | 2,799
– fair value movements on financial instruments 3 | 5 | 2 | (93) | 665 | 579
– restructuring and other related costs 4 | (99) | 14 | 185 | 148 | 248
Adjusted | 24,367 | 16,215 | 15,359 | (596) | 55,345
ECL |  |  |  |  |
Reported | (1,137) | (1,858) | (587) | (10) | (3,592)
Adjusted | (1,137) | (1,858) | (587) | (10) | (3,592)
Operating expenses |  |  |  |  |
Reported | (15,049) | (6,893) | (9,579) | (1,809) | (33,330)
Significant items | 323 | 251 | 254 | 2,036 | 2,864
– customer redress programmes | (37) | — | — | 6 | (31)
– disposals, acquisitions and investment in new businesses | 2 | — | — | 16 | 18
– impairment of goodwill and other intangibles | — | (13) | — | 9 | (4)
– restructuring and other related costs | 358 | 264 | 254 | 2,005 | 2,881
Adjusted | (14,726) | (6,642) | (9,325) | 227 | (30,466)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |
Reported | 29 | 1 | (2) | 2,695 | 2,723
Adjusted | 29 | 1 | (2) | 2,695 | 2,723
Profit/(loss) before tax |  |  |  |  |
Reported | 6,040 | 7,447 | 5,099 | (1,058) | 17,528
Significant items | 2,493 | 269 | 346 | 3,374 | 6,482
– revenue | 2,170 | 18 | 92 | 1,338 | 3,618
– operating expenses | 323 | 251 | 254 | 2,036 | 2,864
Adjusted | 8,533 | 7,716 | 5,445 | 2,316 | 24,010
Loans and advances to customers (net) |  |  |  |  |
Reported | 423,553 | 308,094 | 192,852 | 355 | 924,854
Adjusted | 423,553 | 308,094 | 192,852 | 355 | 924,854
Customer accounts |  |  |  |  |
Reported | 779,310 | 458,714 | 331,844 | 435 | 1,570,303
Adjusted | 779,310 | 458,714 | 331,844 | 435 | 1,570,303

1 Net operating income/(expense) before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.4bn relates to the
planned sale of our retail banking operations in France.
3 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
4 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.

HSBC Holdings plc Annual Report and Accounts 2022 | 109

Reconciliation of reported and adjusted items (continued)
| 2021
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 22,117 | 13,431 | 14,588 | (584) | 49,552
Currency translation | (1,152) | (885) | (987) | (50) | (3,074)
Significant items | (2) | (8) | 381 | 171 | 542
– customer redress programmes | 7 | (18) | — | — | (11)
– fair value movements on financial instruments 2 | — | (1) | 19 | 224 | 242
– restructuring and other related costs 3 | (14) | 3 | 395 | (77) | 307
– currency translation on significant items | 5 | 8 | (33) | 24 | 4
Adjusted | 20,963 | 12,538 | 13,982 | (463) | 47,020
ECL |  |  |  |  |
Reported | 288 | 300 | 337 | 3 | 928
Currency translation | (75) | (75) | (24) | — | (174)
Adjusted | 213 | 225 | 313 | 3 | 754
Operating expenses |  |  |  |  |
Reported | (16,306) | (7,055) | (10,203) | (1,056) | (34,620)
Currency translation | 914 | 429 | 781 | 57 | 2,181
Significant items | 903 | 72 | 172 | 1,188 | 2,335
– customer redress programmes | 39 | 1 | — | 9 | 49
– impairment of goodwill and other intangibles | 587 | — | — | — | 587
– restructuring and other related costs | 296 | 81 | 197 | 1,262 | 1,836
– currency translation on significant items | (19) | (10) | (25) | (83) | (137)
Adjusted | (14,489) | (6,554) | (9,250) | 189 | (30,104)
Share of profit in associates and joint ventures |  |  |  |  |
Reported | 34 | 1 | — | 3,011 | 3,046
Currency translation | — | — | — | (113) | (113)
Adjusted | 34 | 1 | — | 2,898 | 2,933
Profit/(loss) before tax |  |  |  |  |
Reported | 6,133 | 6,677 | 4,722 | 1,374 | 18,906
Currency translation | (313) | (531) | (230) | (106) | (1,180)
Significant items | 901 | 64 | 553 | 1,359 | 2,877
– revenue | (2) | (8) | 381 | 171 | 542
– operating expenses | 903 | 72 | 172 | 1,188 | 2,335
Adjusted | 6,721 | 6,210 | 5,045 | 2,627 | 20,603
Loans and advances to customers (net) |  |  |  |  |
Reported | 488,786 | 349,126 | 207,162 | 740 | 1,045,814
Currency translation | (27,739) | (18,443) | (8,383) | (52) | (54,617)
Adjusted | 461,047 | 330,683 | 198,779 | 688 | 991,197
Customer accounts |  |  |  |  |
Reported | 859,029 | 506,688 | 344,205 | 652 | 1,710,574
Currency translation | (39,710) | (26,487) | (21,770) | (60) | (88,027)
Adjusted | 819,319 | 480,201 | 322,435 | 592 | 1,622,547

1 Net operating income/(expense) before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Global businesses

110 | HSBC Holdings plc Annual Report and Accounts 2022

Reconciliation of reported and adjusted items (continued)
| 2020
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 21,999 | 13,294 | 14,994 | 142 | 50,429
Currency translation | (532) | (423) | (581) | 13 | (1,523)
Significant items | 14 | 18 | 283 | (373) | (58)
– customer redress programmes | 5 | 16 | — | — | 21
– disposals, acquisitions and investment in new businesses | 9 | — | — | 1 | 10
– fair value movements on financial instruments 2 | — | 1 | 2 | (267) | (264)
– restructuring and other related costs 3 | — | 1 | 307 | (138) | 170
– currency translation on significant items | — | — | (26) | 31 | 5
Adjusted | 21,481 | 12,889 | 14,696 | (218) | 48,848
ECL |  |  |  |  |
Reported | (2,855) | (4,754) | (1,209) | 1 | (8,817)
Currency translation | (23) | 44 | (18) | (1) | 2
Adjusted | (2,878) | (4,710) | (1,227) | — | (8,815)
Operating expenses |  |  |  |  |
Reported | (15,446) | (6,900) | (10,169) | (1,917) | (34,432)
Currency translation | 498 | 230 | 400 | 42 | 1,170
Significant items | 412 | 195 | 874 | 1,336 | 2,817
– customer redress programmes | (64) | 1 | — | 9 | (54)
– impairment of goodwill and other intangibles | 294 | 45 | 577 | 174 | 1,090
– past service costs of guaranteed minimum pension benefits equalisation | — | — | — | 17 | 17
– restructuring and other related costs 4 | 192 | 165 | 326 | 1,225 | 1,908
– settlements and provisions in connection with legal and regulatory matters | — | — | 2 | 10 | 12
– currency translation on significant items | (10) | (16) | (31) | (99) | (156)
Adjusted | (14,536) | (6,475) | (8,895) | (539) | (30,445)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |
Reported | 6 | (1) | — | 1,592 | 1,597
Currency translation | — | — | — | 48 | 48
Significant items | — | — | — | 462 | 462
– impairment of goodwill 5 | — | — | — | 462 | 462
– currency translation on significant items | — | — | — | — | —
Adjusted | 6 | (1) | — | 2,102 | 2,107
Profit/(loss) before tax |  |  |  |  |
Reported | 3,704 | 1,639 | 3,616 | (182) | 8,777
Currency translation | (57) | (149) | (199) | 102 | (303)
Significant items | 426 | 213 | 1,157 | 1,425 | 3,221
– revenue | 14 | 18 | 283 | (373) | (58)
– operating expenses | 412 | 195 | 874 | 1,336 | 2,817
– share of profit in associates and joint ventures | — | — | — | 462 | 462
Adjusted | 4,073 | 1,703 | 4,574 | 1,345 | 11,695
Loans and advances to customers (net) |  |  |  |  |
Reported | 469,186 | 343,182 | 224,364 | 1,255 | 1,037,987
Currency translation | (33,081) | (23,098) | (12,854) | (104) | (69,137)
Adjusted | 436,105 | 320,084 | 211,510 | 1,151 | 968,850
Customer accounts |  |  |  |  |
Reported | 834,759 | 470,428 | 336,983 | 610 | 1,642,780
Currency translation | (46,716) | (30,539) | (26,226) | (70) | (103,551)
Adjusted | 788,043 | 439,889 | 310,757 | 540 | 1,539,229

1 Net operating income/(expense) before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
4 Includes impairment of software intangible assets of $189m (of the total software intangible asset impairment of $1,347m) and impairment of tangible
assets of $197m.
5 In 2020, The Saudi British Bank (‘SABB’), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal Bank in 2019.
HSBC’s post-tax share of the goodwill impairment was $462m.

HSBC Holdings plc Annual Report and Accounts 2022 | 111

Reconciliation of reported and adjusted risk-weighted assets

| At 31 Dec 2022
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $bn | $bn | $bn | $bn | $bn
Risk-weighted assets |  |  |  |  |
Reported | 182.9 | 334.8 | 233.5 | 88.5 | 839.7
Adjusted 1 | 182.9 | 334.8 | 233.5 | 88.5 | 839.7
| At 31 Dec 2021
Risk-weighted assets |  |  |  |  |
Reported | 178.3 | 332.9 | 236.2 | 90.9 | 838.3
Currency translation | (8.2) | (19.6) | (9.3) | (1.6) | (38.7)
Adjusted 1 | 170.1 | 313.3 | 226.9 | 89.3 | 799.6

| At 31 Dec 2020
Risk-weighted assets |  |  |  |  |
Reported | 172.8 | 327.7 | 265.1 | 91.9 | 857.5
Currency translation | (10.2) | (24.2) | (13.5) | (2.7) | (50.6)
Adjusted 1 | 162.6 | 303.5 | 251.6 | 89.2 | 806.9

1 Adjusted risk-weighted assets are calculated using reported risk-weighted assets adjusted for the effects of currency translation differences and
significant items.
Supplementary tables for WPB and GBM
WPB adjusted performance by business unit
A breakdown of WPB by business unit is presented below to reflect the basis of how the revenue performance of the business units is
assessed and managed.

WPB – summary (adjusted basis)
|  | Consists of 1
| Total WPB | Banking operations | Insurance manufacturing | Global Private Banking | Asset management
| $m | $m | $m | $m | $m
2022 |  |  |  |  |
Net operating income before change in expected credit losses and other credit impairment charges 2 | 24,367 | 19,342 | 1,914 | 1,978 | 1,133
– net interest income | 18,137 | 14,791 | 2,406 | 946 | (6)
– net fee income/(expense) | 5,030 | 3,848 | (701) | 776 | 1,107
– other income | 1,200 | 703 | 209 | 256 | 32
ECL | (1,137) | (1,114) | (17) | (5) | (1)
Net operating income | 23,230 | 18,228 | 1,897 | 1,973 | 1,132
Total operating expenses | (14,726) | (11,624) | (879) | (1,399) | (824)
Operating profit | 8,504 | 6,604 | 1,018 | 574 | 308
Share of profit in associates and joint ventures | 29 | 11 | 18 | — | —
Profit before tax | 8,533 | 6,615 | 1,036 | 574 | 308
2021 |  |  |  |  |
Net operating income before change in expected credit losses and other credit impairment charges 2 | 20,963 | 15,519 | 2,547 | 1,746 | 1,151
– net interest income | 13,458 | 10,585 | 2,255 | 620 | (2)
– net fee income/(expense) | 5,649 | 4,236 | (599) | 901 | 1,111
– other income | 1,856 | 698 | 891 | 225 | 42
ECL | 213 | 219 | (18) | 13 | (1)
Net operating income | 21,176 | 15,738 | 2,529 | 1,759 | 1,150
Total operating expenses | (14,489) | (11,660) | (564) | (1,491) | (774)
Operating profit | 6,687 | 4,078 | 1,965 | 268 | 376
Share of profit in associates and joint ventures | 34 | 17 | 17 | — | —
Profit before tax | 6,721 | 4,095 | 1,982 | 268 | 376

Global businesses

112 | HSBC Holdings plc Annual Report and Accounts 2022

WPB – summary (adjusted basis) (continued)
| Total WPB | Consists of 1
| Banking operations | Insurance manufacturing | Global Private Banking | Asset management
| $m | $m | $m | $m | $m
2020 |  |  |  |  |
Net operating income before change in expected credit losses and other credit impairment charges 2 | 21,481 | 16,925 | 1,834 | 1,712 | 1,010
– net interest income | 14,752 | 11,904 | 2,189 | 661 | (2)
– net fee income/(expense) | 5,306 | 4,027 | (505) | 813 | 971
– other income | 1,423 | 994 | 150 | 238 | 41
ECL | (2,878) | (2,746) | (63) | (68) | (1)
Net operating income | 18,603 | 14,179 | 1,771 | 1,644 | 1,009
Total operating expenses | (14,536) | (12,010) | (463) | (1,359) | (704)
Operating profit | 4,067 | 2,169 | 1,308 | 285 | 305
Share of profit in associates and joint ventures | 6 | 6 | — | — | —
Profit before tax | 4,073 | 2,175 | 1,308 | 285 | 305

1 The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance
operations. These eliminations are presented within Banking operations.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue. This may differ from
the WPB Life insurance manufacturing revenue shown in the managed view of adjusted revenue on page 32, which excludes the impact of Argentina
hyperinflation.
WPB insurance manufacturing adjusted results
The following table shows the results of our insurance manufacturing
operations by income statement line item. It shows the results of
insurance manufacturing operations for WPB and for all global
business segments in aggregate, and separately the insurance
distribution income earned by HSBC bank channels.
These results are prepared in accordance with current IFRSs, which
will change 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 99.

Adjusted results of insurance manufacturing operations and insurance distribution income earned by HSBC bank channels 1,2
| 2022 | 2021 | 2020
| WPB | All global businesses | WPB | All global businesses | WPB | All global businesses
| $m | $m | $m | $m | $m | $m
Net interest income | 2,406 | 2,595 | 2,255 | 2,430 | 2,189 | 2,352
Net fee income/(expense) | (701) | (724) | (599) | (629) | (505) | (541)
– fee income | 140 | 159 | 100 | 123 | 108 | 129
– fee expense | (841) | (883) | (699) | (752) | (613) | (670)
Net income/(expenses) from financial instruments held for trading or managed on a fair value basis | 95 | 94 | (4) | (12) | 60 | 76
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | (3,411) | (3,413) | 3,867 | 3,903 | 1,903 | 1,853
Gains less losses from financial investments | (12) | (12) | 85 | 89 | 12 | 12
Net insurance premium income | 12,413 | 12,942 | 10,145 | 10,617 | 9,522 | 10,005
Other operating income | 504 | 453 | 164 | 148 | 329 | 342
– of which: PVIF | 369 | 324 | 76 | 69 | 365 | 377
Total operating income | 11,294 | 11,935 | 15,913 | 16,546 | 13,510 | 14,100
Net insurance claims and benefits paid and movement in liabilities to policyholders | (9,380) | (9,929) | (13,366) | (13,863) | (11,676) | (12,166)
Net operating income before change in expected credit losses and other credit impairment charges 3 | 1,914 | 2,006 | 2,547 | 2,683 | 1,834 | 1,934
Change in expected credit losses and other credit impairment charges | (17) | (18) | (18) | (22) | (63) | (72)
Net operating income | 1,897 | 1,988 | 2,529 | 2,661 | 1,771 | 1,862
Total operating expenses | (879) | (918) | (564) | (590) | (463) | (492)
Operating profit | 1,018 | 1,070 | 1,965 | 2,071 | 1,308 | 1,370
Share of profit in associates and joint ventures | 18 | 18 | 17 | 17 | — | —
Profit before tax of insurance manufacturing operations 4 | 1,036 | 1,088 | 1,982 | 2,088 | 1,308 | 1,370
Annualised new business premiums of insurance manufacturing operations | 2,295 | 2,354 | 2,777 | 2,830 | 2,272 | 2,333
Insurance distribution income earned by HSBC bank channels | 764 | 823 | 726 | 795 | 718 | 781

1 Adjusted results are derived by adjusting for year-on-year effects of foreign currency translation differences, and the effect of significant items that
distort year-on-year comparisons. There are no significant items included within insurance manufacturing, and the impact of foreign currency
translation on all global businesses’ profit before tax is 2021: $53m unfavourable (reported: $2,141m), 2020: $7m unfavourable (reported: $1,377m).
2 The results presented for insurance manufacturing operations are shown before elimination of inter-company transactions with HSBC non-insurance
operations.
3 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
4 The effect on the insurance manufacturing operations of applying hyperinflation accounting in Argentina resulted in a decrease in adjusted revenue in
2022 of $3m (2021: increase of $6m, 2020: increase of $1m) and a decrease in profit before tax in 2022 of $2m (2021: increase of $5m, 2020:
increase of $13m). These effects are recorded within ‘All global businesses’.

HSBC Holdings plc Annual Report and Accounts 2022 | 113

Insurance manufacturing
The following commentary, unless otherwise specified, relates to the
‘All global businesses’ results.
HSBC recognises the present value of long-term in-force insurance
contracts and investment contracts with discretionary participation
features (‘PVIF’) as an asset on the balance sheet. The overall balance
sheet equity, including PVIF, is therefore a measure of the embedded
value in the insurance manufacturing entities, and the movement in
this embedded value in the period drives the overall income
statement result.
Adjusted profit before tax of $1.1bn decreased by $1.0bn or 48%
compared with 2021.
Adjusted net operating income before change in expected credit
losses and other credit impairment changes was $2.0bn or 25%
lower than in 2021. This reflected the following:
•‘Net expense from assets and liabilities of insurance businesses,
including related derivatives, measured at fair value through profit
or loss’ of $3.4bn in 2022 compared with a net income of $3.9bn
in 2021. This decrease primarily reflected unfavourable equity
market performance impacting our Hong Kong and France
businesses in 2022, compared with favourable market
performances in 2021.
•This unfavourable movement resulted in a corresponding
movement in liabilities to policyholders and PVIF (see ‘Other
operating income’ below), to the extent to which policyholders and
shareholders respectively participate in the investment
performance of the associated assets.
•Net insurance premium income of $12.9bn was $2.3bn higher
than in 2021, primarily reflecting higher sales volumes, particularly
in Hong Kong which had a higher proportion of single premium
products in its product mix, and in Singapore following the
acquisition of AXA Insurance Pte Limited (‘AXA Singapore‘) during
2022.
•Other operating income of $0.5bn increased by $0.3bn compared
with 2021. This reflected increases in Hong Kong of $0.2bn from
the value of new business, a $0.5bn favourable impact from
sharing lower investment returns with policyholders, a $0.3bn one-
off gain from a pricing update for policyholder funds held on
deposit with us in Hong Kong to reflect the cost of provision of
these services, and a $0.1bn gain on completion of our acquisition
of AXA Singapore in 2022. These were partly offset by a $0.7bn
reduction from PVIF assumption changes primarily in Hong Kong,
reflecting the impact of higher interest rates.
•Net insurance claims and benefits paid and movement in liabilities
to policyholders of $9.9bn were $3.9bn lower, primarily due to a
decline in returns on financial assets supporting contracts where
the policyholder is subject to part or all of the investment risk,
mainly in France and Hong Kong. It also reflected higher sales
volumes in Hong Kong.
Total operating expenses of $0.9bn increased by $0.3bn compared
with 2021, reflecting the incorporation of the results of AXA
Singapore in 2022 and investment in our Pinnacle proposition in
mainland China.
Annualised new business premiums (‘ANP’) is used to assess new
insurance premium generation by the business. It is calculated as
100% of annualised first year regular premiums and 10% of single
premiums, before reinsurance ceded. Lower ANP in the year mainly
reflect a change in product mix in Hong Kong towards single premium
new business, partially offset by higher ANP from business growth in
mainland China and the inclusion of the results of AXA Singapore.
Insurance distribution income from HSBC channels included $503m
(2021: $469m; 2020: $460m) from HSBC manufactured products, for
which a corresponding fee expense is recognised within insurance
manufacturing, and $320m (2021: $326m; 2020: $321m) from
products manufactured by third-party providers. The WPB component
of this distribution income was $461m (2021: $417m; 2020: $413m)
from HSBC manufactured products and $303m (2021: $309m; 2020:
$305m) from third-party products.
WPB: Wealth adjusted revenue by geography
The following table shows the adjusted revenue of our Wealth business by region. Our Wealth business comprises investment distribution, life
insurance manufacturing, Global Private Banking and Asset Management.

Wealth adjusted revenue by geography
| 2022 | 2021 | 2020
| $m | $m | $m
Europe | 2,456 | 2,152 | 1,666
Asia | 4,549 | 5,701 | 5,199
MENA | 198 | 165 | 148
North America | 581 | 522 | 513
Latin America | 307 | 243 | 211
Total | 8,091 | 8,783 | 7,737

Global businesses

114 | HSBC Holdings plc Annual Report and Accounts 2022

WPB: Wealth balances
The following table shows the wealth balances, which include invested assets and wealth deposits. Invested assets comprise customer assets
either managed by our Asset Management business or by external third-party investment managers, as well as self-directed investments by our
customers.

WPB – reported wealth balances 1
| 2022 | 2021
| $bn | $bn
Global Private Banking invested assets | 312 | 351
– managed by Global Asset Management | 57 | 67
– external managers, direct securities and other | 255 | 284
Retail invested assets | 364 | 434
– managed by Global Asset Management | 198 | 229
– external managers, direct securities and other | 166 | 205
Asset Management third-party distribution | 340 | 334
Reported invested assets 1 | 1,016 | 1,119
Wealth deposits (Premier, Jade and Global Private Banking)2 | 503 | 551
Total reported wealth balances | 1,519 | 1,670

1 Invested assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role
as investment manager. At 31 December 2022, $31bn of invested assets were classified as held for sale and are not included in the table above.
2 Premier, Jade and Global Private Banking deposits, which include Prestige deposits in Hang Seng Bank, form part of the total WPB customer accounts
balance of $779bn (2021: $859bn) on page 109. At 31 December 2022, $42bn of wealth deposits were classified as held for sale and are not included
in the table above.
Asset Management: funds under management
The following table shows the funds under management of our Asset
Management business. Funds under management represents assets
managed, either actively or passively, on behalf of our customers.
Funds under management are not reported on the Group’s balance
sheet, except where it is deemed that we are acting as principal
rather than agent in our role as investment manager.

Asset Management – reported funds under management 1
| 2022 | 2021
| $bn | $bn
Opening balance | 630 | 602
Net new invested assets | 45 | 27
Net market movements | (36) | 18
Foreign exchange and others | (44) | (17)
Closing balance | 595 | 630
Asset Management – reported funds under management by geography
| 2022 | 2021
| $bn | $bn
Europe | 327 | 367
Asia | 196 | 180
MENA | 2 | 5
North America | 60 | 69
Latin America | 10 | 9
Closing balance | 595 | 630

1 Funds under management are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent
in our role as investment manager.
At 31 December 2022, Asset Management funds under management
amounted to $595 bn, a decrease of $35 bn or 6%. The decrease
reflected adverse market performance and foreign exchange
translation, which more than offset strong net new invested assets of
$45 bn received in 2022. Within ‘foreign exchange and others’ is a
$14bn reduction related to the reclassification to held for sale of our
banking operations in Canada, which we continue to manage but are
no longer considered part of our core funds under management. This
was partly offset by an increase of $9bn due to the acquisition of L&T
Investment Management. Net new invested assets were notably
from additions in passive, private equity and money market products.
Global Private Banking: client assets 1
Global Private Banking client assets comprises invested assets and
deposits, which are translated at the rates of exchange applicable for
their respective year-ends, with the effects of currency translation
reported separately.

Global Private Banking – reported client assets 2
| 2022 | 2021
| $bn | $bn
Opening balance | 423 | 394
Net new invested assets | 18 | 19
Increase/(decrease) in deposits | (1) | 4
Net market movements | (53) | 17
Foreign exchange and others | (4) | (11)
Closing Balance | 383 | 423

HSBC Holdings plc Annual Report and Accounts 2022 | 115

Global Private Banking – reported client assets by geography
| 2022 | 2021
| $bn | $bn
Europe | 153 | 174
Asia | 174 | 178
North America | 56 | 71
Closing balance | 383 | 423

1 Client assets are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported
separately.
2 Client assets are not reported on the Group’s balance sheet, except where it is deemed that we are acting as principal rather than agent in our role as
investment manager. Customer deposits included in these client assets are on balance sheet.
Retail invested assets
The following table shows the invested assets of our retail
customers. These comprise customer assets either managed by our
Asset Management business or by external third-party
investment managers as well as self-directed investments by our
customers. Retail invested assets are not reported on the Group’s
balance sheet, except where it is deemed that we are acting as
principal rather than agent in our role as investment manager.

Retail invested assets
| 2022 | 2021
| $bn | $bn
Opening balance | 434 | 407
Net new invested assets 1 | 26 | 26
Net market movements | (46) | 5
Foreign exchange and others | (50) | (4)
Closing balance | 364 | 434
Retail invested assets by geography
| 2022 | 2021
| $bn | $bn
Europe | 54 | 81
Asia | 285 | 293
MENA | 5 | 4
North America | 12 | 47
Latin America | 8 | 9
Closing balance | 364 | 434

1‘Retail net new invested assets’ covers nine markets, comprising Hong Kong including Hang Seng Bank (Hong Kong), mainland China, Malaysia,
Singapore, HSBC Bank UK, UAE, US, Canada and Mexico. The net new invested assets related to all other geographies is reported in ‘exchange and
other’.
WPB invested assets
Net new invested assets represents the net customer inflows from
retail invested assets, Asset Management third-party distribution and
Global Private Banking invested assets. It excludes all
customer deposits. The net new invested assets in the table below is
non-additive from the tables above, as net new invested assets
managed by Asset Management that are generated by retail clients or
Global Private Banking will be recorded in both businesses.

WPB: Invested assets
| 2022 | 2021
| $bn | $bn
Opening balance | 1,119 | 1,050
Net new invested assets | 80 | 64
Net market movements | (116) | 33
Foreign exchange and others | (67) | (28)
Closing balance | 1,016 | 1,119
WPB: Net new invested assets by geography
| 2022 | 2021
| $bn | $bn
Europe | 13 | 17
Asia | 59 | 36
MENA | — | —
North America | 7 | 10
Latin America | 1 | 1
Total | 80 | 64

Global businesses

116 | HSBC Holdings plc Annual Report and Accounts 2022

GBM: Securities Services and Issuer
Services
Assets held in custody
Custody is the safekeeping and servicing of securities and other
financial assets on behalf of clients. Assets held in custody are not
reported on the Group’s balance sheet, except where it is deemed
that we are acting as principal rather than agent in our role as
investment manager. At 31 December 2022, we held $9.1tn of assets
as custodian, a reduction of 15% compared with 31 December 2021.
The balance comprised $8.4tn of assets in Securities Services, which
were recorded at market value, and $0.8tn of assets in Issuer
Services, recorded at book value.
The reduction was mainly in Securities Services balances. This was
driven by an adverse impact of currency translation differences in
Europe and Asia, and adverse market movements, notably impacting
Asia and the US. In addition, there was a net outflow of assets in Asia
and Europe.
Assets under administration
Our assets under administration business, which includes the
provision of bond and loan administration services, transfer agency
services and the valuation of portfolios of securities and other
financial assets on behalf of clients, complements the custody
business. At 31 December 2022, the value of assets held under
administration by the Group amounted to $4.5tn, which was 9%
lower than at 31 December 2021. The balance comprised $2.6tn of
assets in Securities Services, which were recorded at market value,
and $1.8tn of assets in Issuer Services, recorded at book value.
The decrease was mainly driven by Securities Services balances due
to an adverse impact of currency translation differences in Europe, a
net outflow of assets, mainly in Asia and Europe, and adverse market
movements in Europe and Asia. These decreases were partly offset
by an inflow of assets from new customers in Europe.
Analysis of reported results by geographical regions

HSBC reported profit/(loss) before tax and balance sheet data
| 2022
| Europe | Asia | MENA | North America | Latin America | Intra-HSBC | Total
| $m | $m | $m | $m | $m | $m | $m
Net interest income | 7,185 | 16,157 | 1,665 | 3,395 | 2,754 | 1,454 | 32,610
Net fee income | 3,554 | 4,695 | 830 | 1,824 | 547 | 1 | 11,451
Net income from financial instruments held for trading or managed on a fair value basis | 3,242 | 5,329 | 578 | 587 | 756 | (23) | 10,469
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss | (1,760) | (1,683) | — | — | 48 | 1 | (3,394)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 1,639 | 4 | 2 | (8) | 20 | (1,431) | 226
Other income/(expense)1 | 3,046 | 4,297 | (138) | 630 | (317) | (7,153) | 365
Net operating income before change in expected credit losses and other credit impairment charges 2 | 16,906 | 28,799 | 2,937 | 6,428 | 3,808 | (7,151) | 51,727
Change in expected credit losses and other credit impairment charges | (857) | (2,089) | 8 | (93) | (561) | — | (3,592)
Net operating income | 16,049 | 26,710 | 2,945 | 6,335 | 3,247 | (7,151) | 48,135
Total operating expenses excluding impairment of goodwill and other intangible assets | (16,370) | (15,343) | (1,582) | (4,639) | (2,401) | 7,152 | (33,183)
Impairment of goodwill and other intangible assets | (54) | (52) | (5) | (30) | (5) | (1) | (147)
Operating profit/(loss) | (375) | 11,315 | 1,358 | 1,666 | 841 | — | 14,805
Share of profit/(loss) in associates and joint ventures | (40) | 2,409 | 342 | — | 12 | — | 2,723
Profit/(loss) before tax | (415) | 13,724 | 1,700 | 1,666 | 853 | — | 17,528
| % | % | % | % | % |  | %
Share of HSBC’s profit before tax | (2.4) | 78.3 | 9.7 | 9.5 | 4.9 |  | 100.0
Cost efficiency ratio | 97.1 | 53.5 | 54.0 | 72.6 | 63.2 |  | 64.4
Balance sheet data | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers (net) | 343,670 | 475,278 | 26,475 | 55,790 | 23,641 | — | 924,854
Total assets | 1,345,971 | 1,316,876 | 70,755 | 341,125 | 51,708 | (159,905) | 2,966,530
Customer accounts | 601,473 | 784,236 | 43,933 | 109,093 | 31,568 | — | 1,570,303
Risk-weighted assets 3 | 251,195 | 409,320 | 60,946 | 106,546 | 38,904 |  | 839,720

HSBC Holdings plc Annual Report and Accounts 2022 | 117

HSBC reported profit/(loss) before tax and balance sheet data (continued) |  |  |  |  |
| 2021
| Europe | Asia | MENA | North America | Latin America | Intra-HSBC items | Total
| $m | $m | $m | $m | $m | $m | $m
Net interest income | 6,454 | 12,596 | 1,299 | 2,845 | 2,195 | 1,100 | 26,489
Net fee income | 3,882 | 5,871 | 774 | 2,056 | 514 | — | 13,097
Net income from financial instruments held for trading or managed on a fair value basis | 2,602 | 3,643 | 431 | 426 | 476 | 166 | 7,744
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss | 1,670 | 2,340 | — | — | 45 | (2) | 4,053
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 1,973 | (3) | (3) | 54 | 40 | (1,263) | 798
Other income/(expense)1 | 3,523 | 1,316 | 59 | 673 | (212) | (7,988) | (2,629)
Net operating income before change in expected credit losses and other credit impairment charges 2 | 20,104 | 25,763 | 2,560 | 6,054 | 3,058 | (7,987) | 49,552
Change in expected credit losses and other credit impairment charges | 1,601 | (840) | 132 | 238 | (203) | — | 928
Net operating income | 21,705 | 24,923 | 2,692 | 6,292 | 2,855 | (7,987) | 50,480
Total operating expenses excluding impairment of goodwill and other intangible assets | (18,099) | (15,136) | (1,536) | (4,905) | (2,198) | 7,987 | (33,887)
Impairment of goodwill and other intangible assets | (95) | (24) | (8) | (13) | (593) | — | (733)
Operating profit/(loss) | 3,511 | 9,763 | 1,148 | 1,374 | 64 | — | 15,860
Share of profit/(loss) in associates and joint ventures | 268 | 2,486 | 275 | — | 17 | — | 3,046
Profit/(loss) before tax | 3,779 | 12,249 | 1,423 | 1,374 | 81 | — | 18,906
| % | % | % | % | % |  | %
Share of HSBC’s profit before tax | 20.0 | 64.8 | 7.5 | 7.3 | 0.4 |  | 100.0
Cost efficiency ratio | 90.5 | 58.8 | 60.3 | 81.2 | 91.3 |  | 69.9
Balance sheet data | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers (net) | 397,090 | 492,525 | 26,375 | 108,717 | 21,107 | — | 1,045,814
Total assets | 1,354,483 | 1,261,707 | 70,974 | 362,150 | 46,602 | (137,977) | 2,957,939
Customer accounts | 667,769 | 792,098 | 42,629 | 178,565 | 29,513 | — | 1,710,574
Risk-weighted assets 3 | 261,115 | 396,206 | 60,223 | 110,412 | 35,915 | — | 838,263
| 2020
Net interest income | 5,695 | 14,318 | 1,465 | 2,836 | 1,960 | 1,304 | 27,578
Net fee income | 3,499 | 5,418 | 695 | 1,795 | 467 | — | 11,874
Net income from financial instruments held for trading or managed on a fair value basis | 3,266 | 4,273 | 402 | 997 | 593 | 51 | 9,582
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit and loss | 327 | 1,699 | — | — | 55 | — | 2,081
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 1,747 | 17 | 3 | 2 | 40 | (1,354) | 455
Other income/(expense)1 | 3,885 | 1,197 | 63 | 745 | (95) | (6,936) | (1,141)
Net operating income before loan impairment (charges)/ recoveries and other credit risk provisions 2 | 18,419 | 26,922 | 2,628 | 6,375 | 3,020 | (6,935) | 50,429
Change in expected credit losses and other credit impairment (charges)/recoveries | (3,751) | (2,284) | (758) | (900) | (1,124) | — | (8,817)
Net operating income | 14,668 | 24,638 | 1,870 | 5,475 | 1,896 | (6,935) | 41,612
Total operating expenses excluding impairment of goodwill and other intangible assets | (17,860) | (13,584) | (1,521) | (5,081) | (1,933) | 6,935 | (33,044)
Impairment of goodwill and other intangible assets | (1,014) | (78) | (65) | (226) | (5) | — | (1,388)
Operating profit/(loss) | (4,206) | 10,976 | 284 | 168 | (42) | — | 7,180
Share of profit in associates and joint ventures | 1 | 1,856 | (265) | — | 5 | — | 1,597
Profit/(loss) before tax | (4,205) | 12,832 | 19 | 168 | (37) | — | 8,777
| % | % | % | % | % |  | %
Share of HSBC’s profit before tax | (47.9) | 146.2 | 0.2 | 1.9 | (0.4) |  | 100.0
Cost efficiency ratio | 102.5 | 50.7 | 60.4 | 83.2 | 64.2 |  | 68.3
Balance sheet data | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers (net) | 408,495 | 473,165 | 28,700 | 107,969 | 19,658 | — | 1,037,987
Total assets | 1,416,111 | 1,206,404 | 68,860 | 373,167 | 49,703 | (130,081) | 2,984,164
Customer accounts | 629,647 | 762,406 | 41,221 | 182,028 | 27,478 | — | 1,642,780
Risk-weighted assets 3 | 284,322 | 384,228 | 60,181 | 117,755 | 35,240 | — | 857,520

1‘Other income/(expense)’ in this context comprises where applicable net income/expense from other financial instruments designated at fair value,
gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net insurance claims
and benefits paid and movement in liabilities to policyholders.
2 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
3 Risk-weighted assets are non-additive across geographical regions due to market risk diversification effects within the Group.
Geographical regions

118 | HSBC Holdings plc Annual Report and Accounts 2022

Reconciliation of reported and adjusted items – geographical regions

Reconciliation of reported and adjusted items
| 2022
| Europe | Asia | MENA | North America | Latin America | Total
| $m | $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |  |
Reported 2 | 16,906 | 28,799 | 2,937 | 6,428 | 3,808 | 51,727
Significant items 2 | 3,065 | (223) | 9 | (108) | 15 | 3,618
– customer redress programmes | (8) | — | — | — | — | (8)
– disposals, acquisitions and investment in new businesses 3 | 2,799 | — | — | — | — | 2,799
– fair value movements on financial instruments 4 | 562 | 22 | (3) | (3) | 1 | 579
– restructuring and other related costs 2,5 | (288) | (245) | 12 | (105) | 14 | 248
Adjusted 2 | 19,971 | 28,576 | 2,946 | 6,320 | 3,823 | 55,345
ECL |  |  |  |  |  |
Reported | (857) | (2,089) | 8 | (93) | (561) | (3,592)
Adjusted | (857) | (2,089) | 8 | (93) | (561) | (3,592)
Operating expenses |  |  |  |  |  |
Reported 2 | (16,424) | (15,395) | (1,587) | (4,669) | (2,406) | (33,330)
Significant items 2 | 2,119 | 833 | 73 | 544 | 155 | 2,864
– customer redress programmes | (31) | — | — | — | — | (31)
– disposals, acquisitions and investment in new businesses | 18 | — | — | — | — | 18
– impairment of goodwill and other intangibles | (4) | — | — | — | — | (4)
– restructuring and other related costs 2 | 2,136 | 833 | 73 | 544 | 155 | 2,881
Adjusted 2 | (14,305) | (14,562) | (1,514) | (4,125) | (2,251) | (30,466)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |  |
Reported | (40) | 2,409 | 342 | — | 12 | 2,723
Adjusted | (40) | 2,409 | 342 | — | 12 | 2,723
Profit/(loss) before tax |  |  |  |  |  |
Reported | (415) | 13,724 | 1,700 | 1,666 | 853 | 17,528
Significant items | 5,184 | 610 | 82 | 436 | 170 | 6,482
– revenue 2 | 3,065 | (223) | 9 | (108) | 15 | 3,618
– operating expenses 2 | 2,119 | 833 | 73 | 544 | 155 | 2,864
Adjusted | 4,769 | 14,334 | 1,782 | 2,102 | 1,023 | 24,010
Loans and advances to customers (net) |  |  |  |  |  |
Reported | 343,670 | 475,278 | 26,475 | 55,790 | 23,641 | 924,854
Adjusted | 343,670 | 475,278 | 26,475 | 55,790 | 23,641 | 924,854
Customer accounts |  |  |  |  |  |
Reported | 601,473 | 784,236 | 43,933 | 109,093 | 31,568 | 1,570,303
Adjusted | 601,473 | 784,236 | 43,933 | 109,093 | 31,568 | 1,570,303

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3 Includes losses from classifying businesses as held for sale as part of a broader restructuring of our European business, of which $2.4bn relates to the
planned sale of our retail banking operations in France.
4 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
5 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.

HSBC Holdings plc Annual Report and Accounts 2022 | 119

Reconciliation of reported and adjusted items (continued)
| 2022
| UK | Hong Kong | Mainland China | US | Mexico
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 17,353 | 16,155 | 4,246 | 4,107 | 2,749
Significant items | 215 | 163 | (73) | (99) | 19
– customer redress programmes | (8) | — | — | — | —
– disposals, acquisitions and investment in new businesses | 60 | — | — | — | —
– fair value movements on financial instruments 2 | 571 | 39 | (1) | (1) | 1
– restructuring and other related costs 3 | (408) | 124 | (72) | (98) | 18
Adjusted | 17,568 | 16,318 | 4,173 | 4,008 | 2,768
ECL |  |  |  |  |
Reported | (712) | (1,680) | (328) | (20) | (507)
Adjusted | (712) | (1,680) | (328) | (20) | (507)
Operating expenses |  |  |  |  |
Reported | (13,224) | (8,275) | (2,906) | (3,438) | (1,642)
Significant items | 1,710 | 393 | 70 | 423 | 115
– customer redress programmes | (31) | — | — | — | —
– restructuring and other related costs | 1,741 | 393 | 70 | 423 | 115
Adjusted | (11,514) | (7,882) | (2,836) | (3,015) | (1,527)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |
Reported | (41) | 5 | 2,386 | — | 12
Adjusted | (41) | 5 | 2,386 | — | 12
Profit before tax |  |  |  |  |
Reported | 3,376 | 6,205 | 3,398 | 649 | 612
Significant items | 1,925 | 556 | (3) | 324 | 134
– revenue | 215 | 163 | (73) | (99) | 19
– operating expenses | 1,710 | 393 | 70 | 423 | 115
Adjusted | 5,301 | 6,761 | 3,395 | 973 | 746
Loans and advances to customers (net) |  |  |  |  |
Reported | 286,032 | 295,873 | 50,481 | 54,159 | 20,446
Adjusted | 286,032 | 295,873 | 50,481 | 54,159 | 20,446
Customer accounts |  |  |  |  |
Reported | 493,028 | 542,543 | 56,948 | 100,404 | 25,531
Adjusted | 493,028 | 542,543 | 56,948 | 100,404 | 25,531

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Geographical regions

120 | HSBC Holdings plc Annual Report and Accounts 2022

Reconciliation of reported and adjusted items (continued) |  |  |  |  |  |
| 2021
| Europe | Asia | MENA | North America | Latin America | Total
| $m | $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |  |
Reported 2 | 20,104 | 25,763 | 2,560 | 6,054 | 3,058 | 49,552
Currency translation 2 | (2,096) | (769) | (224) | (70) | (148) | (3,074)
Significant items 2 | 138 | (154) | (1) | 10 | 5 | 542
– customer redress programmes | (11) | — | — | — | — | (11)
– fair value movements on financial instruments 3 | 226 | 11 | — | 5 | — | 242
– restructuring and other related costs 2,4 | (90) | (175) | — | 5 | 5 | 307
– currency translation on significant items 2 | 13 | 10 | (1) | — | — | 4
Adjusted 2 | 18,146 | 24,840 | 2,335 | 5,994 | 2,915 | 47,020
ECL |  |  |  |  |  |
Reported | 1,601 | (840) | 132 | 238 | (203) | 928
Currency translation | (177) | 19 | (1) | (1) | (14) | (174)
Adjusted | 1,424 | (821) | 131 | 237 | (217) | 754
Operating expenses |  |  |  |  |  |
Reported 2 | (18,194) | (15,160) | (1,544) | (4,918) | (2,791) | (34,620)
Currency translation 2 | 1,645 | 490 | 109 | 43 | 127 | 2,181
Significant items 2 | 1,234 | 492 | 51 | 429 | 673 | 2,335
– customer redress programmes | 49 | — | — | — | — | 49
– impairment of goodwill and other intangibles | — | — | — | — | 587 | 587
– restructuring and other related costs 2 | 1,318 | 509 | 56 | 432 | 83 | 1,836
– currency translation on significant items 2 | (133) | (17) | (5) | (3) | 3 | (137)
Adjusted 2 | (15,315) | (14,178) | (1,384) | (4,446) | (1,991) | (30,104)
Share of profit in associates and joint ventures |  |  |  |  |  |
Reported | 268 | 2,486 | 275 | — | 17 | 3,046
Currency translation | (23) | (90) | — | — | — | (113)
Adjusted | 245 | 2,396 | 275 | — | 17 | 2,933
Profit before tax |  |  |  |  |  |
Reported | 3,779 | 12,249 | 1,423 | 1,374 | 81 | 18,906
Currency translation | (651) | (350) | (116) | (28) | (35) | (1,180)
Significant items | 1,372 | 338 | 50 | 439 | 678 | 2,877
– revenue 2 | 138 | (154) | (1) | 10 | 5 | 542
– operating expenses 2 | 1,234 | 492 | 51 | 429 | 673 | 2,335
Adjusted | 4,500 | 12,237 | 1,357 | 1,785 | 724 | 20,603
Loans and advances to customers (net) |  |  |  |  |  |
Reported | 397,090 | 492,525 | 26,375 | 108,717 | 21,107 | 1,045,814
Currency translation | (38,699) | (11,301) | (1,395) | (3,572) | 350 | (54,617)
Adjusted | 358,391 | 481,224 | 24,980 | 105,145 | 21,457 | 991,197
Customer accounts |  |  |  |  |  |
Reported | 667,769 | 792,098 | 42,629 | 178,565 | 29,513 | 1,710,574
Currency translation | (66,300) | (13,859) | (3,686) | (3,826) | (356) | (88,027)
Adjusted | 601,469 | 778,239 | 38,943 | 174,739 | 29,157 | 1,622,547

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
4 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.

HSBC Holdings plc Annual Report and Accounts 2022 | 121

Reconciliation of reported and adjusted items (continued)
| 2021
| UK | Hong Kong | Mainland China | US | Mexico
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 16,415 | 14,463 | 3,734 | 4,006 | 2,341
Currency translation | (1,664) | (103) | (159) | (1) | 19
Significant items | 7 | 60 | (39) | 14 | 15
– customer redress programmes | (11) | — | — | — | —
– fair value movements on financial instruments 2 | 220 | 7 | — | 5 | —
– restructuring and other related costs 3 | (227) | 54 | (41) | 9 | 15
– currency translation on significant items | 25 | (1) | 2 | — | —
Adjusted | 14,758 | 14,420 | 3,536 | 4,019 | 2,375
ECL |  |  |  |  |
Reported | 1,645 | (608) | (89) | 205 | (224)
Currency translation | (182) | 3 | 9 | — | (7)
Adjusted | 1,463 | (605) | (80) | 205 | (231)
Operating expenses |  |  |  |  |
Reported | (14,808) | (7,955) | (2,773) | (3,683) | (1,565)
Currency translation | 1,292 | 53 | 121 | — | (20)
Significant items | 1,079 | 226 | 30 | 355 | 66
– customer redress programmes | 49 | — | — | — | —
– restructuring and other related costs | 1,144 | 227 | 32 | 355 | 59
– currency translation on significant items | (114) | (1) | (2) | — | 7
Adjusted | (12,437) | (7,676) | (2,622) | (3,328) | (1,519)
Share of profit in associates and joint ventures |  |  |  |  |
Reported | 267 | 16 | 2,461 | — | 17
Currency translation | (23) | — | (89) | — | —
Adjusted | 244 | 16 | 2,372 | — | 17
Profit before tax |  |  |  |  |
Reported | 3,519 | 5,916 | 3,333 | 528 | 569
Currency translation | (577) | (47) | (118) | (1) | (8)
Significant items | 1,086 | 286 | (9) | 369 | 81
– revenue | 7 | 60 | (39) | 14 | 15
– operating expenses | 1,079 | 226 | 30 | 355 | 66
Adjusted | 4,028 | 6,155 | 3,206 | 896 | 642
Loans and advances to customers (net) |  |  |  |  |
Reported | 306,464 | 311,947 | 54,239 | 52,678 | 18,043
Currency translation | (33,683) | 111 | (4,228) | — | 924
Adjusted | 272,781 | 312,058 | 50,011 | 52,678 | 18,967
Customer accounts |  |  |  |  |
Reported | 535,797 | 549,429 | 59,266 | 111,921 | 23,583
Currency translation | (58,889) | 193 | (4,620) | — | 1,208
Adjusted | 476,908 | 549,622 | 54,646 | 111,921 | 24,791

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Geographical regions

122 | HSBC Holdings plc Annual Report and Accounts 2022

Reconciliation of reported and adjusted items (continued)
| 2020
| Europe | Asia | MENA | North America | Latin America | Total
| $m | $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |  |
Reported 2 | 18,419 | 26,922 | 2,628 | 6,375 | 3,020 | 50,429
Currency translation 2 | (819) | (412) | (252) | 49 | (195) | (1,523)
Significant items 2 | (234) | (34) | — | 41 | — | (58)
– customer redress programmes | 21 | — | — | — | — | 21
– disposals, acquisitions and investment in new businesses | — | — | — | 10 | — | 10
– fair value movements on financial investments 3 | (254) | (5) | — | (2) | (3) | (264)
– restructuring and other related costs 2,4 | (9) | (32) | — | 35 | — | 170
– currency translation on significant items 2 | 8 | 3 | — | (2) | 3 | 5
Adjusted 2 | 17,366 | 26,476 | 2,376 | 6,465 | 2,825 | 48,848
ECL |  |  |  |  |  |
Reported | (3,751) | (2,284) | (758) | (900) | (1,124) | (8,817)
Currency translation | 45 | 2 | 20 | (18) | (47) | 2
Adjusted | (3,706) | (2,282) | (738) | (918) | (1,171) | (8,815)
Operating expenses |  |  |  |  |  |
Reported 2 | (18,874) | (13,662) | (1,586) | (5,307) | (1,938) | (34,432)
Currency translation 2 | 756 | 250 | 146 | (28) | 152 | 1,170
Significant items 2 | 2,074 | 164 | 75 | 600 | 73 | 2,817
– customer redress programmes | (54) | — | — | — | — | (54)
– impairment of goodwill and other intangibles | 803 | — | 64 | 223 | — | 1,090
– past service costs of guaranteed minimum pension benefits equalisation | 17 | — | — | — | — | 17
– restructuring and other related costs 2,5 | 1,425 | 171 | 19 | 378 | 91 | 1,908
– settlements and provisions in connection with legal and regulatory matters | 12 | — | — | — | — | 12
– currency translation on significant items 2 | (129) | (7) | (8) | (1) | (18) | (156)
Adjusted 2 | (16,044) | (13,248) | (1,365) | (4,735) | (1,713) | (30,445)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |  |
Reported | 1 | 1,856 | (265) | — | 5 | 1,597
Currency translation | (11) | 59 | — | — | — | 48
Significant items | — | — | 462 | — | — | 462
– impairment of goodwill 6 | — | — | 462 | — | — | 462
– currency translation on significant items | — | — | — | — | — | —
Adjusted | (10) | 1,915 | 197 | — | 5 | 2,107
Profit/(loss) before tax |  |  |  |  |  |
Reported | (4,205) | 12,832 | 19 | 168 | (37) | 8,777
Currency translation | (29) | (101) | (86) | 3 | (90) | (303)
Significant items | 1,840 | 130 | 537 | 641 | 73 | 3,221
– revenue 2 | (234) | (34) | — | 41 | — | (58)
– operating expenses 2 | 2,074 | 164 | 75 | 600 | 73 | 2,817
– share of profit in associates and joint ventures | — | — | 462 | — | — | 462
Adjusted | (2,394) | 12,861 | 470 | 812 | (54) | 11,695
Loans and advances to customers (net) |  |  |  |  |  |
Reported | 408,495 | 473,165 | 28,700 | 107,969 | 19,658 | 1,037,987
Currency translation | (48,299) | (14,753) | (2,814) | (2,974) | (297) | (69,137)
Adjusted | 360,196 | 458,412 | 25,886 | 104,995 | 19,361 | 968,850
Customer accounts |  |  |  |  |  |
Reported | 629,647 | 762,406 | 41,221 | 182,028 | 27,478 | 1,642,780
Currency translation | (74,348) | (19,820) | (4,466) | (3,505) | (1,412) | (103,551)
Adjusted | 555,299 | 742,586 | 36,755 | 178,523 | 26,066 | 1,539,229

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Amounts are non-additive across geographical regions due to inter-company transactions within the Group.
3 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
4 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
5 Includes impairment of software intangible assets of $189m (of total software intangible asset impairment of $1,347m) and impairment of tangible
assets of $197m.
6 In 2020, The Saudi British Bank (’SABB’), an associate of HSBC, impaired the goodwill that arose following the merger with Alawwal bank in
2019. HSBC’s post-tax share of the goodwill impairment was $462m.

HSBC Holdings plc Annual Report and Accounts 2022 | 123

Reconciliation of reported and adjusted items (continued)
| 2020
| UK | Hong Kong | Mainland China | US | Mexico
| $m | $m | $m | $m | $m
Revenue 1 |  |  |  |  |
Reported | 13,886 | 16,345 | 3,088 | 4,590 | 2,234
Currency translation | (540) | (145) | 90 | (1) | 141
Significant items | (187) | 14 | (5) | 40 | (12)
– customer redress programmes | 21 | — | — | — | —
– disposals, acquisitions and investment in new businesses | — | — | — | 10 | —
– fair value movements on financial instruments 2 | (256) | — | (1) | (2) | (1)
– restructuring and other related costs 3 | 48 | 15 | (4) | 33 | (12)
– currency translation on significant items | — | (1) | — | (1) | 1
Adjusted | 13,159 | 16,214 | 3,173 | 4,629 | 2,363
ECL |  |  |  |  |
Reported | (3,256) | (824) | (114) | (622) | (1,050)
Currency translation | 30 | 9 | (10) | — | (77)
Adjusted | (3,226) | (815) | (124) | (622) | (1,127)
Operating expenses |  |  |  |  |
Reported | (14,855) | (7,312) | (2,211) | (4,194) | (1,376)
Currency translation | 438 | 62 | (49) | — | (89)
Significant items | 1,275 | 98 | 18 | 556 | 44
– customer redress programmes | (54) | — | — | — | —
– impairment of goodwill and other intangibles | 650 | — | — | 223 | —
– past service costs of guaranteed minimum pension benefits equalisation | 17 | — | — | — | —
– restructuring and other related costs | 693 | 100 | 19 | 333 | 42
– settlements and provisions in connection with legal and regulatory matters | 12 | — | — | — | —
– currency translation on significant items | (43) | (2) | (1) | — | 2
Adjusted | (13,142) | (7,152) | (2,242) | (3,638) | (1,421)
Share of profit/(loss) in associates and joint ventures |  |  |  |  |
Reported | 1 | (2) | 1,849 | — | 5
Currency translation | (10) | — | 58 | — | —
Adjusted | (9) | (2) | 1,907 | — | 5
Profit/(loss) before tax |  |  |  |  |
Reported | (4,224) | 8,207 | 2,612 | (226) | (187)
Currency translation | (82) | (74) | 89 | (1) | (25)
Significant items | 1,088 | 112 | 13 | 596 | 32
– revenue | (187) | 14 | (5) | 40 | (12)
– operating expenses | 1,275 | 98 | 18 | 556 | 44
Adjusted | (3,218) | 8,245 | 2,714 | 369 | (180)
Loans and advances to customers (net) |  |  |  |  |
Reported | 314,530 | 302,454 | 46,113 | 58,082 | 17,296
Currency translation | (37,030) | (1,635) | (2,417) | — | 391
Adjusted | 277,500 | 300,819 | 43,696 | 58,082 | 17,687
Customer accounts |  |  |  |  |
Reported | 504,275 | 531,489 | 56,826 | 117,485 | 22,220
Currency translation | (59,369) | (2,873) | (2,978) | — | 503
Adjusted | 444,906 | 528,616 | 53,848 | 117,485 | 22,723

1 Net operating income before change in expected credit losses and other credit impairment charges, also referred to as revenue.
2 Includes fair value movements on non-qualifying hedges and debit valuation adjustments on derivatives.
3 Comprises gains and losses relating to the business update in February 2020, including losses associated with the RWA reduction programme.
Geographical regions

124 | HSBC Holdings plc Annual Report and Accounts 2022

Analysis by country

Profit/(loss) before tax by country/territory within global businesses |
| 2022 |
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total |
| $m | $m | $m | $m | $m |
Europe | (95) | 2,652 | (77) | (2,895) | (415) |
– UK 1 | 1,853 | 2,094 | (534) | (37) | 3,376 |
– of which: HSBC UK Bank plc (ring-fenced bank) | 2,112 | 2,662 | 143 | (430) | 4,487 |
– of which: HSBC Bank plc (non-ring-fenced bank) | 386 | 315 | 141 | (474) | 368 |
– of which: Holdings and other | (645) | (883) | (818) | 867 | (1,479) |
– France 2 | (2,016) | 210 | 81 | (268) | (1,993) |
– Germany | 17 | 8 | 133 | (147) | 11 |
– Switzerland | 25 | 17 | 13 | (30) | 25 |
– other 3 | 26 | 323 | 230 | (2,413) | (1,834) |
Asia | 4,995 | 2,981 | 3,529 | 2,219 | 13,724 |
– Hong Kong | 4,521 | 1,309 | 955 | (580) | 6,205 |
– Australia | 147 | 180 | 157 | (37) | 447 |
– India | 45 | 304 | 622 | 306 | 1,277 |
– Indonesia | 4 | 71 | 100 | (9) | 166 |
– mainland China | (109) | 303 | 526 | 2,678 | 3,398 |
– Malaysia | 110 | 89 | 219 | (35) | 383 |
– Singapore | 244 | 255 | 351 | (78) | 772 |
– Taiwan | 36 | 43 | 137 | (17) | 199 |
– other | (3) | 427 | 462 | (9) | 877 |
Middle East and North Africa | 313 | 290 | 861 | 236 | 1,700 |
– Egypt | 101 | 76 | 194 | (5) | 366 |
– UAE | 128 | 107 | 320 | (86) | 469 |
– Saudi Arabia 4 | 30 | — | 94 | 345 | 469 |
– other | 54 | 107 | 253 | (18) | 396 |
North America | 541 | 1,169 | 461 | (505) | 1,666 |
– US | 209 | 557 | 270 | (387) | 649 |
– Canada | 243 | 548 | 140 | (89) | 842 |
– other | 89 | 64 | 51 | (29) | 175 |
Latin America | 286 | 355 | 325 | (113) | 853 |
– Mexico | 269 | 273 | 180 | (110) | 612 |
– other | 17 | 82 | 145 | (3) | 241 |
Year ended 31 Dec 2022 | 6,040 | 7,447 | 5,099 | (1,058) | 17,528 |

1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
2 Includes the impact of goodwill impairment of $425m as a result of the reclassification of our retail banking operations in France to held for sale. As
per Group accounting policy, HSBC’s cash-generating units are based on geographical regions, sub-divided by global businesses.
3 Corporate Centre includes inter-company debt eliminations of $1,850m.
4 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, The Saudi British Bank.

HSBC Holdings plc Annual Report and Accounts 2022 | 125

Profit/(loss) before tax by country/territory within global businesses (continued)
| 2021
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Europe | 1,817 | 2,893 | (299) | (632) | 3,779
– UK 1 | 1,511 | 2,475 | (487) | 20 | 3,519
– of which: HSBC UK Bank plc (ring-fenced bank) | 2,047 | 2,929 | 127 | (318) | 4,785
– of which: HSBC Bank plc (non-ring-fenced bank) | 176 | 259 | 220 | (17) | 638
– of which: Holdings and other | (712) | (713) | (834) | 355 | (1,904)
– France | 236 | 163 | (97) | (133) | 169
– Germany | 17 | 82 | 155 | 67 | 321
– Switzerland | 46 | 10 | — | (12) | 44
– other | 7 | 163 | 130 | (574) | (274)
Asia | 4,366 | 2,364 | 3,193 | 2,326 | 12,249
– Hong Kong | 4,076 | 1,303 | 920 | (383) | 5,916
– Australia | 146 | 132 | 131 | (26) | 383
– India | 20 | 265 | 593 | 232 | 1,110
– Indonesia | 14 | 12 | 111 | (8) | 129
– mainland China | (95) | 288 | 586 | 2,554 | 3,333
– Malaysia | 37 | (23) | 145 | (20) | 139
– Singapore | 145 | 107 | 231 | (13) | 470
– Taiwan | 14 | 16 | 106 | (5) | 131
– other | 9 | 264 | 370 | (5) | 638
Middle East and North Africa | 194 | 235 | 805 | 189 | 1,423
– Egypt | 79 | 42 | 163 | (2) | 282
– UAE | 91 | 3 | 342 | (61) | 375
– Saudi Arabia 2 | 17 | — | 65 | 274 | 356
– other | 7 | 190 | 235 | (22) | 410
North America | 60 | 1,023 | 697 | (406) | 1,374
– US | (131) | 472 | 524 | (337) | 528
– Canada | 141 | 544 | 145 | (62) | 768
– other | 50 | 7 | 28 | (7) | 78
Latin America | (304) | 162 | 326 | (103) | 81
– Mexico | 305 | 88 | 222 | (46) | 569
– other 3 | (609) | 74 | 104 | (57) | (488)
Year ended 31 Dec 2021 | 6,133 | 6,677 | 4,722 | 1,374 | 18,906

1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
2 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, The Saudi British Bank.
3 Includes the impact of goodwill impairment of $587m. As per Group accounting policy, HSBC’s cash-generating units are based on geographical
regions, sub-divided by global businesses.
Geographical regions

126 | HSBC Holdings plc Annual Report and Accounts 2022

Profit/(loss) before tax by country/territory within global businesses (continued)
| 2020
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Europe | (680) | (529) | (1,809) | (1,187) | (4,205)
– UK 1 | (357) | (543) | (1,769) | (1,555) | (4,224)
– of which: HSBC UK Bank plc (ring-fenced bank) | 113 | 167 | 90 | (124) | 246
– of which: HSBC Bank plc (non-ring fenced bank) | 109 | 36 | (1,030) | (454) | (1,339)
– of which: Holdings and other | (579) | (746) | (829) | (977) | (3,131)
– France | (340) | (168) | (347) | (310) | (1,165)
– Germany | 17 | 16 | 197 | (15) | 215
– Switzerland | (2) | (4) | — | (10) | (16)
– other | 2 | 170 | 110 | 703 | 985
Asia | 5,031 | 1,944 | 4,002 | 1,855 | 12,832
– Hong Kong | 4,927 | 1,787 | 1,674 | (181) | 8,207
– Australia | 108 | 76 | 138 | (7) | 315
– India | 16 | 187 | 593 | 228 | 1,024
– Indonesia | (6) | (14) | 147 | (13) | 114
– mainland China | (34) | 295 | 506 | 1,845 | 2,612
– Malaysia | 8 | 33 | 141 | (55) | 127
– Singapore | 45 | (644) | 239 | (12) | (372)
– Taiwan | 9 | 18 | 104 | (2) | 129
– other | (42) | 206 | 460 | 52 | 676
Middle East and North Africa | (15) | (120) | 478 | (324) | 19
– Egypt | 68 | 46 | 185 | (1) | 298
– UAE | (21) | (210) | 102 | (39) | (168)
– Saudi Arabia 2 | 21 | — | 26 | (264) | (217)
– other | (83) | 44 | 165 | (20) | 106
North America | (449) | 366 | 712 | (461) | 168
– US | (547) | 139 | 573 | (391) | (226)
– Canada | 52 | 225 | 100 | (67) | 310
– other | 46 | 2 | 39 | (3) | 84
Latin America | (183) | (22) | 233 | (65) | (37)
– Mexico | (115) | (106) | 59 | (25) | (187)
– other | (68) | 84 | 174 | (40) | 150
Year ended 31 Dec 2020 | 3,704 | 1,639 | 3,616 | (182) | 8,777

1 UK includes results from the ultimate holding company, HSBC Holdings plc, and the separately incorporated group of service companies (‘ServCo
Group’).
2 Includes the results of HSBC Saudi Arabia and our share of the profits of our associate, The Saudi British Bank.

HSBC Holdings plc Annual Report and Accounts 2022 | 127

Reconciliation of alternative performance measures

Contents

128 | Use of alternative performance measures
128 | Return on average ordinary shareholders’ equity and return on average tangible equity
129 | Net asset value and tangible net asset value per ordinary share
130 | Post-tax return and average total shareholders’ equity on average total assets
130 | Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers

Use of alternative performance
measures
Our reported results are prepared in accordance with IFRSs
as detailed in our financial statements starting on page 324.
As described on page 98, we use a combination of reported and
alternative performance measures, including those derived from our
reported results that eliminate factors that distort year-on-year
comparisons. These are considered alternative performance
measures (non-GAAP financial measures).
The following information details the adjustments made to the
reported results and the calculation of other alternative performance
measures. All alternative performance measures are reconciled to the
closest reported performance measure.
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 other equity instruments.
Return on average tangible equity (‘RoTE’) is computed by adjusting
reported results for the movements in the present value of in-force
long-term insurance business (‘PVIF’) and for impairment of goodwill
and other intangible assets (net of tax), divided by average reported
equity adjusted for goodwill, intangibles and PVIF for the period.
Return on average tangible equity excluding significant items is
annualised profit attributable to ordinary shareholders, excluding
changes in PVIF and significant items (net of tax), divided by average
tangible shareholders’ equity excluding fair value of own debt, debit
valuation adjustment (‘DVA’) and other adjustments for the period.
Since 1 January 2021, the UK bank levy has no longer been excluded
from the calculation of this measure. Comparative data have not been
re-presented.
We provide RoTE ratios 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
| 2022 | 2021 | 2020
| $m | $m | $m
Profit |  |  |
Profit attributable to the ordinary shareholders of the parent company | 14,822 | 12,607 | 3,898
Impairment of goodwill and other intangible assets (net of tax) | 531 | 608 | 1,036
Decrease/(increase) in PVIF (net of tax) | (264) | (58) | (253)
Profit attributable to the ordinary shareholders, excluding goodwill, other intangible assets impairment and PVIF | 15,089 | 13,157 | 4,681
Significant items (net of tax) and other adjustments 1,2 | 2,561 | 2,086 | 2,402
Profit attributable to the ordinary shareholders, excluding goodwill impairment, PVIF and significant items 1 | 17,650 | 15,243 | 7,083
Equity |  |  |
Average total shareholders’ equity | 191,998 | 199,295 | 189,719
Effect of average preference shares and other equity instruments | (21,202) | (22,814) | (22,326)
Average ordinary shareholders’ equity | 170,796 | 176,481 | 167,393
Effect of goodwill, PVIF and other intangibles (net of deferred tax) | (17,935) | (17,705) | (17,292)
Average tangible equity | 152,861 | 158,776 | 150,101
Fair value of own debt, DVA and other adjustments | (1,125) | 1,278 | 422
Average tangible equity excluding fair value of own debt, DVA and other adjustments | 151,736 | 160,054 | 150,523
| % | % | %
Ratio |  |  |
Return on average ordinary shareholders’ equity | 8.7 | 7.1 | 2.3
Return on average tangible equity | 9.9 | 8.3 | 3.1
Return on average tangible equity excluding significant items 1 | 11.6 | 9.5 | 4.7

1 Since 1 January 2021, the UK bank levy has no longer been excluded from the calculation of this measure. Comparative data have not been
represented.
2 Other adjustments includes entries relating to the timing of payments on additional tier 1 coupons.
Reconciliation of alternative performance measures

128 | HSBC Holdings plc Annual Report and Accounts 2022

The following table details the adjustments made to reported results by global business:

Return on average tangible equity by global business
| Year ended 31 Dec 2022
| Wealth and Personal Banking | Commercial Banking | Global Banking and Markets | Corporate Centre | Total
| $m | $m | $m | $m | $m
Profit before tax | 6,040 | 7,447 | 5,099 | (1,058) | 17,528
Tax expense | (1,218) | (1,737) | (823) | 2,920 | (858)
Profit after tax | 4,822 | 5,710 | 4,276 | 1,862 | 16,670
Less attributable to: preference shareholders, other equity holders, non- controlling interests | (696) | (493) | (603) | (56) | (1,848)
Profit attributable to ordinary shareholders of the parent company | 4,126 | 5,217 | 3,673 | 1,806 | 14,822
Increase in PVIF (net of tax) | (251) | 36 | — | (49) | (264)
Significant items (net of tax) | 1,960 | 197 | 300 | 581 | 3,038
Other adjustments | 6 | (15) | (24) | 87 | 54
Profit attributable to ordinary shareholders, excluding PVIF, significant items | 5,841 | 5,435 | 3,949 | 2,425 | 17,650
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments | 31,519 | 38,373 | 36,944 | 44,900 | 151,736
Return on average tangible equity excluding significant items (%) | 18.5 | 14.2 | 10.7 | 5.4 | 11.6
| Year ended 31 Dec 2021
Profit before tax | 6,133 | 6,677 | 4,722 | 1,374 | 18,906
Tax expense | (1,540) | (1,783) | (1,020) | 130 | (4,213)
Profit after tax | 4,593 | 4,894 | 3,702 | 1,504 | 14,693
Less attributable to: preference shareholders, other equity holders, non- controlling interests | (735) | (665) | (618) | (68) | (2,086)
Profit attributable to ordinary shareholders of the parent company | 3,858 | 4,229 | 3,084 | 1,436 | 12,607
Increase in PVIF (net of tax) | (65) | 4 | — | 3 | (58)
Significant items (net of tax) | 850 | 51 | 517 | 1,269 | 2,687
Other adjustments | 3 | (4) | (3) | 11 | 7
Profit attributable to ordinary shareholders, excluding PVIF, significant items | 4,646 | 4,280 | 3,598 | 2,719 | 15,243
Average tangible shareholders’ equity excluding fair value of own debt, DVA and other adjustments | 30,587 | 39,487 | 41,816 | 48,164 | 160,054
Return on average tangible equity excluding significant items (%) | 15.2 | 10.8 | 8.6 | 5.6 | 9.5

Net asset value and tangible net asset
value per ordinary share
Net asset value per ordinary share is total shareholders‘ equity less
non-cumulative preference shares and capital securities (‘total
ordinary shareholders’ equity’), divided by the number of ordinary
shares in issue excluding shares that the company has purchased and
are held in treasury.
Tangible net asset value per ordinary share is total ordinary
shareholders’ equity excluding goodwill, PVIF and other intangible
assets (net of deferred tax) (‘tangible ordinary shareholders’ equity’),
divided by the number of basic ordinary shares in issue excluding
shares that the company has purchased and are held in treasury.

Net asset value and tangible net asset value per ordinary share
| 2022 | 2021 | 2020
| $m | $m | $m
Total shareholders’ equity | 187,484 | 198,250 | 196,443
Preference shares and other equity instruments | (19,746) | (22,414) | (22,414)
Total ordinary shareholders’ equity | 167,738 | 175,836 | 174,029
Goodwill, PVIF and intangible assets (net of deferred tax) | (18,383) | (17,643) | (17,606)
Tangible ordinary shareholders’ equity | 149,355 | 158,193 | 156,423
Basic number of $0.50 ordinary shares outstanding | 19,739 | 20,073 | 20,184
| $ | $ | $
Value per share |  |  |
Net asset value per ordinary share | 8.50 | 8.76 | 8.62
Tangible net asset value per ordinary share | 7.57 | 7.88 | 7.75

HSBC Holdings plc Annual Report and Accounts 2022 | 129

Post-tax return and average total shareholders’ equity on average total assets
Post-tax return on average total assets is profit after tax divided by average total assets for the period. Average total shareholders’ equity to
average total assets is average total shareholders’ equity divided by average total assets for the period.

Post-tax return and average total shareholders’ equity on average total assets
| 2022 | 2021 | 2020
| $m | $m | $m
Profit after tax | 16,670 | 14,693 | 6,099
Average total shareholders’ equity | 191,998 | 199,295 | 189,719
Average total assets | 3,030,574 | 3,012,437 | 2,936,939
Ratio | % | % | %
Post-tax return on average total assets | 0.6 | 0.5 | 0.2
Average total shareholders’ equity to average total assets | 6.34 | 6.62 | 6.46

Expected credit losses and other credit impairment charges as % of average
gross loans and advances to customers
Expected credit losses and other credit impairment charges (‘ECL’) as % of average gross loans and advances to customers is the annualised
adjusted ECL divided by adjusted average gross loans and advances to customers for the period. The adjusted numbers are derived by adjusting
reported ECL and loans and advances to customers for the effects of foreign currency translation differences.

Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers
| 2022 | 2021 | 2020
| $m | $m | $m
Expected credit losses and other credit impairment charges (‘ECL’) | (3,592) | 928 | (8,817)
Currency translation |  | (174) | 2
Adjusted ECL | (3,592) | 754 | (8,815)
Average gross loans and advances to customers | 1,015,445 | 1,057,412 | 1,047,114
Currency translation | (13,325) | (63,174) | (34,883)
Average gross loans and advances to customers – at most recent balance sheet foreign exchange rates | 1,002,120 | 994,238 | 1,012,231
Average gross loans and advances to customers, including held for sale | 1,036,974 | 1,058,947 | 1,047,114
Currency translation | (12,846) | (63,012) | (34,883)
Average gross loans and advances to customers, including held for sale – at most recent balance sheet foreign exchange rates | 1,024,128 | 995,935 | 1,012,231
Ratio | % | % | %
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers | 0.36 | (0.08) | 0.87
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers, including held for sale | 0.35 | (0.08) | 0.87

Reconciliation of alternative performance measures

130 | HSBC Holdings plc Annual Report and Accounts 2022

Risk review

Our risk review outlines our approach to risk management, how we identify and monitor top and emerging risks, and the actions we take to mitigate them. In addition, it explains our material banking risks, including how we manage capital.
Contents
132 | Our approach to risk
132 | Our risk appetite
132 | Risk management
135 | Key developments in 2022
135 | Top and emerging risks
135 | Externally driven
140 | Internally driven
142 | Areas of special interest
142 | Risks related to Covid-19
142 | Our material banking risks
145 | Credit risk
202 | Treasury risk
218 | Market risk
221 | Climate risk
230 | Resilience risk
231 | Regulatory compliance risk
231 | Financial crime risk
232 | Model risk
233 | Insurance manufacturing operations risk

Identifying suspicious activities through our
award-winning AI tool
We are using the latest artificial intelligence technology to help
identify suspicious activities to help prevent financial crime.
Our dynamic risk assessment solution brings data together on the
Cloud, and uses machine learning to analyse and identify criminal
activity by making use of relevant data, with the ability to identify
patterns that humans are unlikely to spot.
The tool, which we first developed in November 2021 and is active in
several markets including the UK, enables suspicious activity to be
identified twice as fast than the previous process and reduces case
volumes by 60%.
The solution was recognised at the 2022 Banking Tech Awards,
winning ‘Best Use of Cloud’ and ‘Best Use of AI’. We plan to roll it
out to other markets throughout 2023.

HSBC Holdings plc Annual Report and Accounts 2022 | 131

Our approach to risk

Our risk appetite
We recognise the importance of a strong culture, which refers to our
shared attitudes, beliefs, values and standards that shape behaviours
including those related to risk awareness, risk taking and risk
management. All our people are responsible for the management of
risk, with the ultimate accountability residing with the Board.
We seek to build our business for the long term by balancing social,
environmental and economic considerations in the decisions we
make. Our strategic priorities are underpinned by our endeavour to
operate in a sustainable way. This helps us to carry out our social
responsibility and manage the risk profile of the business. We are
committed to managing and mitigating climate-related risks, both
physical and transition risks, and continue to incorporate consideration
of these into how we manage and oversee risks internally and with
our customers.
The following principles guide the Group’s overarching appetite for
risk and determine how our businesses and risks are managed.
Financial position
•We aim to maintain a strong capital position, defined by regulatory
and internal capital ratios.
•We carry out liquidity and funding management for each operating
entity, on a stand-alone basis.
Operating model
•We seek to generate returns in line with our risk appetite and
strong risk management capability.
•We aim to deliver sustainable and diversified earnings and
consistent returns for shareholders.
Business practice
•We have no appetite for deliberately or knowingly causing
detriment to consumers, or incurring a breach of the letter or spirit
of regulatory requirements.
•We have no appetite for inappropriate market conduct by any
member of staff or by any Group business.
•We are committed to managing the climate risks that have an
impact on our financial position, and delivering on our net zero
ambition.
•We consider and, where appropriate, mitigate reputational risk that
may arise from our business activities and decisions.
•We monitor non-financial risk exposure against risk appetite,
including exposure related to inadequate or failed internal
processes, people and systems, or events that impact our
customers or can lead to sub-optimal returns to shareholders,
censure, or reputational damage.
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 the risk
to achieving our strategy or objectives as the result of failed internal
processes, people and systems, or from external events.
Our risk appetite is expressed in both quantitative and qualitative
terms and applied at the global business level, at the regional level
and to material operating entities. Every three years, the Group Risk
and Compliance function commissions an external independent firm
to review the Group’s approach to risk appetite and to help ensure
that it remains in line with market best practice and regulatory
expectations. This review was last carried out in 2021 and confirmed
the Group’s risk appetite statement (‘RAS’) remains aligned to best
practices, regulatory expectations and strategic goals. Our risk
appetite continues to evolve and expand its scope as part of our
regular review process.
The Board reviews and approves the Group’s risk appetite regularly to
make sure it remains fit for purpose. The Group’s risk appetite is
considered, developed and enhanced through:
•an alignment with our strategy, purpose, values and customer
needs;
•trends highlighted in other Group risk reports;
•communication with risk stewards on the developing risk
landscape;
•strength of our capital, liquidity and balance sheet;
•compliance with applicable laws and regulations;
•effectiveness of the applicable control environment to mitigate
risk, informed by risk ratings from risk control assessments;
•functionality, capacity and resilience of available systems to
manage risk; and
•the level of available staff with the required competencies to
manage risks.
We formally articulate our risk appetite through our RAS. Setting out
our risk appetite ensures 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 is applied to the development of business line strategies,
strategic and business planning and remuneration. At a Group level,
performance against the RAS is reported to the Group Risk
Management Meeting alongside key risk indicators to support
targeted insight and discussion on breaches of risk appetite and any
associated mitigating actions. This reporting allows risks to be
promptly identified and mitigated, and informs risk-adjusted
remuneration to drive a strong risk culture.
Each global business, region and material operating entity is required
to have its own RAS, which is monitored to help ensure it remains
aligned with the Group’s RAS. Each RAS and business activity is
guided and underpinned by qualitative principles and/or quantitative
metrics.
Risk management
We recognise that the primary role of risk management is to protect
our customers, business, colleagues, shareholders and the
communities that we serve, while ensuring we are able to support
our strategy and provide sustainable growth. This is supported
through our three lines of defence model described on page 134.
The implementation of our business strategy remains a key focus. As
we implement change initiatives, we actively manage the execution
risks. We also perform periodic risk assessments, including against
strategies, to help ensure retention of key personnel for our continued
safe operation.
We aim to use a comprehensive risk management approach across
the organisation and across all risk types, underpinned by our culture
and values. This is outlined in our risk management framework,
including the key principles and practices that we employ in managing
material risks, both financial and non-financial. The framework fosters
continual monitoring, promotes risk awareness and encourages a
sound operational and strategic decision-making and escalation
process. It also supports a consistent approach to identifying,
assessing, managing and reporting the risks we accept and incur in
our activities, with clear accountabilities. We actively review and
enhance our risk management framework and our approach to
managing risk, through our activities with regard to: people and
capabilities; governance; reporting and management information;
credit risk management models; and data.
Group Risk and Compliance is independent from the global
businesses, including our sales and trading functions, to provide
challenge, oversight and appropriate balance in risk/return decisions.
Risk review

132 | HSBC Holdings plc Annual Report and Accounts 2022

Our risk management framework
The following diagram and descriptions summarise key aspects of the risk management framework, including governance, structure, risk
management tools and our culture, which together help align employee behaviour with risk appetite.

Key components of our risk management framework
HSBC Values and risk culture
Risk governance |  | Non-executive risk governance |  | The Board approves the Group’s risk appetite, plans and performance targets. It sets the ‘tone from the top’ and is advised by the Group Risk Committee (see page 255).
| Executive risk governance |  | Our executive risk governance structure is responsible for the enterprise-wide management of all risks, including key policies and frameworks for the management of risk within the Group (see pages 134 and 142).
Roles and responsibilities |  | Three lines of defence model |  | Our ‘three lines of defence’ model defines roles and responsibilities for risk management. An independent Group Risk and Compliance function helps ensure the necessary balance in risk/return decisions (see page 134).
Processes and tools |  | Risk appetite |  | The Group has processes in place to identify/assess, monitor, manage and report risks to help ensure we remain within our risk appetite.
| Enterprise-wide risk management tools |
| Active risk management: identification/assessment, monitoring, management and reporting |
Internal controls |  | Policies and procedures |  | Policies and procedures define the minimum requirements for the controls required to manage our risks.
| Control activities |  | Operational and resilience risk management defines minimum standards and processes for managing operational risks and internal controls.
| Systems and infrastructure |  | The Group has systems and/or processes that support the identification, capture and exchange of information to support risk management activities.

Risk governance
The Board has ultimate responsibility for the effective management of
risk and approves our risk appetite.
The Group Chief Risk and Compliance Officer, supported by the
Group Risk Management Meeting, holds executive accountability for
the ongoing monitoring, assessment and management of the risk
environment and the effectiveness of the risk management
framework.
The Group Chief Risk and Compliance Officer is also responsible for
the oversight of reputational risk, with the support of the Group
Reputational Risk Committee. The Group Reputational Risk
Committee considers matters arising from customers, transactions
and third parties that either present a serious potential reputational
risk to the Group or merit a Group-led decision to ensure a consistent
risk management approach across the regions, global businesses and
global functions. Further details can be found under the ‘Reputational
risk’ section of www.hsbc.com/our-approach/risk-and-responsibility.
Day-to-day responsibility for risk management is delegated to senior
managers with individual accountability for decision making. All our
people have a role to play in risk management. These roles are
defined using the three lines of defence model, which takes into
account our business and functional structures as described in the
following commentary, ‘Our responsibilities’.
We use a defined executive risk governance structure to help ensure
there is appropriate oversight and accountability of risk, which
facilitates reporting and escalation to the Group Risk Management
Meeting. This structure is summarised in the following table.

HSBC Holdings plc Annual Report and Accounts 2022 | 133

Governance structure for the management of risk and compliance
Authority | Membership | Responsibilities include:
Group Risk Management Meeting | Group Chief Risk and Compliance Officer Group Chief Legal Officer Group Chief Executive Group Chief Financial Officer Group Head of Financial Crime and Group Money Laundering Reporting Officer Group Head of Compliance All other Group Executive Committee members | •Supporting the Group Chief Risk and Compliance Officer in exercising Board- delegated risk management authority •Overseeing the implementation of risk appetite and the risk management framework •Forward-looking assessment of the risk environment, analysing possible risk impacts and taking appropriate action •Monitoring all categories of risk and determining appropriate mitigating action •Promoting a supportive Group culture in relation to risk management and conduct
Group Risk and Compliance Executive Committee | Group Chief Risk and Compliance Officer Chief risk officers of HSBC’s global businesses and regions Heads of Global Risk and Compliance sub-functions | •Supporting the Group Chief Risk and Compliance Officer in providing strategic direction for the Group Risk and Compliance function, setting priorities and providing oversight •Overseeing a consistent approach to accountability for, and mitigation of, risk and compliance across the Group
Global business/regional risk management meetings | Global business/regional chief risk officer Global business/regional chief executive officer Global business/regional chief financial officer Global business/regional heads of global functions | •Supporting the Group Chief Risk and Compliance Officer in exercising Board- delegated risk management authority •Forward-looking assessment of the risk environment •Implementation of risk appetite and the risk management framework •Monitoring all categories of risk and overseeing appropriate mitigating actions •Embedding a supportive culture in relation to risk management and controls

The Board committees with responsibility for oversight of risk-related matters are set out on page 258.
Treasury risks are the responsibility of the Group Executive Committee and the Group Risk Committee. Global Treasury actively manages these
risks, supported by the Holdings Asset and Liability Management Committee (‘ALCO’) and local ALCOs, overseen by Treasury Risk
Management and the Group Risk Management Meeting. Further details on treasury risk management are set out on page 202.
Our responsibilities
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 as described below.
Three lines of defence
To create a robust control environment to manage risks, we use an
activity-based three lines of defence model. 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 and encouraging collaboration, as well as enabling
efficient coordination of risk and control activities. The three lines of
defence 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.
•The third line of defence is our Global Internal Audit function,
which provides independent assurance as to whether our risk
management approach and processes are designed and operating
effectively.
Group Risk and Compliance function
Our Group Risk and Compliance function is responsible for the
Group’s risk management framework. This responsibility includes
establishing global policy, monitoring risk profiles, and identifying and
managing forward-looking risk. Group Risk and Compliance is made
up of sub-functions covering all risks to our business. Forming part of
the second line of defence, the Group Risk and Compliance function
is independent from the global businesses, including sales and trading
functions, to provide challenge, appropriate oversight and balance in
risk/return decisions.
Responsibility for minimising 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 adequate oversight of our risks through our various specialist
risk stewards and the collective accountability held by our chief risk
officers.
We have continued to strengthen the control environment and our
approach to the management of non-financial risk, as set out in our
risk management framework. The management of non-financial risk
focuses on governance and risk appetite, and provides a single view
of the non-financial risks that matter the most as well as the
associated controls. It incorporates a risk management system
designed to enable the active management of non-financial risk. Our
ongoing focus is on simplifying our approach to non-financial risk
management, while driving more effective oversight and better end-
to-end identification and management of non-financial risks. This is
overseen by the Operational and Resilience Risk function, headed by
the Group Head of Operational and Resilience Risk.
Stress testing and recovery planning
We operate a wide-ranging stress testing programme that is a key
part of our risk management and capital and liquidity planning. Stress
testing provides management with key insights into the impact of
severely adverse events on the Group, and provides confidence to
regulators on the Group’s financial stability.
Our stress testing programme assesses our capital and liquidity
strength through a rigorous examination of our resilience to external
shocks. As well as undertaking regulatory-driven stress tests, we
conduct our own internal stress tests in order to understand the
nature and level of all material risks, quantify the impact of such risks
and develop plausible business-as-usual mitigating actions.
Risk review

134 | HSBC Holdings plc Annual Report and Accounts 2022

Internal stress tests
Our internal capital assessment uses a range of stress scenarios that
explore risks identified by management. They include potential
adverse macroeconomic, geopolitical and operational risk events, as
well as other potential events that are specific to HSBC.
The selection of stress scenarios is based upon the output of our
identified top and emerging risks and our risk appetite. Stress testing
analysis helps management understand the nature and extent of
vulnerabilities to which the Group is exposed. Using this information,
management decides whether risks can or should be mitigated
through management actions or, if they were to crystallise, be
absorbed through capital and liquidity. This in turn informs decisions
about preferred capital and liquidity levels and allocations.
In addition to the Group-wide stress testing scenarios, each major
subsidiary conducts regular macroeconomic and event-driven scenario
analysis specific to its region. They also participate, as required, in the
regulatory stress testing programmes of the jurisdictions in which
they operate, such as stress tests required by the Bank of England
(‘BoE’) in the UK, the Federal Reserve Board (‘FRB’) in the US, and
the Hong Kong Monetary Authority (‘HKMA’) in Hong Kong. Global
functions and businesses also perform bespoke stress testing to
inform their assessment of risks to potential scenarios.
We also conduct reverse stress tests each year at Group level 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 the Group’s financial stability. The Group 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. The Group is committed to
further developing its recovery and resolution capabilities in line with
the BoE’s Resolvability Assessment Framework requirements.
Key developments in 2022
We actively managed the risks related to macroeconomic
uncertainties including inflation, fiscal and monetary policy, the
Russia-Ukraine war, broader geopolitical uncertainties and continued
risks resulting from the Covid-19 pandemic, as well as other key risks
described in this section. In addition, we sought to enhance our risk
management in the following areas:
•We continued to improve our risk governance decision making,
particularly with regard to the governance of treasury risk, to help
ensure senior executives have appropriate oversight and visibility
of macroeconomic trends around inflation and interest rates.
•We adapted our interest rate risk management strategy as market
and official interest rates increased in reaction to inflationary
pressures. This included the Board approving in September a new
interest rate risk in the banking book strategy, a managed
reduction in the duration risk of our hold-to-collect-and-sell asset
portfolio and an increase in net interest income stabilisation.
•We began a process of enhancement of our country credit risk
management framework to strengthen our control of risk tolerance
and appetite at a country level.
•We continued to develop our approach to emerging risk
identification and management, including the use of forward-
looking indicators to support our analysis.
•We enhanced our enterprise risk reporting processes to place a
greater focus on our emerging risks, including by capturing the
materiality, oversight and individual monitoring of these risks.
•We sought to further strengthen our third-party risk policy and
processes to improve control and oversight of our material third
parties to maintain our operational resilience, and to meet new and
evolving regulatory requirements.
•We made progress with our comprehensive regulatory reporting
programme to strengthen our global processes, improve
consistency and enhance controls.
•We continued to embed the governance and oversight around
model adjustments and related processes for IFRS 9 models and
Sarbanes-Oxley controls.
•We commenced a programme to enhance our framework for
managing the risks associated with machine learning and artificial
intelligence (‘AI’).
•Through our climate risk programme, we continued to embed
climate considerations throughout the organisation, including
updating the scope of our programme to cover all risk types,
expanding the scope of climate-related training, developing new
climate risk metrics to monitor and manage exposures, and
developing our internal climate scenario exercise.
•We sought to improve the effectiveness of our financial crime
controls, deploying advanced analytics capabilities into new
markets. We refreshed our financial crime policies to help ensure
they remain up to date and address changing and emerging risks.
We continue to monitor regulatory changes.

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 our regions and global
businesses, for any risks that may require global escalation. We
update our top and emerging risks as necessary.
Our current top and emerging risks are as follows.
Externally driven
Geopolitical and macroeconomic risks
The Russia-Ukraine war has had far-reaching geopolitical and
economic implications. HSBC is monitoring the impacts of the war
and continues to respond to the further economic sanctions and trade
restrictions that have been imposed on Russia in response. In
particular, significant sanctions and trade restrictions imposed against
Russia have been put in place by the UK, the US and the EU, as well
as other countries. Such sanctions and restrictions have specifically
targeted certain Russian government officials, politically exposed
persons, business people, Russian oil imports, energy products,
financial institutions and other major Russian companies. In addition,
there have been put in place more generally applicable investment,
export, and import bans and restrictions. In response to such
sanctions and trade restrictions, as well as asset flight, Russia has
implemented certain countermeasures.
Further sanctions, trade restrictions and Russian countermeasures
may adversely impact the Group, its customers and the markets in
which the Group operates by creating regulatory, reputational and
market risks. Our business in Russia principally serves multinational
corporate clients headquartered in other countries, is not accepting
new business or customers and is consequently on a declining trend.
Following a strategic review, HSBC Europe BV (a wholly-owned
subsidiary of HSBC Bank plc) has entered into an agreement to sell its
wholly-owned subsidiary HSBC Bank (RR) (Limited Liability Company),
subject to regulatory and governmental approvals.
Global commodity markets have been significantly impacted by the
Russia-Ukraine war and localised Covid-19 outbreaks, leading to
continued supply chain disruptions. This has resulted in product
shortages appearing across several regions, and increased prices for
both energy and non-energy commodities, such as food. We do not

HSBC Holdings plc Annual Report and Accounts 2022 | 135

expect these to ease significantly in the near term. In turn, this has
had a significant impact on global inflation. Relatively mild weather,
until recently, and diversification of fuel sources have nevertheless
helped regions most dependent on Russian supply to substantially
reduce risks of rationing over the winter months.
China’s policy measures issued at the end of 2022 have increased
liquidity and the supply of credit to the mainland China commercial
real estate sector. Recovery in the underlying domestic residential
demand and improved customer sentiment will be necessary to
support the ongoing health of the sector. We will continue to monitor
the sector closely, notably the risk of further idiosyncratic real estate
defaults and the potential associated impact on wider market,
investor and consumer sentiment. Given that parts of the global
economy are in, or close to, recession, the demand for Chinese
exports may also diminish.
Rising global inflation has prompted central banks to tighten monetary
policy. Since the beginning of 2022, the US Federal Reserve Board
(‘FRB’) has delivered a cumulative 450 basis point (‘bps’) increase in
the Federal Funds rate. The European Central Bank lagged the FRB
initially, but its benchmark rate has subsequently been increased by
300bps since July 2022. As of mid-February 2023, interest-rate
futures suggested market uncertainty as to whether the FRB would
begin to ease monetary policy over the 12-month horizon. Should
monetary policy rates move materially higher than current
expectations, a realignment of market expectations could cause
turbulence in financial asset prices.
Financial markets have also shown reduced appetite for expansionary
fiscal policies in the context of high debt ratios. Following the fiscal
statement of 23 September 2022 by the UK government, there was a
fall in the value of sterling and a sharp rise in the yields of UK
government securities, known as gilts. Following this, the Bank of
England reversed its plan to begin selling its gilt holdings from
September 2022, and the UK government reversed most of the
previously announced fiscal measures. We continue to monitor our
risk profile closely in the context of uncertainty over global
macroeconomic policies.
Higher inflation and interest rate expectations around the world – and
the resulting economic uncertainty – have had an impact on expected
credit losses and other credit impairment charges (‘ECL’). The
combined pressure of higher inflation and interest rates may impact
the ability of our customers to repay debt. Our Central scenario,
which has the highest probability weighting in our IFRS 9 ‘Financial
Instruments’ calculations of ECL, assumes low growth and a higher
inflation environment across many of our key markets. However, due
to the rapidly changing economic conditions, the potential for forecast
dispersion and volatility remain high, impacting the degree of accuracy
and certainty of our Central scenario forecast. The level of volatility
varies by market, depending on exposure to commodity price
increases, supply chain constraints, the monetary policy response to
inflation and the public health policy response to the Covid-19
pandemic. As a result, our Central scenario for impairment has not
been assigned the same likelihood of occurrence across our key
markets. There is also uncertainty with respect to the relationship
between the economic drivers and the 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 153.
Global tensions over trade, technology and ideology are manifesting
themselves in divergent regulatory standards and compliance
regimes, presenting long-term strategic challenges for multinational
businesses.
The US-China relationship remains complex. To date, the UK, the US,
the EU and other countries have imposed various sanctions and trade
restrictions on Chinese persons and companies. Although sanctions
and trade restrictions are difficult to predict, increases in diplomatic
tensions between China and the US and other countries could result
in sanctions that could negatively impact the Group, its customers
and the markets in which the Group operates. There is a continued
risk of additional sanctions and trade restrictions being imposed by
the US and other governments in relation to human rights,
technology, and other issues with China, and this could create a more
complex operating environment for the Group and its customers.
China has in turn announced a number of its own sanctions and trade
restrictions that target, or provide authority to target, foreign
individuals and companies.
These and any future measures and countermeasures that may be
taken by the US, China and other countries may affect the Group, its
customers and the markets in which the Group operates.
Negotiations between the UK and the EU over the operation of the
Northern Ireland Protocol are continuing. While there are signs that
differences may be diminishing, failure to reach agreement could
have implications for the future operation of the EU-UK Trade and
Cooperation Agreement.
In June 2022, the UK government published proposed legislation that
seeks to amend the Protocol in a number of respects. In response,
the EU launched infringement procedures against the UK, and is
evaluating the UK response, received in September 2022. If the
proposed legislation were to pass, and infringement procedures
progressed, it could further complicate the terms of trade between
the UK and the EU and potentially prevent progress in other areas
such as financial services. Over the medium to long term, the UK’s
withdrawal from the EU may impact markets and increase economic
risk, particularly in the UK, which could adversely impact our
profitability and prospects for growth in this market. We are
monitoring the situation closely, including the potential impacts on our
customers.
In August 2022, the US Inflation Reduction Act introduced a minimum
tax of 15% with effect from 1 January 2023. It is possible that the
minimum tax could result in an additional US tax liability over our
regular US federal corporate tax liability in a given year, based on the
differences between US book and taxable income (including as a
result of temporary differences). Given its recent pronouncement, it is
unclear at this time what, if any, impact the US Inflation Reduction
Act will have on HSBC’s US tax rate and US financial results. HSBC
will continue to evaluate its impact as further information becomes
available. In addition, potential changes to tax legislation and tax rates
in the countries and territories in which we operate could increase our
effective tax rate in the future.
As the geopolitical landscape evolves, compliance by multinational
corporations with their legal or regulatory obligations in one
jurisdiction may be seen as supporting the law or policy objectives of
that jurisdiction over another, creating additional compliance,
reputational and political risks for the Group. We maintain dialogue
with our regulators in various jurisdictions on the impact of legal and
regulatory obligations on our business and customers.
The financial impact on the Group of geopolitical risks in Asia is
heightened due to the region’s relatively high contribution to the
Group’s profitability, particularly in Hong Kong.
While it is the Group's policy to comply with all applicable laws and
regulations of all jurisdictions in which it operates, geopolitical risks
and tensions, and potential ambiguities in the Group’s compliance
obligations, will continue to present challenges and risks for the
Group and could have a material adverse impact on the Group‘s
business, financial condition, results of operations, prospects and
strategy, as well as on the Group’s customers.
Expanding data privacy, national security and cybersecurity laws in a
number of markets could pose potential challenges to intra-group data
sharing. These developments could increase financial institutions’
compliance obligations in respect of cross-border transfers of
personal information, which may affect our ability to manage financial
crime risks across markets.
Mitigating actions
•We closely monitor geopolitical and economic developments in
key markets and sectors and undertake scenario analysis where
appropriate. This helps us to take portfolio actions where
necessary, including through enhanced monitoring, amending our
risk appetite and/or reducing limits and exposures.
Risk review

136 | HSBC Holdings plc Annual Report and Accounts 2022

•We stress test portfolios of particular concern to identify
sensitivity to loss under a range of scenarios, with management
actions being taken to rebalance exposures and manage risk
appetite where necessary.
•We regularly review key portfolios to help ensure that individual
customer or portfolio risks are understood and that our ability to
manage the level of facilities offered through any downturn is
appropriate.
•We continue to manage sanctions and trade restrictions through
the use of, and enhancements to, our existing controls.
•We continue to monitor the UK’s relationship with the EU, and
assess the potential impact on our people, operations and
portfolios.
•We have taken steps, where necessary, to enhance physical
security in geographical areas deemed to be at high risk from
terrorism and military conflicts.
Technology and cybersecurity risk
Together with other organisations, we operate in an extensive and
complex technology landscape, which needs to remain resilient in
order to support customers, our organisation and financial markets
globally. Risks arise where technology is not understood, maintained,
or developed appropriately. We also continue to operate in an
increasingly hostile cyber threat environment globally. These threats
include potential unauthorised access to customer accounts, attacks
on our systems or those of our third-party suppliers, and require
ongoing investment in business and technical controls to defend
against.
Mitigating actions
•We continue to invest in transforming how software solutions are
developed, delivered and maintained to improve system resilience.
We continue to build security into our software development
lifecycle and improve our testing processes and tools.
•We continue to upgrade many of our IT systems, simplify our
service provision and replace older IT infrastructure and
applications. These enhancements supported global
improvements in service availability during 2022 for both our
customers and colleagues.
•We continually evaluate threat levels for the most prevalent cyber-
attack types and their potential outcomes. To further protect HSBC
and our customers and help ensure the safe expansion of our
global businesses, we continue to strengthen our controls to
reduce the likelihood and impact of advanced malware, data
leakage, exposure through third parties and security vulnerabilities.
•We continue to enhance our cybersecurity capabilities, including
Cloud security, identity and access management, metrics and data
analytics, and third-party security reviews. An important part of our
defence strategy is ensuring our colleagues remain aware of
cybersecurity issues and know how to report incidents.
•We report and review cyber risk and control effectiveness at
executive and non-executive Board level. We also report it across
our global businesses, functions and regions to help ensure there
is 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
work together preventing, detecting and defending against cyber-
attacks on financial organisations globally.
Evolving regulatory environment risk
We aim to keep abreast of the emerging regulatory compliance and
conduct agenda, which currently includes, but is not limited to: ESG
matters; ensuring good customer outcomes; addressing customer
vulnerabilities due to cost of living pressures; regulatory compliance;
regulatory reporting; employee compliance, including the use of e-
communication channels; and the proposed reforms to the UK
financial services sector, known as the Edinburgh Reforms. We
monitor regulatory developments closely and engage with regulators,
as appropriate, to help ensure new regulatory requirements are
implemented effectively and in a timely way. The competitive
landscape in which the Group operates may be impacted by future
regulatory changes and government intervention.
Mitigating actions
•We monitor for regulatory developments to understand the
evolving regulatory landscape and seek to respond with changes in
a timely manner.
•We engage with governments and regulators, responding to
consultations with a view to help shaping regulations that 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 aligns to our purpose and values,
in particular the value ‘we take responsibility’.
Financial crime risk
Financial institutions remain under considerable regulatory scrutiny
regarding their ability to detect and prevent financial crime. These
evolving challenges include managing conflicting laws and approaches
to legal and regulatory regimes, and implementing an unprecedented
volume and diverse set of sanctions, notably as a result of the Russia-
Ukraine war.
Amid rising inflation and increasing cost of living pressures, we face
increasing regulatory expectations with respect to managing internal
and external fraud, and protecting vulnerable customers.
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 with respect to the intersection of ESG issues and
financial crime, as our organisation, customers and suppliers transition
to net zero, continue to increase. 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 manage sanctions and trade restrictions through
the use of, and enhancements to, our existing controls.
•We continue to develop our fraud controls and invest in
capabilities to fight financial crime through the application of
advanced analytics and artificial intelligence.
•We are looking at the impact of a rapidly changing payments
ecosystem, as well as risks associated with direct and indirect
exposure to digital assets and currencies, in an effort to maintain
appropriate financial crime controls.
•We are assessing our existing policies and control framework so
that developments relating to ESG are considered and the risks
mitigated.
•We engage with regulators, policymakers and relevant
international bodies, seeking to address data privacy challenges
through international standards, guidance and legislation.
Ibor transition risk
Interbank offered rates (‘Ibors’) have previously been used extensively
to set interest rates on different types of financial transactions and for
valuation purposes, risk measurement and performance
benchmarking.
Following the UK’s Financial Conduct Authority (‘FCA’) announcement
in July 2017 that it would no longer continue to persuade or require
panel banks to submit rates for the London interbank offered rate
(‘Libor’) after 2021, we have been actively working to transition legacy

HSBC Holdings plc Annual Report and Accounts 2022 | 137

contracts from Ibors to products linked to near risk-free replacement
rates (‘RFRs’) or alternative reference rates.
The publication of sterling, Swiss franc, euro and Japanese yen Libor
interest rate benchmarks, as well as Euro Overnight Index Average
(‘Eonia’), ceased from the end of 2021. Our Ibor transition programme
– which is tasked with the development of RFR products and the
transition of legacy Ibor products – has continued to support the
transition of a limited number of remaining contracts in sterling and
Japanese yen Libor, which were published using a ‘synthetic’ interest
rate methodology during 2022. The remaining ‘tough legacy’ sterling
contracts have required protracted client discussions where contracts
are complex or restructuring of facilities is required. The publication of
‘synthetic’ Japanese yen Libor ceased after 31 December 2022. In
addition the FCA announced, in September and November 2022, that
one month and six-month ‘synthetic’ sterling Libor rates will cease to
be published from 31 March 2023, and three-month ‘synthetic’
sterling Libor will cease to be published after 31 March 2024. We
have or are prepared to transition or remediate the remaining few
contracts relying on ‘synthetic’ sterling settings, outstanding as at
31 December 2022, in advance of those cessation dates.
For the cessation of the publication of US dollar Libor from 30 June
2023, we have implemented the majority of required processes,
technology and RFR product capabilities throughout the Group in
preparation for upcoming market events. We will continue to
transition outstanding legacy contracts through the first half of 2023.
We have completed the transition of the majority of our uncommitted
lending facilities, and continue to make steady progress with the
transition of the outstanding legacy committed lending facilities.
Transition of our derivatives portfolio is progressing well with most
clients reliant on industry mechanisms to transition to RFRs. For the
limited number of bilateral derivatives trades where an alternative
transition path is required, client engagement is continuing. For
certain products and contracts, including bonds and syndicated loans,
we remain reliant on the continued support of agents and third
parties, but we continue to progress those contracts requiring
transition. We continue to monitor contracts that may be potentially
more challenging to transition, and may need to rely upon legislative
solutions. Additionally, following the FCA’s consultation in November
2022 proposing that US dollar Libor is to be published using a
‘synthetic’ methodology for a defined period, we will continue to work
with our clients to support them through the transition of their
products if transition is not completed by 30 June 2023.
For the Group’s own debt securities issuances, we continue to have
instruments in US dollars, sterling, Japanese yen and Singapore
dollars where the terms provide for an Ibor benchmark to be used to
reset the coupon rate if HSBC chooses not to redeem them on their
call dates. We remain mindful of the various factors that have an
impact on the Ibor remediation strategy for our regulatory capital and
MREL instruments, including – but not limited to – timescales for
cessation of relevant Ibor rates, constraints relating to the governing
law of outstanding instruments, the potential relevance of legislative
solutions and industry best practice guidance. We remain committed
to seeking to remediate or mitigate relevant risks relating to Ibor-
demise, as appropriate, on our outstanding regulatory capital and
MREL instruments before the relevant calculation dates, which may
occur post-cessation of the relevant Ibor rate or rates.
For US dollar Libor and other demising Ibors, we continue to be
exposed to, and actively monitor, risks including:
•regulatory compliance and conduct risks, as the transition of
legacy contracts to RFRs or alternative rates, or sales of products
referencing RFRs, may not deliver fair client outcomes;
•resilience and operational risks, as changes to manual and
automated processes, made in support of new RFR
methodologies, and the transition of large volumes of Ibor
contracts may lead to operational issues;
•legal risk, as issues arising from the use of legislative solutions and
from legacy contracts that the Group is unable to transition may
result in unintended or unfavourable outcomes for clients and
market participants, which could potentially increase the risk of
disputes;
•model risk, as there is a risk that changes to our models to replace
Ibor-related data adversely affect the accuracy of model outputs;
and
•market risk, because as a result of differences in Libor and RFR
interest rates, we are exposed to basis risk resulting from the
asymmetric adoption of rates across assets, liabilities and
products. Additionally the current stage of the Term Secured
Overnight Financing Rate (‘SOFR’) market presents challenges for
certain hedge accounting strategies.
While the level of risk is diminishing in line with our process
implementation and continued transition of contracts, we will monitor
these risks through the remainder of the transition of legacy
contracts. Throughout 2023, we plan to continue to engage with our
clients and investors to complete an orderly transition of contracts
that reference the remaining demising Ibors.
Mitigating actions
•Our global Ibor transition programme, which is overseen by the
Group Chief Risk and Compliance Officer, will continue to deliver
IT and operational processes to meet its objectives.
•We carry out extensive training, communication and client
engagement to facilitate appropriate selection of new rates and
products.
•We have dedicated teams in place to support the transition.
•We have actively transitioned legacy contracts and ceased
entering into new contracts based on demised or demising Ibors,
other than those allowed under regulatory exemptions, and
implemented associated monitoring and controls.
•We assess, monitor and dynamically manage risks arising from
Ibor transition, and implement specific mitigating controls when
required.
•We continue to actively engage with regulatory and industry
bodies to mitigate risks relating to ‘tough legacy’ contracts.
F inancial instruments impacted by Ibor reform
(Audited)
Interest Rate Benchmark Reform Phase 2, the amendments to IFRSs
issued in August 2020, represents the second phase of the IASB’s
project on the effects of interest rate benchmark reform. The
amendments address issues affecting financial statements when
changes are made to contractual cash flows and hedging
relationships.
Under these amendments, changes made to a financial instrument
measured at other than fair value through profit or loss that are
economically equivalent and required by interest rate benchmark
reform, do not result in the derecognition or a change in the carrying
amount of the financial instrument. Instead they require the effective
interest rate to be updated to reflect the change in the interest rate
benchmark. In addition, hedge accounting will not be discontinued
solely because of the replacement of the interest rate benchmark if
the hedge meets other hedge accounting criteria.
Risk review

138 | HSBC Holdings plc Annual Report and Accounts 2022

| Financial instruments yet to transition to alternative benchmarks, by main benchmark
| USD Libor | GBP Libor | JPY Libor | Others 1
At 31 Dec 2022 | $m | $m | $m | $m
Non-derivative financial assets |  |  |  |
Loans and advances to customers | 49,632 | 262 | — | 7,912
Other financial assets | 4,716 | 42 | — | 1,562
Total non-derivative financial assets 2 | 54,348 | 304 | — | 9,474
Non-derivative financial liabilities |  |  |  |
Financial liabilities designated at fair value | 17,224 | 1,804 | 1,179 | —
Debt securities in issue | 5,352 | — | — | —
Other financial liabilities | 2,988 | — | — | 176
Total non-derivative financial liabilities | 25,564 | 1,804 | 1,179 | 176
Derivative notional contract amount |  |  |  |
Foreign exchange | 140,223 | — | — | 7,337
Interest rate | 2,208,189 | 68 | — | 186,952
Total derivative notional contract amount | 2,348,412 | 68 | — | 194,289

| Financial instruments yet to transition to alternative benchmarks, by main benchmark
| USD Libor | GBP Libor | JPY Libor | Others 1
At 31 Dec 2021 | $m | $m | $m | $m
Non-derivative financial assets |  |  |  |
Loans and advances to customers | 70,932 | 18,307 | 370 | 8,259
Other financial assets | 5,131 | 1,098 | — | 2
Total non-derivative financial assets 2 | 76,063 | 19,405 | 370 | 8,261
Non-derivative financial liabilities |  |  |  |
Financial liabilities designated at fair value | 20,219 | 4,019 | 1,399 | 1
Debt securities in issue | 5,255 | — | — | —
Other financial liabilities | 2,998 | 78 | — | —
Total non-derivative financial liabilities | 28,472 | 4,097 | 1,399 | 1
Derivative notional contract amount |  |  |  |
Foreign exchange | 137,188 | 5,157 | 31,470 | 9,652
Interest rate | 2,318,613 | 284,898 | 72,229 | 133,667
Total derivative notional contract amount | 2,455,801 | 290,055 | 103,699 | 143,319

1 Comprises financial instruments referencing other significant benchmark rates yet to transition to alternative benchmarks (euro Libor, Swiss franc
Libor, Eonia, SOR, THBFIX, MIFOR and Sibor). Announcements were made by regulators during 2022 on the cessation of the Canadian dollar offered
rate (‘CDOR’) and Mexican Interbank equilibrium interest rate (‘TIIE’), which will eventually transition to the Canadian overnight repo rate average
(‘CORRA’) and a new Mexican overnight fall-back rate, respectively. Therefore, CDOR and TIIE are also included in Others during the current period.
2 Gross carrying amount excluding allowances for expected credit losses.
The amounts in the above table relate to HSBC’s main operating
entities where HSBC has material exposures impacted by Ibor reform,
including in the UK, Hong Kong, France, the US, Mexico, Canada,
Singapore, the UAE, Bermuda, Australia, Qatar, Germany, Thailand,
India and Japan. 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 HSBC’s consolidated balance sheet.
Environmental, social and governance
(’ESG’) risk
We are subject to financial and non-financial risks associated with
ESG-related matters. Our current areas of focus include climate risk,
nature-related risks and human rights risks. These can impact us both
directly and indirectly through our business activities and
relationships. For details of how we govern ESG, see page 86.
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. Focus on climate-related risk continued to increase over 2022,
owing to the pace and volume of policy and regulatory changes
globally, particularly on climate risk management, stress testing and
scenario analysis and disclosures. If we fail to meet evolving
regulatory expectations or requirements on climate risk management,
this could have regulatory compliance and reputational impacts.
We could face direct impacts, 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.
Our customers may find that their business models fail to align to a
net zero economy or face disruption to their operations or
deterioration to their assets as a result of extreme weather.
We face increased reputational, legal and regulatory risk as we make
progress towards our net zero ambition, with stakeholders likely to
place greater focus on our actions such as the development of
climate-related policies, our disclosures and financing and investment
decisions relating to our ambition.
We will face additional risks if we are perceived to mislead
stakeholders in respect of our climate strategy, the climate impact of
a product or service, or the commitments of our customers. Climate
risk may also impact on model risk, as the uncertain impacts of
climate change and data and methodology limitations present
challenges to creating reliable and accurate model outputs.
We also face reporting risk in relation to our climate disclosures, as
any data, methodologies and standards we have used may evolve
over time in line with market practice, regulation or owing to
developments in climate science. While emissions reporting has
improved over time, data remains of limited quality and consistency.
The use of inconsistent or incomplete data and models could result in
sub-optimal decision making. Any changes could result in revisions to
our internal frameworks and reported data, and could mean that

HSBC Holdings plc Annual Report and Accounts 2022 | 139

reported figures are not reconcilable or comparable year on year. We
may also have to re-evaluate our progress towards our climate-related
targets in future and this could result in reputational, legal and
regulatory risks.
There is increasing evidence that a number of nature-related risks
beyond climate change, which include risks that can be represented
more broadly by impact and dependence on nature, can and will have
significant economic impact. These risks arise when the provision of
natural services – such as water availability, air quality and soil quality
– is compromised by overpopulation, urban development, natural
habitat and ecosystem loss, ecosystem degradation arising from
economic activity and other environmental stresses beyond climate
change. They can show themselves in various ways, including
through macroeconomic, market, credit, reputational, legal and
regulatory risks, for both HSBC and our customers. We continue to
engage with investors, regulators and customers on nature-related
risks to evolve our approach and understand best practice risk
mitigation.
Regulation and disclosure requirements in relation to human rights,
and to modern slavery in particular, are increasing. Businesses are
expected to be transparent about their efforts to identify and respond
to the risk of negative human rights impacts arising from their
business activities and relationships.
Mitigating actions
•We aim to deepen our understanding of the drivers of climate risk.
A dedicated Climate Risk Oversight Forum is responsible for
shaping and overseeing our approach and providing support in
managing climate risk. For further details of the Group’s ESG
governance structure, see page 86.
•Our climate risk programme continues to support the development
of our climate risk management capabilities across four key pillars:
governance and risk appetite, risk management, stress testing and
scenario analysis, and disclosures. We also aim to enhance our
approach to greenwashing risk management.
•In December 2022, we published our updated policy covering the
broader energy system including upstream oil and gas, oil and gas
power generation, coal, hydrogen, renewables and hydropower,
nuclear, biomass and energy from waste. We also expanded our
thermal coal phase-out policy, in which we committed to not
provide new finance or advisory services for the specific purposes
of the conversion of existing coal-to-gas fired power plants, or new
metallurgical coal mines (see page 65).
•Climate stress tests and scenarios are being used to further
improve our understanding of our risk exposures for use in risk
management and business decision making.
•In 2022, we reviewed our salient human rights issues following
the methodology set out in the UNGPs. These are the human
rights at risk of the most severe potential negative impact through
our business activities and relationships. This review built on an
earlier review that had identified modern slavery and discrimination
as priority human rights issues. For further details, see page 87 of
the ESG review.
•In 2021, we joined several industry working groups dedicated to
helping us assess and manage nature-related risks, such as the
Taskforce on Nature-related Financial Disclosures (‘TNFD’). In 2022
our asset management business published its biodiversity policy to
publicly explain how our analysts address nature-related issues.
•We continue to engage with our customers, investors and
regulators proactively on the management of ESG risks. We also
engage with initiatives, including the Climate Financial Risk Forum,
Equator Principles, Task Force on Climate-related Financial
Disclosures and CDP (formerly the Carbon Disclosure Project) to
help drive best practice for climate risk management.
For further details of our approach to climate risk management, see
‘Climate risk’ on page 221.
For further details of ESG risk management, see ‘Financial crime risk‘
on page 231 and ‘Regulatory compliance risk environment including
conduct’ on page 225.
Our ESG review can be found on page 44.
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 and taking advantage of
new digital capabilities so that we improve how we serve our
customers, 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 blockchain and quantum computing offer
both business opportunities and potential risks for HSBC. As with all
use of 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, as well as the
advances in technology, and changes in customer behaviours to
understand how these may impact our business.
•We assess 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
Risks associated with workforce capability,
capacity and environmental factors with
potential impact on growth
Our global businesses and functions in all of our markets are exposed
to risks associated with workforce capacity challenges, including
challenges to retain, develop and attract high-performing employees
in key labour markets, and compliance with employment laws and
regulations. Changed working arrangements, and the residual impact
of local Covid-19-related restrictions and health concerns during the
pandemic, have also affected employee mental health and well-being.
Mitigating actions
•We seek to promote a diverse and inclusive workforce and provide
health and well-being support. We continue to build our speak-up
culture through active campaigns.
•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.
•We monitor people risks that could arise due to organisational
restructuring, helping to ensure we manage redundancies
sensitively and support impacted employees. 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 at HSBC is well understood.
•Our Future Skills curriculum helps provides skills that will help to
enable employees and HSBC to be successful in the future.
•We develop succession plans for key management roles, with
oversight from the Group Executive Committee.
Risk review

140 | HSBC Holdings plc Annual Report and Accounts 2022

Risks arising from the receipt of services
from third parties
We use third parties to provide a range of goods and services. Risks
arising from the use of third-party providers and their supply chain
may be harder to identify. It is critical that we ensure we have
appropriate risk management policies, processes and practices over
the selection, governance and oversight of third parties and their
supply chain, particularly for key activities that could affect our
operational resilience. Any deficiency in the management of risks
associated with our third parties could affect our ability to support our
customers and meet regulatory expectations.
Mitigating actions
•We continue to monitor the effectiveness of the controls operated
by our third-party providers and request third-party control reports,
where required. We have made further enhancements to our
framework to help ensure risks associated with these
arrangements are understood and managed effectively by our
global businesses, global functions and regions.
•We continue to enhance the effective management of our intra-
Group arrangements using the same control standards as we have
for external third-party arrangements.
•We are implementing the changes required by new regulations as
set by our regulators.
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 such as
customer selection, product pricing, financial crime transaction
monitoring, creditworthiness evaluation and financial reporting.
Assessing model performance is a continuous undertaking. Models
can need redevelopment as market conditions change. Significant
increases in global inflation and interest rates have impacted the
reliability and accuracy of both credit and market risk models.
We continued to prioritise the redevelopment of internal ratings-based
(‘IRB’) and internal model methods (‘IMM’) models, in relation to
counterparty credit, as part of the IRB repair and Basel III programmes
with a key focus on enhancing the quality of data used as model
inputs. A number of these models have been submitted to the UK’s
Prudential Regulation Authority (‘PRA’) and other key regulators for
feedback, and approval is in progress. Some IMM and internal model
approach (‘IMA’) models have been approved for use, and feedback
has been received for some IRB models. Climate risk modelling is a
key focus for the Group as HSBC’s commitment to ESG has become
a key 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 in many
jurisdictions and further developments in policy expected from many
regulators, including the PRA.
Mitigating actions
•We have continued to embed the enhanced monitoring, review
and challenge of expected credit loss model performance through
our Model Risk Management function as part of a broader
quarterly process to determine loss levels. The Model Risk
Management team aims to provide effective review and challenge
of any future redevelopment of these models.
•Model Risk Governance committees at the Group, business and
functional levels continue to provide oversight of model risk.
•Model Risk Management works closely with businesses to ensure
that IRB/IMM/IMA models in development meet risk
management, pricing and capital management needs. Global
Internal Audit provides assurance over the risk management
framework for models.
•Additional assurance work is performed by the model risk
governance teams, which act as second lines of defence. The
teams test whether controls implemented by model users comply
with model risk policy and if model risk standards are adequate.
•Models using advanced machine learning techniques are validated
and monitored to 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. Along with other banks and financial institutions, 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 (which includes
trusted sources, data flows and data quality) in order to enhance
the end-to-end management of data risk.
•We have established a global data management utility, and
continue to simplify and unify data management activities across
the Group.
•We seek 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 continue to modernise our data and analytics infrastructure
through investments in Cloud technology, data visualisation,
machine learning and artificial intelligence.
•We continue to educate our employees on data risk and data
management. We have delivered regular mandatory training
globally on how to protect and manage data appropriately.
Change execution risk
We have continued investment in strategic change to support the
delivery of our strategic priorities and regulatory commitments. This
requires change to be executed safely and efficiently.
Mitigating actions
•In 2022, we added change execution risk to our risk taxonomy and
control library, so that it could be defined, assessed, managed,
reported and overseen in the same way as our other material risks.
•The Transformation Oversight Executive Committee oversees the
prioritisation, strategic alignment and management of execution
risk for all change portfolios and initiatives.

HSBC Holdings plc Annual Report and Accounts 2022 | 141

Areas of special interest

During 2022, a number of areas were identified and considered as
part of our top and emerging risks because of the effect they may
have on the Group. While considered under the themes captured
under top and emerging risks, in this section we have placed a
particular focus on the Covid-19 pandemic.
Risks related to Covid-19
The impact from the Covid-19 pandemic remains a continuing risk to
our customers and organisation. However, the appetite for public
health restrictions has reduced following the successful roll-out of
vaccine programmes, and as societies have adapted. Countries
continue to differ in their approach, although China has recently
reversed restrictions on activity and mobility.
In most countries, high vaccination rates and acquired population
immunity have minimised the public health risks and the need for
restrictions. However, in mainland China and Hong Kong, adherence
to public health restrictions had adverse economic implications
throughout much of 2022. Government-imposed restrictions on
activity in major Chinese cities, and restrictions on travel, adversely
affected global tourism and supply chains.
While the recovery in China resulting from the relaxation of Covid-19
related restrictions on movement, international travel and tourism in
China that commenced in December 2022, raises the prospect of
global growth, it could also lead to renewed inflationary pressures as
demand for commodities and other goods rises. However, there are
still short-term risks, as any surge in Covid-19 infections in China may
dampen confidence and activity, and lead to the emergence of new
vaccine-resistant variants of the virus.
We continue to monitor the situation closely, and given the continuing
uncertainties related to the post-pandemic landscape, additional
mitigating actions may be required.

Our material banking 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 145)
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 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, which outlines clear and consistent policies, principles and guidance for risk managers.
Treasury risk (see page 202)
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 and changes in market interest rates, together with pension and insurance risk. | Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment. | Treasury risk is: •measured through risk appetite and more granular limits, set to provide an early warning of increasing risk, minimum ratios of relevant regulatory metrics, and metrics to monitor the key risk drivers impacting treasury resources; •monitored and projected against appetites and by using operating plans based on strategic objectives together with stress and scenario testing; and •managed through control of resources in conjunction with risk profiles, strategic objectives and cash flows.
Market risk (see page 218)
Market risk is the risk of an adverse financial impact on trading activities arising from changes in market parameters such as interest rates, foreign exchange rates, asset prices, volatilities, correlations and credit spreads. | Exposure to market risk is separated into two portfolios: trading portfolios and non-trading portfolios. Market risk for non-trading portfolios is discussed in the Treasury risk section on page 214. Market risk exposures arising from our insurance operations are discussed on page 237. | Market risk is: •measured using sensitivities, value at risk 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 value at risk, stress testing and other measures; and •managed using risk limits approved by the Group Risk Management Meeting and the risk management meetings in various global businesses.

Risk review

142 | HSBC Holdings plc Annual Report and Accounts 2022

Description of risks – banking operations (continued)
Risks | Arising from | Measurement, monitoring and management of risk
Climate risk (see page 221)
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a greener economy. | Climate risk can materialise through: •physical risk, which arises from the increased frequency and severity of weather events; •transition risk, which arises from the process of moving to a low- carbon economy; and •greenwashing risk, which arises from the act of knowingly or unknowingly misleading stakeholders regarding our strategy relating to climate, the climate impact/benefits of a product or service, or the climate commitments or performance of our customers. | Climate risk is: •measured using a variety of risk appetite metrics and key management indicators, which assess the impact of climate risk across the risk taxonomy; •monitored using stress testing; and •managed through adherence to risk appetite thresholds and via specific policies.
Resilience risk (see page 230)
Resilience risk is the risk of sustained and significant business disruption from execution, delivery, physical security or safety events, causing the inability to provide critical services to our customers, affiliates, and counterparties. | Resilience risk arises from failures or inadequacies in processes, people, systems or external events. | Resilience risk is: •measured using 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 continual monitoring and thematic reviews.
Regulatory compliance risk (see page 231)
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. | 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 231)
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. | Financial crime risk is: • measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our compliance teams; • monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and the results of internal and external audits and regulatory inspections; and • managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Model risk (see page 232)
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. | Model risk is: •measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; •monitored against model risk appetite statements, insight from the independent review function, feedback from internal and external audits, and regulatory reviews; and •managed by creating and communicating appropriate policies, procedures and guidance, training colleagues in their application, and supervising their adoption to ensure operational effectiveness.

HSBC Holdings plc Annual Report and Accounts 2022 | 143

Our insurance manufacturing subsidiaries are regulated separately
from our banking operations. Risks in our insurance entities are
managed using methodologies and processes that are subject to
Group oversight. Our insurance operations are also subject to many of
the same risks as our banking operations, and these are covered by
the Group’s risk management processes. However, there are 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 237) |
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 risk arises from: •market risk affecting the fair values of financial assets or their future cash flows; •credit risk; and •liquidity risk of entities being unable to make payments to policyholders as they fall due. | Financial risk is: •measured for credit risk, in terms of economic capital and the amount that could be lost if a counterparty fails to make repayments; for market risk, in terms of economic capital, internal metrics and fluctuations in key financial variables; and 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, which outlines clear and consistent policies, principles and guidance. This includes using product design, asset liability matching and bonus rates.
Insurance risk (see page 238) |
Insurance risk is the risk that, over time, the cost of insurance policies written, 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 through a framework of approved limits and delegated authorities; and •managed through a robust risk control framework, which outlines clear and consistent policies, principles and guidance. This includes using product design, underwriting, reinsurance and claims-handling procedures.

Risk review

144 | HSBC Holdings plc Annual Report and Accounts 2022

Credit risk

Contents

145 | Overview
145 | Credit risk management
147 | Credit risk in 2022
148 | Summary of credit risk
151 | Stage 2 decomposition as at December 2022
152 | Credit exposure
153 | Measurement uncertainty and sensitivity analysis of ECL
162 | Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
165 | Credit quality
170 | Wholesale lending
187 | Personal lending
196 | Supplementary information
201 | HSBC Holdings

Overview
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 other products such as guarantees and derivatives.
Credit risk management
Key developments in 2022
There were no material changes to the policies and practices for the
management of credit risk in 2022. We continued to apply the
requirements of IFRS 9 ‘Financial Instruments’ within the Credit Risk
sub-function. For certain retail portfolios, we enhanced the significant
increase in credit risk (‘SICR’) approach in relation to capturing relative
movements in probability of default (‘PD’) since origination.
For our retail portfolios, we adopted the EBA ‘Guidelines on the
application of definition of default’ during 2022 and, for our wholesale
portfolios, these guidelines were adopted during 2021. Adoption of
these guidelines did not have a material impact on our portfolios and
comparative disclosures have not been restated.
We actively managed the risks related to macroeconomic
uncertainties, including inflation, fiscal and monetary policy, the
Russia-Ukraine war, broader geopolitical uncertainties, and the
continued risks resulting from the Covid-19 pandemic.
For further details, see ‘Top and emerging risks’ on page 135.
Governance and structure
We have established 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 Group
Chief Executive together with the authority to sub-delegate them. The
Credit Risk sub-function in Group Risk and Compliance is responsible
for the key policies and processes for managing credit risk, which
include formulating Group credit policies and risk rating frameworks,
guiding the Group’s appetite for credit risk exposures, undertaking
independent reviews and objective assessment of credit risk, and
monitoring performance and management of portfolios.
The principal objectives of our credit risk management are:
•to maintain across HSBC a strong culture of responsible lending,
and robust risk policies and control frameworks;
•to both partner and challenge our 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 processes
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
We have established IFRS 9 modelling and data processes in various
geographies, which are subject to internal model risk governance
including independent review of significant model developments.
We have a centralised process for generating unbiased and
independent global economic scenarios. Scenarios are subject to a
process of review and challenge by a dedicated team, as well as
regional groupings. Each quarter, the scenarios and probability
weights are reviewed and checked for consistency with the economic
conjuncture and current economic and financial risks. These are
subject to final review and approval by senior management in a
Forward Economic Guidance Global Business Impairment Committee.
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
Regional management review forums are established in key sites and
regions in order to review and approve the impairment results.
Regional management review forums have representatives from
Credit Risk and Finance. The key site and regional approvals are
reported up to the relevant global business impairment committee for
final approval of the Group’s ECL for the period. Required members of
the committee are the Wholesale Global Chief Corporate Credit
Officer and Chief Risk Officer for Wealth and Personal Banking Risk,
as well as the relevant global business Chief Financial Officer and the
Global Financial Controller.
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. We use a number of controls
and measures to minimise undue concentration of exposure in our
portfolios across industries, countries and global businesses. These
include portfolio and counterparty limits, approval and review controls,
and stress testing.
C redit quality of financial instruments
(Audited)
Our risk rating system facilitates the internal ratings-based approach
under the Basel framework adopted by the Group to support the
calculation of our minimum credit regulatory capital requirement. The
five credit quality classifications encompass a range of granular
internal credit rating grades assigned to wholesale and retail

HSBC Holdings plc Annual Report and Accounts 2022 | 145

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 probability of default (‘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 Basel probability of default % | Internal credit rating | 12 month probability- weighted PD %
Quality classification 1,2 |  |  |  |  |  |
Strong | BBB and above | A- and above | CRR 1 to CRR 2 | 0–0.169 | Band 1 and 2 | 0.000–0.500
Good | BBB- to BB | BBB+ to BBB- | CRR 3 | 0.170–0.740 | Band 3 | 0.501–1.500
Satisfactory | BB- to B and unrated | BB+ to B and unrated | CRR 4 to CRR 5 | 0.741–4.914 | Band 4 and 5 | 1.501–20.000
Sub-standard | B- to C | B- to C | CRR 6 to CRR 8 | 4.915–99.999 | Band 6 | 20.001–99.999
Credit impaired | Default | Default | CRR 9 to CRR 10 | 100 | Band 7 | 100

1 Customer risk rating (‘CRR’).
2 12-month point-in-time probability-weighted probability of default (‘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 on Note 1.2(i) on the financial statements.

Forborne loans and advances
(Audited)
Forbearance measures consist of concessions towards an obligor that
is experiencing or about to experience difficulties in meeting its
financial commitments.
We continue to class loans as forborne when we modify the
contractual payment terms due to having significant concerns about
the borrowers’ ability to meet contractual payments when they were
due.
In 2022, we expanded our definition of forborne to capture non-
payment-related concessions, such as covenant waivers. For our
wholesale portfolio, we began identifying non-payment-related
concessions in 2021 when our internal policies were changed. For our
retail portfolios, we began identifying them during 2022.
The comparative disclosures have been presented under the prior
definition of forborne for the wholesale and retail portfolios.
For details of our policy on 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 the customer being classed as credit impaired.
Forborne loans and recognition of expected credit lo sses
(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.
Risk review

146 | HSBC Holdings plc Annual Report and Accounts 2022

Impairment assessment
(Audited)
For details of our impairment policies on loans and advances and
financial investments, see Note 1.2(i) on the financial statements.
Write-off of loans and advances
(Audited)
For details of our policy on the write-off of loans and advances, see
Note 1.2(i) on the financial statements.
Unsecured personal facilities, including credit cards, are generally
written off at between 150 and 210 days past due. The standard
period runs until the end of the month in which the account becomes
180 days contractually delinquent. However, in exceptional
circumstances to achieve a fair customer outcome, and in line with
regulatory expectations, they may be extended further.
For secured facilities, write-off should occur upon repossession of
collateral, receipt of proceeds via settlement, or determination that
recovery of the collateral will not be pursued.
Any secured assets maintained on the balance sheet beyond
60 months of consecutive delinquency-driven default require
additional monitoring and review to assess the prospect of recovery.
There are exceptions in a few countries and territories where local
regulation or legislation constrains earlier write-off, or where the
realisation of collateral for secured real estate lending takes more
time. Write-off, either partially or in full, may be earlier when there is
no reasonable expectation of further recovery, for example, in the
event of a bankruptcy or equivalent legal proceedings. Collection
procedures may continue after write-of f.
Credit risk in 2022
At 31 December 2022, gross loans and advances to customers and
banks of $1,041bn decreased by $99.1bn, compared with
31 December 2021. This included adverse foreign exchange
movements of $59.2bn and an $81.2bn decrease due to a
reclassification of businesses to assets held for sale, including our
banking business in Canada and our retail banking operations in
France.
Excluding foreign exchange movements, the underlying decrease of
$39.9bn was driven by a $36.1bn decrease in personal loans and
advances to customers and by a $29.9bn decrease in wholesale loans
and advances to customers. These were partly offset by a $25.9bn
increase in loans and advances to banks.
The underlying decrease in personal loans and advances to customers
was driven by the $50.1bn reclassification of businesses to assets
held for sale, and by a decrease in other personal lending, mainly in
Hong Kong (down $1.5bn). This was offset by mortgage growth of
$15.4bn, mainly in the UK (up $8.9bn), Hong Kong (up $3.4bn) and
Australia (up $1.6bn).
The underlying increase in loans and advances to banks was driven by
growth in the UK (up $10.6bn), Hong Kong (up $7.9bn) and Egypt (up
$1.9bn), driven mainly by higher central bank placements.
At 31 December 2022, the allowance for ECL of $12.6 bn increased by
$0.5 bn compared with 31 December 2021, including favourable
foreign exchange movements of $0.6 bn and the effect of
reclassifications to assets held for sale of $0.4bn. The $12.6 bn
allowance comprised $12.1 bn in respect of assets held at amortised
cost, $0.4 bn in respect of loan commitments and financial
guarantees, and $0.1 bn in respect of debt instruments measured at
fair value through other comprehensive income (‘FVOCI’).
Excluding foreign exchange movements, the allowance for ECL in
relation to loans and advances to customers increased by $0.6bn from
31 December 2021. This was attributable to:
•a $0.7bn increase in wholesale loans and advances to customers,
of which $0.7bn was driven by stage 3; and
•a $0.1bn decrease in personal loans and advances to customers,
of which $0.4bn was driven by stage 3, partly offset by an increase
of $0.3bn in stages 1 and 2.
Stage 3 balances at 31 December 2022 increased by $1.9bn from
31 December 2021. This was driven by a $3.2bn increase in
wholesale loans and advances to customers, mainly in corporate real
estate portfolios in Hong Kong. This was partly offset by a decrease
of $1.3bn in personal loans and advances to customers.
At 31 December 2022, for certain retail lending portfolios, we
introduced enhancements in the significant increase in credit risk
(‘SICR’) approach in relation to capturing relative movements in
probability of default (‘PD’). The enhanced approach captured relative
movements in PD since origination, which resulted in a significant
migration to stage 2 from loans to customers gross carrying amounts
in stage 1.
The volume of stage 1 customer accounts with lower absolute levels
of credit risk who have exhibited some amount of relative increase in
PD since origination have migrated into stage 2, and accounts
originated with higher absolute levels of credit risk with no or
insignificant increases in PD since origination have been transferred to
stage 1, with no material overall change in risk.
The impact on ECL is immaterial due to the offsetting ECL impacts of
stage migrations and due to the low loan-to-value (‘LTV‘) profiles. This
is particularly applicable to UK customers.
The enhancement of the SICR approach constitutes an improvement
towards more responsive models that better reflect the SICR since
origination. This includes consideration of the current cost of living
pressures, as markets adjust to the higher interest-rate environment.
In wholesale lending, China’s commercial real estate sector continued
to deteriorate in 2022, resulting in further stage 2 allowances on
downgrades and new and additional stage 3 charges.
The ECL charge for 2022 was $3.6bn, inclusive of recoveries. This
was driven by higher ECL charges relating to increasing inflationary
pressures, rising interest rates, China commercial real estate
exposures and economic uncertainty, partly offset by a release in
Covid-19-related allowances at the beginning of the year.
The ECL charge comprised: $2.4bn in respect of wholesale lending, of
which $1.7bn were in stage 3 and purchased or originated credit
impaired (‘POCI‘); $1.1bn in respect of personal lending, of which
$0.5bn were in stage 3; and $0.1bn in respect of debt instruments
measured at FVOCI.
Income statement movements are analysed further on page 101.
While credit risk arises across most of our balance sheet, ECL have
typically been recognised on loans and advances to customers and
banks, in addition to securitisation exposures and other structured
products. As a result, our disclosures focus primarily on these two
areas. For further details of:
•maximum exposure to credit risk, see page 153;
•measurement uncertainty and sensitivity analysis of ECL
estimates, see page 153;
•reconciliation of changes in gross carrying/nominal amount and
allowances for loans and advances to banks and customers
including loan commitments and financial guarantees, see
page 162;
•credit quality, see page 165;
•total wholesale lending for loans and advances to banks and
customers by stage distribution, see page 171;
•wholesale lending collateral, see page 180;
•total personal lending for loans and advances to customers at
amortised cost by stage distribution, see page 188; and
•personal lending collateral, see page 193.

HSBC Holdings plc Annual Report and Accounts 2022 | 147

Summary of credit risk
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.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited)
| 31 Dec 2022 | At 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL 1 | Gross carrying/ nominal amount | Allowance for ECL 1
| $m | $m | $m | $m
Loans and advances to customers at amortised cost | 936,307 | (11,453) | 1,057,231 | (11,417)
– personal | 415,012 | (2,872) | 478,337 | (3,103)
– corporate and commercial | 454,356 | (8,324) | 513,539 | (8,204)
– non-bank financial institutions | 66,939 | (257) | 65,355 | (110)
Loans and advances to banks at amortised cost | 104,951 | (69) | 83,153 | (17)
Other financial assets measured at amortised cost | 1,014,498 | (553) | 880,351 | (193)
– cash and balances at central banks | 327,005 | (3) | 403,022 | (4)
– items in the course of collection from other banks | 7,297 | — | 4,136 | —
– Hong Kong Government certificates of indebtedness | 43,787 | — | 42,578 | —
– reverse repurchase agreements – non-trading | 253,754 | — | 241,648 | —
– financial investments | 168,827 | (80) | 97,364 | (62)
– assets held for sale 2 | 102,556 | (415) | 2,859 | (43)
– prepayments, accrued income and other assets 3 | 111,272 | (55) | 88,744 | (84)
Total gross carrying amount on-balance sheet | 2,055,756 | (12,075) | 2,020,735 | (11,627)
Loans and other credit-related commitments | 618,788 | (386) | 627,637 | (379)
– personal | 244,006 | (27) | 239,685 | (39)
– corporate and commercial | 269,187 | (340) | 283,625 | (325)
– financial | 105,595 | (19) | 104,327 | (15)
Financial guarantees | 18,783 | (52) | 27,795 | (62)
– personal | 1,135 | — | 1,130 | —
– corporate and commercial | 13,587 | (50) | 22,355 | (58)
– financial | 4,061 | (2) | 4,310 | (4)
Total nominal amount off-balance sheet 4 | 637,571 | (438) | 655,432 | (441)
| 2,693,327 | (12,513) | 2,676,167 | (12,068)
| 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’) | 266,303 | (145) | 347,203 | (96)

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 For further details on gross carrying amounts and allowances for ECL related to assets held for sale, see ‘Assets held for sale’ on page 151.
3 Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’
as presented within the consolidated balance sheet on page 326 comprises both financial and non-financial assets, including cash collateral and
settlement accounts.
4 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
5 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.
The following table provides an overview of the Group’s 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
on these financial assets since initial recognition for 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.
•POCI: Financial assets that are purchased or originated at a deep
discount are seen to reflect the incurred credit losses on which a
lifetime ECL is recognised.
Risk review

148 | HSBC Holdings plc Annual Report and Accounts 2022

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2022
(Audited)
| Gross carrying/nominal amount 1 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m | % | % | % | % | %
Loans and advances to customers at amortised cost | 777,543 | 139,130 | 19,505 | 129 | 936,307 | (1,095) | (3,491) | (6,829) | (38) | (11,453) | 0.1 | 2.5 | 35.0 | 29.5 | 1.2
– personal | 362,781 | 48,891 | 3,340 | — | 415,012 | (562) | (1,505) | (805) | — | (2,872) | 0.2 | 3.1 | 24.1 | — | 0.7
– corporate and commercial | 353,010 | 85,521 | 15,696 | 129 | 454,356 | (490) | (1,909) | (5,887) | (38) | (8,324) | 0.1 | 2.2 | 37.5 | 29.5 | 1.8
– non-bank financial institutions | 61,752 | 4,718 | 469 | — | 66,939 | (43) | (77) | (137) | — | (257) | 0.1 | 1.6 | 29.2 | — | 0.4
Loans and advances to banks at amortised cost | 103,042 | 1,827 | 82 | — | 104,951 | (18) | (29) | (22) | — | (69) | — | 1.6 | 26.8 | — | 0.1
Other financial assets measured at amortised cost | 996,489 | 17,166 | 797 | 46 | 1,014,498 | (124) | (188) | (234) | (7) | (553) | — | 1.1 | 29.4 | 15.2 | 0.1
Loan and other credit-related commitments | 583,383 | 34,033 | 1,372 | — | 618,788 | (141) | (180) | (65) | — | (386) | — | 0.5 | 4.7 | — | 0.1
– personal | 239,521 | 3,686 | 799 | — | 244,006 | (26) | (1) | — | — | (27) | — | — | — | — | —
– corporate and commercial | 241,313 | 27,323 | 551 | — | 269,187 | (111) | (166) | (63) | — | (340) | — | 0.6 | 11.4 | — | 0.1
– financial | 102,549 | 3,024 | 22 | — | 105,595 | (4) | (13) | (2) | — | (19) | — | 0.4 | 9.1 | — | —
Financial guarantees | 16,071 | 2,463 | 249 | — | 18,783 | (6) | (13) | (33) | — | (52) | — | 0.5 | 13.3 | — | 0.3
– personal | 1,123 | 11 | 1 | — | 1,135 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 11,547 | 1,793 | 247 | — | 13,587 | (5) | (12) | (33) | — | (50) | — | 0.7 | 13.4 | — | 0.4
– financial | 3,401 | 659 | 1 | — | 4,061 | (1) | (1) | — | — | (2) | — | 0.2 | — | — | —
At 31 Dec 2022 | 2,476,528 | 194,619 | 22,005 | 175 | 2,693,327 | (1,384) | (3,901) | (7,183) | (45) | (12,513) | 0.1 | 2.0 | 32.6 | 25.7 | 0.5

1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2 Purchased or originated credit-impaired (‘POCI’).
Unless identified at an earlier stage, all financial assets are deemed to
have suffered a significant increase in credit risk when they are 30
days past due (‘DPD’) and are transferred from stage 1 to stage 2.
The following disclosure presents the ageing of stage 2
financial assets by those less than 30 days and greater than 30 DPD
and therefore presents those financial assets classified as stage 2 due
to ageing (30 DPD) and those identified at an earlier stage (less than
30 DPD).

Stage 2 days past due analysis at 31 December 2022
(Audited)
| Gross carrying amount | Allowance for ECL | ECL coverage %
| Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
| $m | $m | $m | $m | $m | $m | $m | $m | % | % | % | %
Loans and advances to customers at amortised cost | 139,130 | 134,733 | 2,411 | 1,986 | (3,491) | (3,019) | (234) | (238) | 2.5 | 2.2 | 9.7 | 12.0
– personal | 48,891 | 46,402 | 1,683 | 806 | (1,505) | (1,080) | (214) | (211) | 3.1 | 2.3 | 12.7 | 26.2
– corporate and commercial | 85,521 | 84,005 | 712 | 804 | (1,909) | (1,862) | (20) | (27) | 2.2 | 2.2 | 2.8 | 3.4
– non-bank financial institutions | 4,718 | 4,326 | 16 | 376 | (77) | (77) | — | — | 1.6 | 1.8 | — | —
Loans and advances to banks at amortised cost | 1,827 | 1,817 | — | 10 | (29) | (29) | — | — | 1.6 | 1.6 | — | —
Other financial assets measured at amortised cost | 17,166 | 16,930 | 140 | 96 | (188) | (164) | (8) | (16) | 1.1 | 1.0 | 5.7 | 16.7

1 Days past due (‘DPD’).
2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.

HSBC Holdings plc Annual Report and Accounts 2022 | 149

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2021 (continued)
(Audited)
| Gross carrying/nominal amount 1 | Allowance for ECL | ECL coverage %
| Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total | Stage 1 | Stage 2 | Stage 3 | POCI 2 | Total
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m | % | % | % | % | %
Loans and advances to customers at amortised cost | 918,936 | 119,224 | 18,797 | 274 | 1,057,231 | (1,367) | (3,119) | (6,867) | (64) | (11,417) | 0.1 | 2.6 | 36.5 | 23.4 | 1.1
– personal | 456,956 | 16,439 | 4,942 | — | 478,337 | (658) | (1,219) | (1,226) | — | (3,103) | 0.1 | 7.4 | 24.8 | — | 0.6
– corporate and commercial | 400,894 | 98,911 | 13,460 | 274 | 513,539 | (665) | (1,874) | (5,601) | (64) | (8,204) | 0.2 | 1.9 | 41.6 | 23.4 | 1.6
– non-bank financial institutions | 61,086 | 3,874 | 395 | — | 65,355 | (44) | (26) | (40) | — | (110) | 0.1 | 0.7 | 10.1 | — | 0.2
Loans and advances to banks at amortised cost | 81,636 | 1,517 | — | — | 83,153 | (14) | (3) | — | — | (17) | — | 0.2 | — | — | —
Other financial assets measured at amortised cost | 875,016 | 4,988 | 304 | 43 | 880,351 | (91) | (54) | (42) | (6) | (193) | — | 1.1 | 13.8 | 14.0 | —
Loan and other credit-related commitments | 594,473 | 32,389 | 775 | — | 627,637 | (165) | (174) | (40) | — | (379) | — | 0.5 | 5.2 | — | 0.1
– personal | 237,770 | 1,747 | 168 | — | 239,685 | (37) | (2) | — | — | (39) | — | 0.1 | — | — | —
– corporate and commercial | 254,750 | 28,269 | 606 | — | 283,625 | (120) | (165) | (40) | — | (325) | — | 0.6 | 6.6 | — | 0.1
– financial | 101,953 | 2,373 | 1 | — | 104,327 | (8) | (7) | — | — | (15) | — | 0.3 | — | — | —
Financial guarantees | 24,932 | 2,638 | 225 | — | 27,795 | (11) | (30) | (21) | — | (62) | — | 1.1 | 9.3 | — | 0.2
– personal | 1,114 | 15 | 1 | — | 1,130 | — | — | — | — | — | — | — | — | — | —
– corporate and commercial | 20,025 | 2,107 | 223 | — | 22,355 | (10) | (28) | (20) | — | (58) | — | 1.3 | 9.0 | — | 0.3
– financial | 3,793 | 516 | 1 | — | 4,310 | (1) | (2) | (1) | — | (4) | — | 0.4 | 100.0 | — | 0.1
At 31 Dec 2021 | 2,494,993 | 160,756 | 20,101 | 317 | 2,676,167 | (1,648) | (3,380) | (6,970) | (70) | (12,068) | 0.1 | 2.1 | 34.7 | 22.1 | 0.5

1 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
2 Purchased or originated credit-impaired (‘POCI’).

Stage 2 days past due analysis at 31 December 2021 (continued)
(Audited)
| Gross carrying amount | Allowance for ECL | ECL coverage %
| Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2 | Stage 2 | Up-to- date | 1 to 29 DPD 1,2 | 30 and > DPD 1,2
| $m | $m | $m | $m | $m | $m | $m | $m | % | % | % | %
Loans and advances to customers at amortised cost | 119,224 | 115,350 | 2,193 | 1,681 | (3,119) | (2,732) | (194) | (193) | 2.6 | 2.4 | 8.8 | 11.5
– personal | 16,439 | 14,124 | 1,387 | 928 | (1,219) | (884) | (160) | (175) | 7.4 | 6.3 | 11.5 | 18.9
– corporate and commercial | 98,911 | 97,388 | 806 | 717 | (1,874) | (1,822) | (34) | (18) | 1.9 | 1.9 | 4.2 | 2.5
– non-bank financial institutions | 3,874 | 3,838 | — | 36 | (26) | (26) | — | — | 0.7 | 0.7 | — | —
Loans and advances to banks at amortised cost | 1,517 | 1,517 | — | — | (3) | (3) | — | — | 0.2 | 0.2 | — | —
Other financial assets measured at amortised cost | 4,988 | 4,935 | 22 | 31 | (54) | (47) | (4) | (3) | 1.1 | 1.0 | 18.2 | 9.7

1 Days past due (‘DPD’).
2 The days past due amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.
Risk review

150 | HSBC Holdings plc Annual Report and Accounts 2022

Stage 2 decomposition
The following table presents the stage 2 decomposition of gross
carrying amount and allowances for ECL for loans and advances to
customers. It also sets out the reasons why an exposure is classified
as stage 2 and therefore presented as a significant increase in credit
risk at 31 December 2022.
The quantitative classification shows gross carrying values and
allowances for ECL for which the applicable reporting date probability
of default (‘PD’) measure exceeds defined quantitative thresholds for
retail and wholesale exposures, as set out in Note 1.2 ‘Summary of
significant accounting policies’, on page 342.
The qualitative classification primarily accounts for 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 significant accounting
policies’ on page 342.

Loans and advances to customers 1
| At 31 Dec 2022
| Gross carrying amount | Allowance for ECL | ECL coverage
| Personal | Corporate and commercial | Non-bank financial institutions | Total | Personal | Corporate and commercial | Non-bank financial institutions | Total | Total
| $m | $m | $m | $m | $m | $m | $m | $m | %
Quantitative | 41,611 | 66,450 | 3,679 | 111,740 | (1,301) | (1,644) | (66) | (3,011) | 2.7
Qualitative | 7,233 | 18,555 | 878 | 26,666 | (201) | (262) | (11) | (474) | 1.8
30 DPD backstop 2 | 47 | 516 | 161 | 724 | (3) | (3) | — | (6) | 0.8
Total stage 2 | 48,891 | 85,521 | 4,718 | 139,130 | (1,505) | (1,909) | (77) | (3,491) | 2.5
| At 31 Dec 2021
Quantitative | 9,907 | 68,000 | 3,041 | 80,948 | (1,076) | (1,347) | (19) | (2,442) | 3.0
Qualitative | 6,329 | 30,326 | 818 | 37,473 | (134) | (520) | (7) | (661) | 1.8
30 DPD backstop 2 | 203 | 585 | 15 | 803 | (9) | (7) | — | (16) | 2.0
Total stage 2 | 16,439 | 98,911 | 3,874 | 119,224 | (1,219) | (1,874) | (26) | (3,119) | 2.6

1 Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure
and ECL have been assigned in order of categories presented.
2 Days past due (‘DPD’).
Assets held for sale
(Audited)
During 2022, gross loans and advances and related impairment
allowances were reclassified from ‘loans and advances to customers’
and ‘loans and advances to banks’ to ‘assets held for sale’ in the
balance sheet.
At 31 December 2022, the most material balances held for sale came
from our banking business in Canada and 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 153);
•‘Distribution of financial instruments by credit quality at
31 December’ (page 165);
Although there was a reclassification on the balance sheet, there was
no separate income statement reclassification. As a result, charges
for changes in expected credit losses and other credit impairment
charges shown in the credit risk disclosures include charges relating
to financial assets classified as ‘assets held for sale’.
‘Loans and other credit-related commitments’ and ‘financial
guarantees’, as reported in credit disclosures, also include exposures
and allowances relating to financial assets classified as ‘assets held
for sale’.

Loans and advances to customers and banks measured at amortised cost
(Audited)
| 2022 | 2021
| Total gross loans and advances | Allowance for ECL | Total gross loans and advances | Allowance for ECL
| $m | $m | $m | $m
As reported | 1,041,258 | (11,522) | 1,140,384 | (11,434)
Reported in ‘Assets held for sale’ | 81,221 | (392) | 2,424 | (39)
At 31 December | 1,122,479 | (11,914) | 1,142,808 | (11,473)

At 31 December 2022, gross loans and advances of our banking
business in Canada were $55.5b n, and the related allowance for ECL
were $0.2b n. Gross loans of our retail banking operations in France
were $25.1b n, and the related allowance for ECL were $0.1b n.
Lending balances held for sale continue to be measured at amortised
cost less allowances for impairment and, therefore, such carrying
amounts may differ from fair value.
These lending balances are part of associated disposal groups that are
measured in their entirety at the lower of carrying amount and fair
value less costs to sell. Any difference between the carrying amount
of these assets and their sales price is part of the overall gain or loss
on the associated disposal group as a whole.
For further details of the carrying amount and the fair value at
31 December 2022 of loans and advances to banks and customers
classified as held for sale, see Note 23 on the financial statements.

HSBC Holdings plc Annual Report and Accounts 2022 | 151

Gross loans and allowance for ECL on loans and advances to customers and banks reported in ‘Assets held for sale’
(Audited)
| Banking business in Canada | Retail banking operations in France | Other 1 | Total
| Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL
| $m | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers at amortised cost | 55,431 | (234) | 25,121 | (92) | 412 | (62) | 80,964 | (388)
– personal | 26,637 | (75) | 22,691 | (88) | 305 | (47) | 49,633 | (210)
– corporate and commercial | 27,128 | (154) | 2,379 | (4) | 107 | (15) | 29,614 | (173)
– non-bank financial institutions | 1,666 | (5) | 51 | — | — | — | 1,717 | (5)
Loans and advances to banks at amortised cost | 100 | — | — | — | 157 | (4) | 257 | (4)
At 31 December 2022 | 55,531 | (234) | 25,121 | (92) | 569 | (66) | 81,221 | (392)
| Banking business in Canada | Retail banking operations in France | Other 2 | Total
| Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL | Gross carrying value | Allowance for ECL
| $m | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers at amortised cost | — | — | — | — | 2,424 | (39) | 2,424 | (39)
– personal | — | — | — | — | 2,424 | (39) | 2,424 | (39)
– corporate and commercial | — | — | — | — | — | — | — | —
– non-bank financial institutions | — | — | — | — | — | — | — | —
Loans and advances to banks at amortised cost | — | — | — | — | — | — | — | —
At 31 December 2021 | — | — | — | — | 2,424 | (39) | 2,424 | (39)

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

Changes in expected credit losses and other credit impairment
(Audited)
| 2022 | 2021
| $m | $m
ECL (charges)/releases arising from: |  |
– assets held for sale | (5) | —
–assets not held for sale | (3,587) | 928
Year ended 31 December | (3,592) | 928

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.
Commentary on consolidated balance sheet movements in 2022
is provided on page 106.
The offset on derivatives remains in line with the movements
in maximum exposure amounts.

‘Maximum exposure to credit risk’ table The following table presents our maximum exposure before taking account of any collateral held or other credit enhancements (unless such enhancements meet accounting offsetting requirements). The table excludes financial instruments whose carrying amount best represents the net exposure to credit risk, and it excludes equity securities as they are not subject to credit risk. For the financial assets recognised on the balance sheet, the maximum exposure to credit risk equals their carrying amount and is net of the allowance for ECL. 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.

Risk review

152 | HSBC Holdings plc Annual Report and Accounts 2022

Other credit risk mitigants
While not disclosed as an offset in the following ‘Maximum exposure
to credit risk’ table, other arrangements are in place that 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
the 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 page
341 and Note 31 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’
section on page 180.

Maximum exposure to credit risk
(Audited)
| 2022 | 2021
| Maximum exposure | Offset | Net | Maximum exposure | Offset | Net
| $m | $m | $m | $m | $m | $m
Loans and advances to customers held at amortised cost | 924,854 | (20,315) | 904,539 | 1,045,814 | (22,838) | 1,022,976
– personal | 412,140 | (2,575) | 409,565 | 475,234 | (4,461) | 470,773
– corporate and commercial | 446,032 | (16,262) | 429,770 | 505,335 | (16,824) | 488,511
– non-bank financial institutions | 66,682 | (1,478) | 65,204 | 65,245 | (1,553) | 63,692
Loans and advances to banks at amortised cost | 104,882 | — | 104,882 | 83,136 | — | 83,136
Other financial assets held at amortised cost | 1,029,618 | (8,969) | 1,020,649 | 882,708 | (12,231) | 870,477
– cash and balances at central banks | 327,002 | — | 327,002 | 403,018 | — | 403,018
– items in the course of collection from other banks | 7,297 | — | 7,297 | 4,136 | — | 4,136
– Hong Kong Government certificates of indebtedness | 43,787 | — | 43,787 | 42,578 | — | 42,578
– reverse repurchase agreements – non-trading | 253,754 | (8,969) | 244,785 | 241,648 | (12,231) | 229,417
– financial investments | 168,747 | — | 168,747 | 97,302 | — | 97,302
– assets held for sale | 115,919 | — | 115,919 | 3,411 | — | 3,411
– prepayments, accrued income and other assets | 113,112 | — | 113,112 | 90,615 | — | 90,615
Derivatives | 284,146 | (273,497) | 10,649 | 196,882 | (188,284) | 8,598
Total on-balance sheet exposure to credit risk | 2,343,500 | (302,781) | 2,040,719 | 2,208,540 | (223,353) | 1,985,187
Total off-balance sheet | 934,326 | — | 934,326 | 928,183 | — | 928,183
– financial and other guarantees | 106,861 | — | 106,861 | 113,088 | — | 113,088
– loan and other credit-related commitments | 827,465 | — | 827,465 | 815,095 | — | 815,095
At 31 Dec | 3,277,826 | (302,781) | 2,975,045 | 3,136,723 | (223,353) | 2,913,370

Concentration of exposure
We have a number of global businesses with a broad range of
products. We operate in a number of geographical markets with the
majority of our exposures in Asia and Europe.
For an analysis of:
•financial investments, see Note 16 on the financial statements;
•trading assets, see Note 11 on the financial statements;
•derivatives, see page 187 and Note 15 on the financial statements;
and
•loans and advances by industry sector and by the location of the
principal operations of the lending subsidiary (or, in the case of the
operations of The Hongkong and Shanghai Banking Corporation
Limited, HSBC Bank plc, HSBC Bank Middle East Limited and
HSBC Bank USA, by the location of the lending branch), see page
170 for wholesale lending and page 187 for personal lending.
C redit deterioration of financial instruments
(Audited)
A summary of our current policies and practices regarding the
identification, treatment and measurement of stage 1, stage 2,
stage 3 (credit impaired) and POCI financial instruments can be found
in Note 1.2 on the financial statements.
Measurement uncertainty and
sensitivity analysis of ECL estimates
(Audited)
The recognition and measurement of ECL involves the use of
significant judgement and estimation. We form multiple economic
scenarios based on economic forecasts, apply these assumptions to
credit risk models to estimate future credit losses, and probability
weight the results to determine an unbiased ECL estimate.
Management judgemental adjustments are used to address late-
breaking events, data and model limitations, model deficiencies and
expert credit judgements.
Amid a deterioration in the economic and geopolitical environment,
management judgements and estimates continued to be subject to a
high degree of uncertainty in relation to assessing economic
scenarios for impairment allowances in 2022.
Inflation, economic contraction and high interest rates, combined with
an unstable geopolitical environment and the effects of global supply
chain disruption, contributed to elevated levels of uncertainty during
the year.
At 31 December 2022, as a result of this uncertainty, additional stage
1 and 2 impairment allowances were recognised. Management
continued to reflect a degree of caution both in the selection of
economic scenarios and their weightings, and in the use of
management judgemental adjustments, described in more detail
below.
At 31 December 2022, there was a reduction in management
judgemental adjustments compared with 31 December 2021.
Adjustments related to Covid-19 and for sector-specific risks were
reduced as scenarios and modelled outcomes better reflected the key
risks at 31 December 2022.

HSBC Holdings plc Annual Report and Accounts 2022 | 153

Methodology
Four global economic scenarios are used to capture the current
economic environment and to articulate management’s view of the
range of potential outcomes. Scenarios produced to calculate ECL are
aligned to HSBC’s top and emerging risks.
Three of the scenarios are drawn from consensus forecasts and
distributional estimates. The Central scenario is deemed the ‘most
likely’ scenario, and usually attracts the largest probability weighting,
while the outer scenarios represent the tails of the distribution, which
are less likely to occur. The Central scenario is created using the
average of a panel of external forecasters. Consensus Upside and
Downside scenarios are created with reference to distributions for
select markets that capture forecasters’ views of the entire range of
outcomes. In the later years of the scenarios, projections revert to
long-term consensus trend expectations. In the consensus outer
scenarios, reversion to trend expectations is done mechanically with
reference to historically observed quarterly changes in the values of
macroeconomic variables.
The fourth scenario, Downside 2, is designed to represent
management’s view of severe downside risks. It is a globally
consistent narrative-driven scenario that explores more extreme
economic outcomes than those captured by the consensus scenarios.
In this scenario, variables do not, by design, revert to long-term trend
expectations. They may instead explore alternative states of
equilibrium, where economic activity moves permanently away from
past trends. The consensus Downside and the consensus Upside
scenarios are each constructed to be consistent with a 10%
probability. The Downside 2 is constructed with a 5% probability. The
Central scenario is assigned the remaining 75%. This weighting
scheme is deemed appropriate for the unbiased estimation of ECL in
most circumstances. However, management may depart from this
probability-based scenario weighting approach when the economic
outlook is determined to be particularly uncertain and risks are
elevated.
In light of ongoing risks, management deviated from this probability
weighting in the fourth quarter of 2022, and assigned additional
weight to outer scenarios.
Description of economic scenarios
The economic assumptions presented in this section have been
formed by HSBC with reference to external forecasts and estimates,
specifically for the purpose of calculating ECL.
Economic forecasts in the Central scenario remain subject to a high
degree of uncertainty. Upside and Downside scenarios are
constructed so that they encompass the potential crystallisation of a
number of key macro-financial risks.
At the end of 2022, risks to the economic outlook included the
persistence of high inflation and its consequences on monetary
policy. Rapid changes to public policy also increased forecast
uncertainty.
In Asia, the removal of Chinese Covid-19-related public health
restrictions presents a key source of potential upside risk, but with
significant near-term uncertainty relating to a subsequent surge of
infections. This policy change could also have global implications.
In Europe, risks relating to energy pricing and supply security remain
significant. Geopolitical risks also remain significant and include the
possibility of a prolonged and escalating Russia-Ukraine war,
continued differences between the US and other countries with China
over a range of economic and strategic issues, and the evolution of
the UK’s relationship with the EU.
Economic forecasts for our main markets deteriorated in the fourth
quarter as GDP growth slowed. In North America and Europe, high
inflation and rising interest rates have reduced real household
incomes and raised business costs, dampening consumption and
investment and lowering growth expectations. The effects of higher
interest rate expectations and lower growth are evident in asset price
expectations, with house prices forecasts, in particular, significantly
lower.
In Asia, forecasts for Hong Kong and mainland China were cut
following weaker than expected third-quarter GDP growth, and due to
China’s adherence to a stringent pandemic-related public health policy
response for the majority of the year. While China made an abrupt
reversal of the policy in December and GDP is expected to recover in
2023, there remains a very high degree of uncertainty to both the
upside and downside, and consensus forecasts have been slow to
adjust. The increased uncertainty over China’s lifting of the
restrictions has been reflected in management’s assessment of
scenario probabilities.
The scenarios used to calculate ECL in the Annual Report and
Accounts 2022 are described below.
The consensus Central scenario
HSBC’s Central scenario reflects a low-growth and higher-inflation
environment across many of our key markets. The scenario features
an initial period of below-trend GDP growth in most of our main
markets as higher inflation and tighter monetary policy causes a
squeeze on business margins and households’ real disposable
income. Growth returns to its long-term expected trend in later years
as central banks bring inflation back to target.
However, three of our markets are forecast to experience increased
GDP growth. In Hong Kong and mainland China, GDP growth is
expected to be stronger in 2023 relative to 2022, following several
quarters of negative GDP growth and the suspension of Covid-19-
related restrictions. In the UAE, high oil prices and the continued
recovery of international travel and tourism are expected to ensure
growth remains above trend in the short term.
Our Central scenario assumes that inflation peaked in most of our key
markets at the end of 2022, but remains high through 2023, before
moderating as energy prices stabilise and supply chain disruptions
abate. Central banks are expected to keep raising interest rates until
the middle of 2023. Inflation is forecast to revert to target in most
markets by early 2024.
Global GDP is expected to grow by 1.6% in 2023 in the Central
scenario, and the average rate of global GDP growth is forecast to be
2.5% over the five-year forecast period. This is below the average
growth rate over the five-year period prior to the onset of the
pandemic.
The key features of our Central scenario are:
•Economic activity in European and North American markets
continues to weaken. Most major economies are forecast to grow
in 2023, but at very low rates. Hong Kong and mainland China are
expected to see a recovery in activity from 2023 as Covid-19-
related restrictions are lifted.
•In most markets, unemployment rises moderately from historical
lows as economic activity slows. Labour markets remain fairly
tight across our key markets.
•Inflation is expected to remain elevated across many of our key
markets, driven by energy and food prices. Inflation is
subsequently expected to converge back towards central banks’
target rates over the next two years of the forecast.
•Policy interest rates in key markets will continue to rise in the near
term but at a slower pace. Interest rates will stay elevated but
start to ease as inflation in each of the markets return to target.
•The West Texas Intermediate oil price is forecast to average $72
per barrel over the projection period.
The Central scenario was first created with forecasts available in
November, and reviewed continually until late December. Probability
weights assigned to the Central scenario vary from 55% to 70% and
reflect relative differences in risk and uncertainty across markets.
Risk review

154 | HSBC Holdings plc Annual Report and Accounts 2022

The following table describes key macroeconomic variables and the probabilities assigned in the consensus Central scenario.

Central scenario 2023–2027
| UK | US | Hong Kong | Mainland China | Canada | France | UAE | Mexico
| % | % | % | % | % | % | % | %
GDP growth rate |  |  |  |  |  |  |  |
2023: Annual average growth rate | (0.8) | 0.2 | 2.7 | 4.6 | 0.6 | 0.2 | 3.7 | 1.2
2024: Annual average growth rate | 1.3 | 1.5 | 3.0 | 4.8 | 1.9 | 1.6 | 3.7 | 2.0
2025: Annual average growth rate | 1.7 | 2.0 | 2.7 | 4.7 | 2.0 | 1.5 | 3.1 | 2.3
5-year average | 1.1 | 1.5 | 2.7 | 4.6 | 1.6 | 1.2 | 3.2 | 1.9
Unemployment rate |  |  |  |  |  |  |  |
2023: Annual average rate | 4.4 | 4.3 | 3.7 | 5.2 | 6.1 | 7.6 | 2.9 | 3.7
2024: Annual average rate | 4.6 | 4.5 | 3.5 | 5.1 | 5.9 | 7.5 | 2.8 | 3.7
2025: Annual average rate | 4.3 | 4.2 | 3.4 | 5.0 | 6.0 | 7.3 | 2.8 | 3.5
5-year average | 4.3 | 4.2 | 3.4 | 5.0 | 5.9 | 7.3 | 2.8 | 3.6
House price growth |  |  |  |  |  |  |  |
2023: Annual average growth rate | 0.2 | (2.5) | (10.0) | (0.1) | (15.6) | 1.8 | 5.9 | 7.9
2024: Annual average growth rate | (3.8) | (3.2) | (3.0) | 2.9 | (1.2) | 2.0 | 5.2 | 5.2
2025: Annual average growth rate | 0.7 | (1.0) | 1.7 | 3.5 | 4.0 | 3.1 | 4.5 | 4.2
5-year average | 0.4 | (0.7) | (1.0) | 2.9 | (1.1) | 2.8 | 4.4 | 5.1
Inflation rate |  |  |  |  |  |  |  |
2023: Annual average rate | 6.9 | 4.1 | 2.1 | 2.4 | 3.5 | 4.6 | 3.2 | 5.7
2024: Annual average rate | 2.5 | 2.5 | 2.1 | 2.2 | 2.2 | 2.0 | 2.2 | 4.1
2025: Annual average rate | 2.1 | 2.2 | 2.0 | 2.2 | 2.1 | 1.8 | 2.1 | 3.7
5-year average | 3.1 | 2.7 | 2.1 | 2.2 | 2.4 | 2.4 | 2.3 | 4.2
Probability | 60 | 70 | 55 | 55 | 70 | 60 | 70 | 70

The graphs compare the respective Central scenario at the year end 2021 with economic expectations at the end of 2022.
GDP growth: Comparison of Central scenarios

UK

Note: Real GDP shown as year-on-year percentage change.

Hong Kong

Note: Real GDP shown as year-on-year percentage change.

US

Note: Real GDP shown as year-on-year percentage change.

Mainland China

Note: Real GDP shown as year-on-year percentage change.

HSBC Holdings plc Annual Report and Accounts 2022 | 155

The consensus Upside scenario
Compared with the Central scenario, the consensus Upside scenario
features stronger economic activity in the near term, before
converging to long-run trend expectations. It also incorporates a faster
fall in the rate of inflation than incorporated in the Central scenario.
The scenario is consistent with a number of key upside risk themes.
These include faster resolution of supply chain issues; a rapid
conclusion to the Russia-Ukraine war; de-escalation of tensions
between the US and China; relaxation of Covid-19 policies in Asia; and
improved relations between the UK and the EU.
The following table describes key macroeconomic variables and the
probabilities assigned in the consensus Upside scenario.

Consensus Upside scenario ‘best outcome’
| UK | US | Hong Kong | Mainland China | Canada | France | UAE | Mexico
| % |  | % |  | % |  | % |  | % |  | % |  | % |  | % |
GDP growth rate | 4.4 | (4Q24) | 3.6 | (4Q24) | 9.0 | (3Q23) | 10.3 | (2Q23) | 4.3 | (3Q24) | 3.1 | (1Q24) | 7.8 | (4Q23) | 4.7 | (4Q23)
Unemployment rate | 3.5 | (4Q23) | 3.1 | (3Q23) | 3.0 | (4Q23) | 4.7 | (3Q24) | 5.2 | (3Q24) | 6.5 | (4Q24) | 2.2 | (3Q24) | 3.1 | (3Q23)
House price growth | 4.2 | (1Q23) | 3.6 | (1Q23) | 1.4 | (4Q24) | 6.9 | (4Q24) | 4.9 | (2Q24) | 3.7 | (1Q23) | 9.5 | (2Q24) | 10.3 | (4Q23)
Inflation rate | 0.7 | (1Q24) | 1.6 | (1Q24) | (0.1) | (4Q23) | 0.8 | (4Q23) | 1.0 | (1Q24) | 0.8 | (4Q23) | 1.5 | (3Q24) | 3.2 | (1Q24)
Probability | 5 | 5 | 20 | 20 | 5 | 5 | 5 | 5

Note: Extreme point in the consensus Upside is ‘best outcome’ in the scenario, for example the highest GDP growth and the lowest unemployment rate,
in the first two years of the scenario. The date on which the extreme is reached is indicated in parenthesis. For inflation, lower inflation is interpreted as
the ‘best’ outcome.
Downside scenarios
Downside scenarios explore the intensification and crystallisation of a
number of key economic and financial risks.
High inflation and a stronger monetary policy response have become
key concerns for global growth. In the Downside scenarios, supply
chain disruptions intensify, exacerbated by an escalation in the spread
of Covid-19, and rising geopolitical tensions drive inflation higher.
There also remains a risk that energy and food prices rise further due
to the Russia-Ukraine war, increasing pressure on household budgets
and firms’ costs.
The possibility of inflation expectations becoming detached from
central bank targets also remains a risk. A wage-price spiral triggered
by higher inflation and pandemic-related labour supply shortages
could put sustained upward pressure on wages, 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
and, ultimately, a deep economic recession.
The risks relating to Covid-19 are centred on the emergence of a new
variant with greater vaccine resistance that necessitates the
imposition of stringent public health policies. In Asia, with the
reopening of China in December, management of Covid-19 remains a
key source of uncertainty, with the rapid spread of the virus posing a
heightened risk of new vaccine-resistant variants emerging.
The geopolitical environment also present risks, including:
•a prolonged Russia-Ukraine war with escalation beyond Ukraine’s
borders;
•the deterioration of the trading relationship between the UK and
the EU over the Northern Ireland Protocol; and
•continued differences between the US and other countries with
China, which could affect sentiment and restrict global economic
activity.
The consensus Downside scenario
In the consensus Downside scenario, economic activity is
considerably weaker compared with the Central scenario. In this
scenario, GDP growth weakens below the Central scenario,
unemployment rates rise and asset prices fall. The scenario features a
temporary supply side shock that keeps inflation higher than the
baseline, before the effects of weaker demand begin to dominate,
leading to a fall in commodity prices and to lower inflation.
The following table describes key macroeconomic variables and the
probabilities assigned in the consensus Downside scenario.

Consensus Downside scenario ‘worst outcome’
| UK | US | Hong Kong | Mainland China | Canada | France | UAE | Mexico
| % |  | % |  | % |  | % |  | % |  | % |  | % |  | % |
GDP growth rate | (3.5) | (3Q23) | (3.7) | (4Q23) | (2.2) | (4Q23) | (1.2) | (4Q23) | (3.9) | (4Q23) | (1.4) | (3Q23) | 1.0 | (4Q23) | (2.7) | (4Q23)
Unemployment rate | 5.8 | (2Q24) | 5.9 | (1Q24) | 5.2 | (3Q24) | 5.9 | (4Q23) | 7.6 | (3Q23) | 8.8 | (4Q23) | 4.1 | (3Q23) | 4.4 | (1Q23)
House price growth | (10.1) | (2Q24) | (7.8) | (4Q23) | (14.9) | (2Q23) | (1.9) | (1Q23) | (23.8) | (2Q23) | (0.6) | (4Q23) | (3.0) | (4Q23) | 2.2 | (3Q24)
Inflation rate (min) | (0.4) | (4Q24) | 0.6 | (4Q24) | 0.3 | (4Q24) | 0.7 | (4Q24) | 0.4 | (4Q24) | 0.3 | (4Q24) | 1.8 | (2Q23) | 2.2 | (4Q24)
Inflation rate (max) | 10.8 | (1Q23) | 6.2 | (1Q23) | 3.7 | (4Q23) | 4.0 | (4Q23) | 6.0 | (1Q23) | 7.2 | (1Q23) | 4.5 | (1Q23) | 7.9 | (1Q23)
Probability | 25 | 20 | 20 | 20 | 15 | 25 | 20 | 20

Note: Ex treme poin t in the consensus Downside is ‘worst outcome‘ in the scenario, for example lowest GDP growth and the highest unemployment rate,
in the first two years of the scenario. The date on which the extreme is reached is indicated in parenthesis. Due to the nature of the shock to inflation in
the Downside scenarios, both the lowest and the highest point is shown in the tables.
Downside 2 scenario
The Downside 2 scenario features a deep global recession and
reflects management’s view of the tail of the economic distribution. It
incorporates the crystallisation of a number of risks simultaneously,
including further escalation of the Russia-Ukraine war, worsening of
supply chain disruptions and the emergence of a vaccine-resistant
Covid-19 variant that necessitates a stringent public health policy
response globally.
This scenario features an initial supply-side shock that pushes up
inflation and interest rates higher. This impulse is expected to prove
short lived as a large downside demand pressure causes commodity
prices to correct sharply and global price inflation to fall as a severe
and prolonged recession takes hold.
Risk review

156 | HSBC Holdings plc Annual Report and Accounts 2022

The following table describes key macroeconomic variables and the probabilities assigned in the Downside 2 scenario.

Downside 2 scenario ‘worst outcome’
| UK | US | Hong Kong | Mainland China | Canada | France | UAE | Mexico
| % |  | % |  | % |  | % |  | % |  | % |  | % |  | % |
GDP growth rate | (6.9) | (3Q23) | (5.0) | (4Q23) | (9.2) | (4Q23) | (6.9) | (4Q23) | (5.9) | (4Q23) | (6.8) | (4Q23) | (3.7) | (2Q24) | (7.4) | (4Q23)
Unemployment rate | 8.7 | (2Q24) | 9.5 | (4Q24) | 5.8 | (1Q24) | 6.8 | (4Q24) | 11.6 | (2Q24) | 10.3 | (4Q24) | 4.6 | (2Q24) | 5.6 | (2Q24)
House price growth | (22.9) | (2Q24) | (21.5) | (4Q23) | (18.2) | (1Q24) | (18.5) | (4Q23) | (36.3) | (4Q23) | (6.4) | (2Q24) | (3.6) | (4Q23) | 0.9 | (3Q24)
Inflation rate (min) | (2.3) | (2Q24) | 0.3 | (4Q24) | 0.6 | (4Q24) | 1.0 | (4Q24) | 1.1 | (4Q24) | (2.5) | (2Q24) | 1.7 | (4Q24) | 2.0 | (4Q24)
Inflation rate (max) | 13.5 | (2Q23) | 6.3 | (1Q23) | 4.3 | (4Q23) | 4.6 | (4Q23) | 6.5 | (1Q23) | 10.4 | (2Q23) | 4.8 | (1Q23) | 7.9 | (1Q23)
Probability | 10 | 5 | 5 | 5 | 10 | 10 | 5 | 5

Note: Extreme point in the Downside 2 is ‘worst outcome‘ in the scenario, for example lowest GDP growth and the highest unemployment rate, in the
first two years of the scenario. The date on which the extreme is reached is indicated in parenthesis. Due to the nature of the shock to inflation in the
D ownside scenarios, both the lowest and the highest point is shown in the tables.
Scenario weighting
In reviewing the economic conjuncture, the level of risk and
uncertainty, management has considered both global and country-
specific factors. This has led management to assign scenario
probabilities that are tailored to its view of uncertainty in individual
markets.
Key consideration around uncertainty attached to the Central scenario
projections focused on:
•the progression of the Covid-19 pandemic in Asian countries, and
the announcement of the removal of Covid-19-related measures
and travel restrictions in mainland China and Hong Kong;
•further tightening of monetary policy, and the impact on borrowing
costs in interest-rate sensitive sectors, such as housing;
•the risks to gas supply security in Europe, and the subsequent
impact on inflation and commodity prices and growth; and
•the ongoing risks to global supply chains.
In mainland China and Hong Kong, the announcement of the
relaxation of Covid-19-related measures and travel restrictions has led
to increased uncertainty around the Central scenario projection. It was
management’s view that the easing of the policy could increase risks
to the upside in the form of increased spending and travel. However,
the continuing risks to the downside were also acknowledged, given
the surge in Covid-19 infections and the potential for a new vaccine-
resistant variant. This led management to assign a combined
weighting of 75% to the consensus Upside and Central scenarios in
both markets.
In the UK and US, the surge in price inflation and a squeeze on
household real incomes have led to strong monetary policy responses
from both central banks. Higher interest rates have increased
recession risks and the prospects for outright decline in house prices.
The UK faces additional challenges from the rise in energy prices and
accompanying deterioration in the terms of trade. For Canada and
Mexico, similar risk themes dominate, and the connectivity to the US
has also been a key consideration. For the UK, the consensus Upside
and Central scenarios had a combined weighting of 65%. In each of
the other three markets, the combined weightings of the consensus
Upside and Central scenarios were 75%.
In France, uncertainties around the outlook remain elevated due to
high inflation and Europe’s exposure to the Russia-Ukraine war
through the economic costs incurred from the imposition of
sanctions, trade disruption and energy dependence on Russia. The
consensus Upside and Central scenarios had a combined weighting of
65%.
Management concluded that the outlook for the UAE was the least
uncertain of all our key markets. It is benefiting from higher
commodity prices and the revival in tourism and travel. The
consensus Upside and Central scenarios had a combined weighting of
75%.
The following graphs show the historical and forecasted GDP growth
rate for the various economic scenarios in our four largest markets.

US

UK

Hong Kong

HSBC Holdings plc Annual Report and Accounts 2022 | 157

Mainland China

Critical estimates and judgements
The calculation of ECL under IFRS 9 involves significant judgements,
assumptions and estimates. The level of estimation uncertainty and
judgement has remained elevated since 31 December 2021, including
judgements relating to:
•the selection and weighting of economic scenarios, given rapidly
changing economic conditions and a wide dispersion of economic
forecasts. There is judgement in making assumptions about the
effects of inflation and interest rates, global growth, supply chain
disruption; and
•estimating the economic effects of those scenarios on ECL,
particularly as the historical relationship between macroeconomic
variables and defaults might not reflect the dynamics of current
macroeconomic conditions.
How economic scenarios are reflected in
ECL calculations
Models are used to reflect economic scenarios on ECL estimates. As
described above, modelled assumptions and linkages based on
historical information could not alone produce relevant information
under the conditions experienced in 2022, and management
judgemental adjustments were still required to support modelled
outcomes.
We have developed globally consistent methodologies for the
application of forward economic guidance into the calculation of ECL
for wholesale and retail credit risk. These standard approaches are
described below, followed by the management judgemental
adjustments made, including those to reflect the circumstances
experienced in 2022.
For our wholesale portfolios, a global methodology is used for the
estimation of the term structure of probability of default (‘PD’) and
loss given default (‘LGD’). For PDs, we consider the correlation of
forward economic guidance to default rates for a particular industry in
a country. For LGD calculations, we consider the correlation of
forward economic guidance to collateral values and realisation rates
for a particular country and industry. PDs and LGDs are estimated for
the entire term structure of each instrument.
For impaired loans, LGD estimates take into account independent
recovery valuations provided by external consultants where available
or internal forecasts corresponding to anticipated economic conditions
and individual company conditions. In estimating the ECL on impaired
loans that are individually considered not to be significant, we
incorporate the forward economic guidance proportionate to the
probability-weighted outcome and the Central scenario outcome of
the performing population.
For our retail portfolios, the impact of economic scenarios on PD is
modelled at a portfolio level. Historical relationships between
observed default rates and macroeconomic variables are integrated
into IFRS 9 ECL estimates by using economic response models.
The impact of these scenarios on PD is modelled over a period equal
to the remaining maturity of the underlying asset or assets. The
impact on LGD is modelled for mortgage portfolios by forecasting
future loan-to-value profiles for the remaining maturity of the asset by
using national level forecasts of the house price index and applying
the corresponding LGD expectation.
These models are based largely on historical observations and
correlations with default rates. Management judgemental
adjustments are described below.
Management judgemental adjustments
In the context of IFRS 9, management judgemental adjustments are
typically short-term increases or decreases to the ECL at either a
customer, segment or portfolio level to account for late-breaking
events, model and data limitations and deficiencies, and expert credit
judgement applied following management review and challenge.
This includes refining model inputs and outputs and using
adjustments to ECL based on management judgement and higher-
level quantitative analysis for impacts that are difficult to model.
The effects of management judgemental adjustments are considered
for both balances and 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 145). 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.
At 31 December 2022, there was a $0.9 bn reduction in management
judgemental adjustments compared with 31 December 2021.
Adjustments related to Covid-19 and for sector-specific risks were
reduced as scenarios and modelled outcomes better reflected the key
risks at 31 December 2022.
Management judgemental adjustments made in estimating the
scenario-weighted reported ECL at 31 December 2022 are set out in
the following table.

Management judgemental adjustments to ECL at 31 December 2022 1
| Retail | Wholesale | Total
| $bn | $bn | $bn
Banks, sovereigns, government entities and low-risk counterparties | — | — | —
Corporate lending adjustments |  | 0.5 | 0.5
Retail lending inflation- related adjustments | 0.1 |  | 0.1
Other macroeconomic- related adjustments | 0.1 |  | 0.1
Pandemic-related economic recovery adjustments | — |  | —
Other retail lending adjustments | 0.2 |  | 0.2
Total | 0.3 | 0.5 | 0.8

.
Risk review

158 | HSBC Holdings plc Annual Report and Accounts 2022

Management judgemental adjustments to ECL at 31 December 2021 1
| Retail | Wholesale | Total
| $bn | $bn | $bn
Banks, sovereigns, government entities and low-risk counterparties |  | (0.1) | (0.1)
Corporate lending adjustments |  | 1.3 | 1.3
Retail lending inflation- related adjustments |  |  | —
Other macroeconomic- related adjustments |  |  | —
Pandemic-related economic recovery adjustments | 0.2 |  | 0.2
Other retail lending adjustments | 0.3 |  | 0.3
Total | 0.5 | 1.2 | 1.7

1 Management judgemental adjustments presented in the table reflect
increases or (decreases) to ECL, respectively.
Management judgemental adjustments at 31 December 2022 were
an increase to ECL of $0.5b n for the wholesale portfolio and an
increase to ECL of $0.3b n for the retail portfolio.
At 31 December 2022, wholesale management judgemental
adjustments were an ECL increase of $0.5b n (31 December 2021:
$1.2bn increase).
•Adjustments to corporate exposures increased ECL by $0.5b n at
31 December 2022 (31 December 2021: $1.3b n increase). These
principally reflected the outcome of management judgements for
high-risk and vulnerable sectors in some of our key markets. This
was supported by credit experts’ input, portfolio risk metrics,
short- to medium-term risks under each scenario, model
performance, quantitative analyses and benchmarks.
Considerations include risk of individual exposures under different
macroeconomic scenarios and sub-sector analyses.
The largest increase in ECL was observed in the real estate sector,
including material adjustments to reflect the uncertainty of the
higher-risk Chinese commercial real estate exposures, booked in
Hong Kong.
At 31 December 2022, retail management judgemental adjustments
were an ECL increase of $0.3b n (31 December 2021: $0.5b n
increase).
•Retail lending inflation-related adjustments increased ECL by
$0.1b n (31 December 2021: $0.0b n). These adjustments
addressed where increasing inflation and interest rates result in
affordability risks that were not fully captured by the modelled
output.
•Other macroeconomic-related adjustments increased ECL by
$0.1b n (31 December 2021: $0.0b n). These adjustments were
primarily in relation to country-specific risks related to future
macroeconomic conditions.
•Other retail lending adjustments increased ECL by $0.2b n
(31 December 2021: $0.3b n increase), reflecting all other data,
model and management judgemental adjustments.
•Pandemic-related economic recovery adjustments were removed
during 2022 as scenarios stabilised.
Economic scenarios sensitivity analysis of
ECL estimates
Management considered the sensitivity of the ECL outcome against
the economic forecasts as part of the ECL governance process by
recalculating the ECL under each scenario described above for
selected portfolios, applying a 100% weighting to each scenario in
turn. The weighting is reflected in both the determination of a
significant increase in credit risk and the measurement of the
resulting ECL.
The ECL calculated for the Upside and Downside scenarios should
not be taken to represent the upper and lower limits of possible ECL
outcomes. The impact of defaults that might occur in the future under
different economic scenarios is captured by recalculating ECL for
loans at the balance sheet date.
There is a particularly high degree of estimation uncertainty in
numbers representing more severe risk scenarios when assigned a
100% weighting.
For wholesale credit risk exposures, the sensitivity analysis excludes
ECL and financial instruments related to defaulted (stage 3) obligors.
It is generally impracticable to separate the effect of macroeconomic
factors in individual assessments of obligors in default. The
measurement of stage 3 ECL is relatively more sensitive to credit
factors specific to the obligor than future economic scenarios, and
loans to defaulted obligors are a small portion of the overall wholesale
lending exposure, even if representing the majority of the allowance
for ECL. Therefore, the sensitivity analysis to macroeconomic
scenarios does not capture the residual estimation risk arising from
wholesale stage 3 exposures. Due to the range and specificity of the
credit factors to which the ECL is sensitive, it is not possible to
provide a meaningful alternative sensitivity analysis for a consistent
set of risks across all defaulted obligors.
For retail credit risk exposures, the sensitivity analysis includes ECL
for loans and advances to customers related to defaulted obligors.
This is because the retail ECL for secured mortgage portfolios
including loans in all stages is sensitive to macroeconomic variables.
Wholesale and retail sensitivity
The wholesale and retail sensitivity tables present the 100%
weighted results. These exclude portfolios held by the insurance
business and small portfolios, and as such cannot be directly
compared with personal and wholesale lending presented in other
credit risk tables. 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 judgemental adjustments, as appropriate to each
scenario.

HSBC Holdings plc Annual Report and Accounts 2022 | 159

Wholesale analysis

IFRS 9 ECL sensitivity to future economic conditions 1,2,3
| Gross carrying amount 2 | Reported ECL | Consensus Central scenario ECL | Consensus Upside scenario ECL | Consensus Downside scenario ECL | Downside 2 scenario ECL
By geography at 31 Dec 2022 | $m | $m | $m | $m | $m | $m
UK | 421,685 | 769 | 624 | 484 | 833 | 2,240
US | 190,858 | 277 | 241 | 227 | 337 | 801
Hong Kong | 415,875 | 925 | 819 | 592 | 1,315 | 2,161
Mainland China | 125,466 | 295 | 242 | 144 | 415 | 1,227
Canada 4 | 83,274 | 126 | 80 | 60 | 148 | 579
Mexico | 26,096 | 88 | 80 | 67 | 116 | 313
UAE | 45,064 | 45 | 41 | 30 | 55 | 93
France | 173,146 | 110 | 102 | 90 | 121 | 145

By geography at 31 Dec 2021 |  |  |  |  |  |
UK | 483,273 | 920 | 727 | 590 | 944 | 1,985
US | 227,817 | 227 | 204 | 155 | 317 | 391
Hong Kong | 434,608 | 767 | 652 | 476 | 984 | 1,869
Mainland China | 120,627 | 149 | 113 | 36 | 216 | 806
Canada 4 | 85,117 | 151 | 98 | 61 | 150 | 1,121
Mexico | 23,054 | 118 | 80 | 61 | 123 | 358
UAE | 44,767 | 158 | 122 | 73 | 214 | 711
France | 163,845 | 133 | 121 | 106 | 162 | 187

1 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 170.
4 Classified as held for sale at 31 December 2022.
At 31 December 2021, the most significant level of ECL sensitivity
was observed in the UK, Hong Kong and mainland China.
Real estate was the sector with higher sensitivity to a severe
Downside scenario, namely in Hong Kong and mainland China due to
higher risk of some material exposures.
In the UK, the real estate and services sectors accounted for the
majority of ECL sensitivity due to higher exposure to these sectors in
this market.
Risk review

160 | HSBC Holdings plc Annual Report and Accounts 2022

Retail analysis

IFRS 9 ECL sensitivity to future economic conditions 1
| Gross carrying amount | Reported ECL | Consensus Central scenario ECL | Consensus Upside scenario ECL | Consensus Downside scenario ECL | Downside 2 scenario ECL
By geography at 31 December 2022 | $m | $m | $m | $m | $m | $m
UK |  |  |  |  |  |
Mortgages | 147,306 | 204 | 188 | 183 | 189 | 399
Credit cards | 6,518 | 455 | 434 | 396 | 442 | 719
Other | 7,486 | 368 | 333 | 274 | 383 | 605
Mexico |  |  |  |  |  |
Mortgages | 6,319 | 152 | 127 | 102 | 183 | 270
Credit cards | 1,616 | 198 | 162 | 97 | 233 | 289
Other | 3,447 | 438 | 400 | 318 | 503 | 618
Hong Kong |  |  |  |  |  |
Mortgages | 100,107 | 1 | 1 | — | 1 | 1
Credit cards | 8,003 | 261 | 227 | 180 | 417 | 648
Other | 5,899 | 85 | 81 | 74 | 100 | 123
UAE |  |  |  |  |  |
Mortgages | 2,170 | 37 | 37 | 36 | 38 | 38
Credit cards | 441 | 41 | 37 | 21 | 68 | 86
Other | 718 | 17 | 17 | 15 | 19 | 22
France 3 |  |  |  |  |  |
Mortgages | 21,440 | 51 | 50 | 50 | 51 | 52
Other | 1,433 | 54 | 53 | 52 | 55 | 59
US |  |  |  |  |  |
Mortgages | 13,489 | 7 | 6 | 6 | 8 | 15
Credit cards | 219 | 26 | 25 | 23 | 27 | 36
Canada 2 |  |  |  |  |  |
Mortgages | 25,163 | 45 | 44 | 43 | 46 | 58
Credit cards | 299 | 10 | 9 | 8 | 11 | 11
Other | 1,399 | 16 | 14 | 13 | 17 | 36

IFRS 9 ECL sensitivity to future economic conditions 1
| Gross carrying amount | Reported ECL | Consensus Central scenario ECL | Consensus Upside scenario ECL | Consensus Downside scenario ECL | Downside 2 scenario ECL
By geography at 31 December 2021 | $m | $m | $m | $m | $m | $m
UK |  |  |  |  |  |
Mortgages | 155,084 | 191 | 182 | 175 | 197 | 231
Credit cards | 8,084 | 439 | 381 | 330 | 456 | 987
Other | 7,902 | 369 | 298 | 254 | 388 | 830
Mexico |  |  |  |  |  |
Mortgages | 4,972 | 123 | 116 | 106 | 130 | 164
Credit cards | 1,167 | 141 | 134 | 122 | 150 | 176
Other | 2,935 | 366 | 360 | 350 | 374 | 401
Hong Kong |  |  |  |  |  |
Mortgages | 96,697 | — | — | — | — | —
Credit cards | 7,644 | 218 | 206 | 154 | 231 | 359
Other | 5,628 | 109 | 101 | 88 | 128 | 180
UAE |  |  |  |  |  |
Mortgages | 1,982 | 45 | 44 | 42 | 46 | 57
Credit cards | 429 | 43 | 41 | 29 | 54 | 82
Other | 615 | 19 | 18 | 13 | 21 | 25
France |  |  |  |  |  |
Mortgages | 23,159 | 63 | 62 | 62 | 63 | 64
Other | 1,602 | 61 | 61 | 60 | 61 | 63
US |  |  |  |  |  |
Mortgages | 15,379 | 28 | 27 | 26 | 29 | 41
Credit cards | 446 | 80 | 76 | 70 | 83 | 118
Canada |  |  |  |  |  |
Mortgages | 26,097 | 28 | 27 | 26 | 29 | 48
Credit cards | 279 | 9 | 9 | 9 | 10 | 13
Other | 1,598 | 19 | 18 | 17 | 19 | 27

1 ECL sensitivities exclude portfolios utilising less complex modelling approaches.
2 Classified as ‘assets held for sale’ at 31 December 2022.
3 Includes balances and ECL, which have been reclassified from ‘loans and advances to customers’ to ‘assets held for sale’ in the balance sheet. This
also includes any balances and ECL which continue to be reported as personal lending in ‘loans and advances to customers’ that are in accordance
with the basis of inclusion for retail sensitivity analysis.

HSBC Holdings plc Annual Report and Accounts 2022 | 161

At 31 December 2022, the most significant level of ECL sensitivity
was observed in the UK, Mexico and Hong Kong. Mortgages reflected
the lowest level of ECL sensitivity across most markets as collateral
values remained resilient. Hong Kong mortgages had low levels of
reported ECL due to the credit quality of the portfolio. Credit cards
and other unsecured lending are more sensitive to economic
forecasts, and therefore reflected the highest level of ECL sensitivity
during 2022.
Group ECL sensitivity results
The ECL impact of the scenarios and management judgemental
adjustments are highly sensitive to movements in economic
forecasts. Based upon the sensitivity tables presented above, if the
Group ECL balance was estimated solely on the basis of the Central
scenario, Downside scenario or the Downside 2 scenario at
31 December 2022, it would increase/(decrease) as presented in the
below table.

| Retail 1 | Wholesale 1
Total Group ECL at 31 December 2022 | $bn | $bn
Reported ECL | 3.0 | 3.1
Scenarios |  |
100% Consensus Central scenario | (0.2) | (0.5)
100% Consensus Upside scenario | (0.6) | (1.1)
100% Consensus Downside scenario | 0.4 | 0.8
100% Downside 2 scenario | 1.8 | 5.5

| Retail 1 | Wholesale
Total Group ECL at 31 December 2021 | $bn | $bn
Reported ECL | 3.0 | 3.1
Scenarios |  |
100% Consensus Central scenario | (0.2) | (0.6)
100% Consensus Upside scenario | (0.5) | (1.2)
100% Consensus Downside scenario | 0.2 | 0.6
100% Downside 2 scenario | 2.0 | 5.5

1 On the same basis as retail and wholesale sensitivity analysis.
At Group level for both the retail and wholesale portfolios, the
reported ECL in scope of this analysis remained stable since
31 December 2021. The Group total Downside 2 scenario ECL
continues to present the highest level of sensitivity.
The ECL sensitivity for the Central scenario remained flat for the
wholesale and retail portfolios from the previous year. For the
remaining scenarios, the changes in ECL sensitivity from the previous
year were reflective of geographical and sector risks, which increased
or reduced accordingly with macroeconomic conditions.
Reconciliation of changes in gross
carrying/nominal amount and
allowances for loans and advances to
banks and customers including loan
commitments and financial
guarantees
The following disclosure provides a reconciliation by stage of the
Group’s gross carrying/nominal amount and allowances for loans and
advances to banks and customers, including loan commitments and
financial guarantees. Movements are calculated on a quarterly basis
and therefore fully capture stage movements between quarters. If
movements were calculated on a year-to-date basis they would only
reflect the opening and closing position of the financial instrument.
The transfers of financial instruments represents the impact of stage
transfers upon the gross carrying/nominal amount and associated
allowance for ECL.
The net remeasurement of ECL arising from stage transfers
represents the increase or decrease due to these transfers, for
example, moving from a 12-month (stage 1) to a lifetime (stage 2)
ECL measurement basis. Net remeasurement excludes the
underlying customer risk rating (‘CRR’)/probability of default (‘PD’)
movements of the financial instruments transferring stage. This is
captured, along with other credit quality movements in the ‘changes
in risk parameters – credit quality’ line item.
Changes in ‘New financial assets originated or purchased’, ‘assets
derecognised (including final repayments)’ and ‘changes to risk
parameters – further lending/repayment’ represent the impact from
volume movements within the Group’s lending portfolio.
Risk review

162 | HSBC Holdings plc Annual Report and Accounts 2022

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
(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
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2022 | 1,577,582 | (1,557) | 155,742 | (3,326) | 19,797 | (6,928) | 274 | (64) | 1,753,395 | (11,875)
Transfers of financial instruments: | (99,022) | (798) | 89,052 | 1,620 | 9,970 | (822) | — | — | — | —
– transfers from stage 1 to stage 2 | (225,616) | 470 | 225,616 | (470) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 128,246 | (1,216) | (128,246) | 1,216 | — | — | — | — | — | —
– transfers to stage 3 | (2,392) | 9 | (10,087) | 1,132 | 12,479 | (1,141) | — | — | — | —
– transfers from stage 3 | 740 | (61) | 1,769 | (258) | (2,509) | 319 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 739 | — | (953) | — | (152) | — | — | — | (366)
New financial assets originated or purchased | 483,617 | (548) | — | — | — | — | 26 | (2) | 483,643 | (550)
Assets derecognised (including final repayments) | (318,659) | 148 | (37,941) | 343 | (2,806) | 416 | (97) | — | (359,503) | 907
Changes to risk parameters – further lending/repayment | (65,778) | 226 | (6,963) | 93 | (594) | 259 | (61) | 5 | (73,396) | 583
Changes to risk parameters – credit quality | — | 403 | — | (1,670) | — | (3,019) | — | 32 | — | (4,254)
Changes to models used for ECL calculation | — | 4 | — | (151) | — | 13 | — | — | — | (134)
Assets written off | — | — | — | — | (2,794) | 2,794 | (10) | 10 | (2,804) | 2,804
Credit-related modifications that resulted in derecognition | — | — | — | — | (32) | 9 | — | — | (32) | 9
Foreign exchange | (81,975) | 59 | (8,811) | 170 | (1,395) | 323 | (3) | 1 | (92,184) | 553
Others 1 | (60,557) | 64 | (13,716) | 161 | (938) | 158 | — | (20) | (75,211) | 363
At 31 Dec 2022 | 1,435,208 | (1,260) | 177,363 | (3,713) | 21,208 | (6,949) | 129 | (38) | 1,633,908 | (11,960)
ECL income statement change for the period |  | 972 |  | (2,338) |  | (2,483) |  | 35 |  | (3,814)
Recoveries |  |  |  |  |  |  |  |  |  | 316
Others |  |  |  |  |  |  |  |  |  | (26)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (3,524)

1 Total includes $82.7b n 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 $426m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups
held for sale’ on page 389.

| At 31 Dec 2022 | 12 months ended 31 Dec 2022
| Gross carrying/ nominal amount | Allowance for ECL | ECL charge
| $m | $m | $m
As above | 1,633,908 | (11,960) | (3,524)
Other financial assets measured at amortised cost | 1,014,498 | (553) | (41)
Non-trading reverse purchase agreement commitments | 44,921 | — | —
Performance and other guarantees not considered for IFRS 9 | — | — | 41
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 2,693,327 | (12,513) | (3,524)
Debt instruments measured at FVOCI | 266,303 | (145) | (68)
Total allowance for ECL/total income statement ECL change for the period | n/a | (12,658) | (3,592)

As shown in the previous table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees increased $85m during the period from
$11,875m at 31 December 2021 to $11,960m at 31 December 2022.
This increase was primarily driven by:
•$4,254m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between
stages;

HSBC Holdings plc Annual Report and Accounts 2022 | 163

•$366m relating to the net remeasurement impact of stage
transfers; and
•$134m of changes to models used for ECL calculation.
These were partly offset by:
•$2,804m of assets written off;
•$940m relating to volume movements, which included the ECL
allowance associated with new originations, assets derecognised
and further lending/repayment; and
•foreign exchange and other movements of $916m.
The ECL charge for the period of $3,814m presented in the previous
table consisted of $4,254m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages, $366m relating to the net
remeasurement impact of stage transfers, and $134m in changes to
models used for ECL calculation. This was partly offset by $940m
relating to underlying net book volume movement.
Summary views of the movement in wholesale and personal lending
are presented on pages 173 and 191.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
(Audited)
| Non-credit impaired | Credit impaired |  |
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| Gross exposure | Allowance / provision for ECL | Gross exposure | Allowance / provision for ECL | Gross exposure | Allowance/ provision for ECL | Gross exposure | Allowance / provision for ECL | Gross exposure | Allowance/ provision for ECL
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2021 | 1,506,451 | (2,331) | 223,432 | (5,403) | 20,424 | (7,544) | 279 | (113) | 1,750,586 | (15,391)
Transfers of financial instruments: | 21,107 | (1,792) | (27,863) | 2,601 | 6,756 | (809) | — | — | — | —
– transfers from stage 1 to stage 2 | (159,633) | 527 | 159,633 | (527) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 182,432 | (2,279) | (182,432) | 2,279 | — | — | — | — | — | —
– transfers to stage 3 | (2,345) | 24 | (6,478) | 1,010 | 8,823 | (1,034) | — | — | — | —
– transfers from stage 3 | 653 | (64) | 1,414 | (161) | (2,067) | 225 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 1,225 | — | (596) | — | (34) | — | — | — | 595
New financial assets originated or purchased | 444,070 | (553) | — | — | — | — | 124 | — | 444,194 | (553)
Assets derecognised (including final repayments) | (304,158) | 174 | (31,393) | 489 | (2,750) | 458 | (10) | 6 | (338,311) | 1,127
Changes to risk parameters – further lending/repayment | (61,742) | 547 | (3,634) | 498 | (1,268) | 576 | (108) | 12 | (66,752) | 1,633
Changes to risk parameters – credit quality | — | 1,111 | — | (1,012) | — | (2,354) | — | 28 | — | (2,227)
Changes to models used for ECL calculation | — | (17) | — | (33) | — | 1 | — | — | — | (49)
Assets written off | — | — | — | — | (2,610) | 2,605 | (7) | 7 | (2,617) | 2,612
Credit-related modifications that resulted in derecognition | — | — | — | — | (125) | — | — | — | (125) | —
Foreign exchange | (25,231) | 26 | (2,918) | 45 | (479) | 157 | (4) | 1 | (28,632) | 229
Others 1 | (2,915) | 53 | (1,882) | 85 | (151) | 16 | — | (5) | (4,948) | 149
At 31 Dec 2021 | 1,577,582 | (1,557) | 155,742 | (3,326) | 19,797 | (6,928) | 274 | (64) | 1,753,395 | (11,875)
ECL income statement change for the period |  | 2,487 |  | (654) |  | (1,353) |  | 46 |  | 526
Recoveries |  |  |  |  |  |  |  |  |  | 409
Others |  |  |  |  |  |  |  |  |  | (111)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 824

1 Total includes $3.0b n of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance
for ECL of $123m, reflecting our exit of the domestic mass market retail banking in the US.

| At 31 Dec 2021 | 12 months ended 31 Dec 2021
| Gross carrying/ nominal amount | Allowance for ECL | ECL charge
| $m | $m | $m
As above | 1,753,395 | (11,875) | 824
Other financial assets measured at amortised cost | 880,351 | (193) | (19)
Non-trading reverse purchase agreement commitments | 42,421 | — | —
Performance and other guarantees not considered for IFRS 9 | — | — | 75
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/Summary consolidated income statement | 2,676,167 | (12,068) | 880
Debt instruments measured at FVOCI | 347,203 | (96) | 48
Total allowance for ECL/total income statement ECL change for the period | n/a | (12,164) | 928

Risk review

164 | HSBC Holdings plc Annual Report and Accounts 2022

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 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 146.

Distribution of financial instruments by credit quality at 31 December 2022
(Audited)
| Gross carrying/notional amount | Allowance for ECL/ other credit provisions | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
| $m | $m | $m | $m | $m | $m | $m | $m
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 492,848 | 197,560 | 196,819 | 29,446 | 19,634 | 936,307 | (11,453) | 924,854
– personal | 333,838 | 45,696 | 28,942 | 3,196 | 3,340 | 415,012 | (2,872) | 412,140
– corporate and commercial | 126,659 | 132,847 | 154,135 | 24,890 | 15,825 | 454,356 | (8,324) | 446,032
– non-bank financial institutions | 32,351 | 19,017 | 13,742 | 1,360 | 469 | 66,939 | (257) | 66,682
Loans and advances to banks held at amortised cost | 93,025 | 4,890 | 5,643 | 1,311 | 82 | 104,951 | (69) | 104,882
Cash and balances at central banks | 325,119 | 1,296 | 590 | — | — | 327,005 | (3) | 327,002
Items in the course of collection from other banks | 7,280 | 12 | 5 | — | — | 7,297 | — | 7,297
Hong Kong Government certificates of indebtedness | 43,787 | — | — | — | — | 43,787 | — | 43,787
Reverse repurchase agreements – non-trading | 170,386 | 41,659 | 41,686 | 20 | 3 | 253,754 | — | 253,754
Financial investments | 151,385 | 14,113 | 3,121 | 161 | 47 | 168,827 | (80) | 168,747
Assets held for sale | 67,617 | 17,993 | 13,972 | 2,333 | 641 | 102,556 | (415) | 102,141
Other assets | 91,114 | 10,911 | 8,821 | 274 | 152 | 111,272 | (55) | 111,217
– endorsements and acceptances | 2,350 | 3,059 | 2,815 | 175 | 25 | 8,424 | (17) | 8,407
– accrued income and other | 88,764 | 7,852 | 6,006 | 99 | 127 | 102,848 | (38) | 102,810
Debt instruments measured at fair value through other comprehensive income 1 | 261,247 | 10,132 | 5,981 | 1,949 | 42 | 279,351 | (145) | 279,206
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 91,330 | 14,371 | 23,415 | 820 | 133 | 130,069 | — | 130,069
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 6,281 | 809 | 1,785 | 110 | — | 8,985 | — | 8,985
Derivatives | 241,905 | 34,181 | 7,843 | 181 | 36 | 284,146 | — | 284,146
Assets held for sale | 15,254 | — | — | — | — | 15,254 | — | 15,254
Total gross carrying amount on balance sheet | 2,058,578 | 347,927 | 309,681 | 36,605 | 20,770 | 2,773,561 | (12,220) | 2,761,341
Percentage of total credit quality | 74.2% | 12.5% | 11.2% | 1.3% | 0.8% | 100% |  |
Loan and other credit-related commitments | 402,972 | 132,402 | 74,410 | 7,632 | 1,372 | 618,788 | (386) | 618,402
Financial guarantees | 8,281 | 4,669 | 4,571 | 1,013 | 249 | 18,783 | (52) | 18,731
In-scope: Irrevocable loan commitments and financial guarantees | 411,253 | 137,071 | 78,981 | 8,645 | 1,621 | 637,571 | (438) | 637,133
Loan and other credit-related commitments | 76,095 | 69,667 | 59,452 | 3,360 | 489 | 209,063 | — | 209,063
Performance and other guarantees | 37,943 | 30,029 | 17,732 | 2,137 | 399 | 88,240 | (110) | 88,130
Out-of-scope: Revocable loan commitments and non- financial guarantees | 114,038 | 99,696 | 77,184 | 5,497 | 888 | 297,303 | (110) | 297,193

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

HSBC Holdings plc Annual Report and Accounts 2022 | 165

Distribution of financial instruments by credit quality at 31 December 2021 (continued)
(Audited)
| Gross carrying/notional amount | Allowance for ECL/other credit provisions | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
| $m | $m | $m | $m | $m | $m | $m | $m
In-scope for IFRS 9 ECL |  |  |  |  |  |  |  |
Loans and advances to customers held at amortised cost | 544,695 | 230,326 | 233,739 | 29,404 | 19,067 | 1,057,231 | (11,417) | 1,045,814
– personal | 388,903 | 52,080 | 30,492 | 1,920 | 4,942 | 478,337 | (3,103) | 475,234
– corporate and commercial | 124,819 | 158,938 | 188,858 | 27,194 | 13,730 | 513,539 | (8,204) | 505,335
– non-bank financial institutions | 30,973 | 19,308 | 14,389 | 290 | 395 | 65,355 | (110) | 65,245
Loans and advances to banks held at amortised cost | 72,978 | 4,037 | 5,020 | 1,118 | — | 83,153 | (17) | 83,136
Cash and balances at central banks | 400,176 | 1,675 | 1,171 | — | — | 403,022 | (4) | 403,018
Items in the course of collection from other banks | 4,122 | 10 | 4 | — | — | 4,136 | — | 4,136
Hong Kong Government certificates of indebtedness | 42,578 | — | — | — | — | 42,578 | — | 42,578
Reverse repurchase agreements – non-trading | 175,576 | 46,412 | 18,881 | 779 | — | 241,648 | — | 241,648
Financial investments | 84,477 | 11,442 | 1,401 | 1 | 43 | 97,364 | (62) | 97,302
Assets held for sale | 560 | 1,112 | 936 | 110 | 141 | 2,859 | (43) | 2,816
Other assets | 66,537 | 10,997 | 10,749 | 298 | 163 | 88,744 | (84) | 88,660
– endorsements and acceptances | 1,742 | 5,240 | 4,038 | 199 | 26 | 11,245 | (17) | 11,228
– accrued income and other | 64,795 | 5,757 | 6,711 | 99 | 137 | 77,499 | (67) | 77,432
Debt instruments measured at fair value through other comprehensive income 1 | 320,161 | 12,298 | 11,677 | 1,087 | 46 | 345,269 | (96) | 345,173
Out-of-scope for IFRS 9 |  |  |  |  |  |  |  |
Trading assets | 101,879 | 16,254 | 20,283 | 678 | 134 | 139,228 | — | 139,228
Other financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 6,438 | 723 | 4,455 | 150 | — | 11,766 | — | 11,766
Derivatives | 146,748 | 42,717 | 6,691 | 719 | 7 | 196,882 | — | 196,882
Total gross carrying amount on balance sheet | 1,966,925 | 378,003 | 315,007 | 34,344 | 19,601 | 2,713,880 | (11,723) | 2,702,157
Percentage of total credit quality | 72.5% | 13.9% | 11.6% | 1.3% | 0.7% | 100% |  |
Loan and other credit-related commitments | 389,865 | 136,297 | 92,558 | 8,142 | 775 | 627,637 | (379) | 627,258
Financial guarantees | 16,511 | 4,902 | 5,166 | 991 | 225 | 27,795 | (62) | 27,733
In-scope: Irrevocable loan commitments and financial guarantees | 406,376 | 141,199 | 97,724 | 9,133 | 1,000 | 655,432 | (441) | 654,991
Loan and other credit-related commitments | 62,701 | 65,031 | 56,446 | 3,327 | 332 | 187,837 | — | 187,837
Performance and other guarantees | 31,510 | 32,193 | 19,265 | 2,027 | 539 | 85,534 | (179) | 85,355
Out-of-scope: Revocable loan commitments and non-financial guarantees | 94,211 | 97,224 | 75,711 | 5,354 | 871 | 273,371 | (179) | 273,192

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

166 | HSBC Holdings plc Annual Report and Accounts 2022

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
| Gross carrying/notional amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
| $m | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers at amortised cost | 492,848 | 197,560 | 196,819 | 29,446 | 19,634 | 936,307 | (11,453) | 924,854
– stage 1 | 458,843 | 170,875 | 142,695 | 5,130 | — | 777,543 | (1,095) | 776,448
– stage 2 | 34,005 | 26,685 | 54,124 | 24,316 | — | 139,130 | (3,491) | 135,639
– stage 3 | — | — | — | — | 19,505 | 19,505 | (6,829) | 12,676
– POCI | — | — | — | — | 129 | 129 | (38) | 91
Loans and advances to banks at amortised cost | 93,025 | 4,890 | 5,643 | 1,311 | 82 | 104,951 | (69) | 104,882
– stage 1 | 92,696 | 4,465 | 5,466 | 415 | — | 103,042 | (18) | 103,024
– stage 2 | 329 | 425 | 177 | 896 | — | 1,827 | (29) | 1,798
– stage 3 | — | — | — | — | 82 | 82 | (22) | 60
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 856,688 | 85,984 | 68,195 | 2,788 | 843 | 1,014,498 | (553) | 1,013,945
– stage 1 | 855,523 | 80,175 | 60,583 | 208 | — | 996,489 | (124) | 996,365
– stage 2 | 1,165 | 5,809 | 7,612 | 2,580 | — | 17,166 | (188) | 16,978
– stage 3 | — | — | — | — | 797 | 797 | (234) | 563
– POCI | — | — | — | — | 46 | 46 | (7) | 39
Loan and other credit-related commitments | 402,972 | 132,402 | 74,410 | 7,632 | 1,372 | 618,788 | (386) | 618,402
– stage 1 | 398,120 | 121,581 | 60,990 | 2,692 | — | 583,383 | (141) | 583,242
– stage 2 | 4,852 | 10,821 | 13,420 | 4,940 | — | 34,033 | (180) | 33,853
– stage 3 | — | — | — | — | 1,372 | 1,372 | (65) | 1,307
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 8,281 | 4,669 | 4,571 | 1,013 | 249 | 18,783 | (52) | 18,731
– stage 1 | 8,189 | 4,245 | 3,488 | 149 | — | 16,071 | (6) | 16,065
– stage 2 | 92 | 424 | 1,083 | 864 | — | 2,463 | (13) | 2,450
– stage 3 | — | — | — | — | 249 | 249 | (33) | 216
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2022 | 1,853,814 | 425,505 | 349,638 | 42,190 | 22,180 | 2,693,327 | (12,513) | 2,680,814
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 260,941 | 10,000 | 5,690 | — | — | 276,631 | (68) | 276,563
– stage 2 | 306 | 132 | 291 | 1,949 | — | 2,678 | (69) | 2,609
– stage 3 | — | — | — | — | 5 | 5 | (1) | 4
– POCI | — | — | — | — | 37 | 37 | (7) | 30
At 31 Dec 2022 | 261,247 | 10,132 | 5,981 | 1,949 | 42 | 279,351 | (145) | 279,206

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

HSBC Holdings plc Annual Report and Accounts 2022 | 167

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 |  |
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total | Allowance for ECL | Net
| $m | $m | $m | $m | $m | $m | $m | $m
Loans and advances to customers at amortised cost | 544,695 | 230,326 | 233,739 | 29,404 | 19,067 | 1,057,231 | (11,417) | 1,045,814
– stage 1 | 537,642 | 206,645 | 169,809 | 4,840 | — | 918,936 | (1,367) | 917,569
– stage 2 | 7,053 | 23,681 | 63,930 | 24,560 | — | 119,224 | (3,119) | 116,105
– stage 3 | — | — | — | — | 18,797 | 18,797 | (6,867) | 11,930
– POCI | — | — | — | 4 | 270 | 274 | (64) | 210
Loans and advances to banks at amortised cost | 72,978 | 4,037 | 5,020 | 1,118 | — | 83,153 | (17) | 83,136
– stage 1 | 72,903 | 3,935 | 4,788 | 10 | — | 81,636 | (14) | 81,622
– stage 2 | 75 | 102 | 232 | 1,108 | — | 1,517 | (3) | 1,514
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | — | — | — | —
Other financial assets measured at amortised cost | 774,026 | 71,648 | 33,142 | 1,188 | 347 | 880,351 | (193) | 880,158
– stage 1 | 773,427 | 70,508 | 30,997 | 84 | — | 875,016 | (91) | 874,925
– stage 2 | 599 | 1,140 | 2,145 | 1,104 | — | 4,988 | (54) | 4,934
– stage 3 | — | — | — | — | 304 | 304 | (42) | 262
– POCI | — | — | — | — | 43 | 43 | (6) | 37
Loan and other credit-related commitments | 389,865 | 136,297 | 92,558 | 8,142 | 775 | 627,637 | (379) | 627,258
– stage 1 | 387,434 | 129,455 | 76,043 | 1,541 | — | 594,473 | (165) | 594,308
– stage 2 | 2,431 | 6,842 | 16,515 | 6,601 | — | 32,389 | (174) | 32,215
– stage 3 | — | — | — | — | 775 | 775 | (40) | 735
– POCI | — | — | — | — | — | — | — | —
Financial guarantees | 16,511 | 4,902 | 5,166 | 991 | 225 | 27,795 | (62) | 27,733
– stage 1 | 16,351 | 4,469 | 3,929 | 183 | — | 24,932 | (11) | 24,921
– stage 2 | 160 | 433 | 1,237 | 808 | — | 2,638 | (30) | 2,608
– stage 3 | — | — | — | — | 225 | 225 | (21) | 204
– POCI | — | — | — | — | — | — | — | —
At 31 Dec 2021 | 1,798,075 | 447,210 | 369,625 | 40,843 | 20,414 | 2,676,167 | (12,068) | 2,664,099
Debt instruments at FVOCI 1 |  |  |  |  |  |  |  |
– stage 1 | 319,557 | 12,196 | 11,354 | — | — | 343,107 | (67) | 343,040
– stage 2 | 604 | 102 | 323 | 1,087 | — | 2,116 | (22) | 2,094
– stage 3 | — | — | — | — | — | — | — | —
– POCI | — | — | — | — | 46 | 46 | (7) | 39
At 31 Dec 2021 | 320,161 | 12,298 | 11,677 | 1,087 | 46 | 345,269 | (96) | 345,173

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

168 | HSBC Holdings plc Annual Report and Accounts 2022

Forbearance
The following table shows the gross carrying amounts and allowances for ECL 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 145.

Forborne loans and advances to customers at amortised cost by stage allocation
| Performing – forborne | Non-performing – forborne | Total – forborne
| Stage 1 | Stage 2 | Stage 3 | POCI | Total
| $m | $m | $m | $m | $m
Gross carrying amount |  |  |  |  |
Personal | — | 651 | 1,171 | — | 1,822
– first lien residential mortgages | — | 369 | 738 | — | 1,107
– second lien residential mortgages | — | — | 7 | — | 7
– guaranteed loans in respect of residential property | — | — | 4 | — | 4
– other personal lending which is secured | — | 5 | 13 | — | 18
– credit cards | — | 93 | 75 | — | 168
– other personal lending which is unsecured | — | 179 | 334 | — | 513
– motor vehicle finance | — | 5 | — | — | 5
Wholesale | — | 4,873 | 4,576 | 107 | 9,556
– corporate and commercial | — | 4,859 | 4,562 | 107 | 9,528
– non-bank financial institutions | — | 14 | 14 | — | 28
At 31 Dec 2022 | — | 5,524 | 5,747 | 107 | 11,378
Allowance for ECL |  |  |  |  |
Personal | — | (124) | (302) | — | (426)
– first lien residential mortgages | — | (49) | (118) | — | (167)
– second lien residential mortgages | — | — | (3) | — | (3)
– guaranteed loans in respect of residential property | — | — | (3) | — | (3)
– other personal lending which is secured | — | — | (2) | — | (2)
– credit cards | — | (19) | (44) | — | (63)
– other personal lending which is unsecured | — | (54) | (132) | — | (186)
– motor vehicle finance | — | (2) | — | — | (2)
Wholesale | — | (152) | (1,497) | (25) | (1,674)
– corporate and commercial | — | (151) | (1,490) | (25) | (1,666)
– non-bank financial institutions | — | (1) | (7) | — | (8)
At 31 Dec 2022 | — | (276) | (1,799) | (25) | (2,100)

Gross carrying amount |  |  |  |  |
Personal | — | — | 2,256 | — | 2,256
– first lien residential mortgages | — | — | 1,547 | — | 1,547
– second lien residential mortgages | — | — | 22 | — | 22
– guaranteed loans in respect of residential property | — | — | 23 | — | 23
– other personal lending which is secured | — | — | 39 | — | 39
– credit cards | — | — | 168 | — | 168
– other personal lending which is unsecured | — | — | 456 | — | 456
– motor vehicle finance | — | — | 1 | — | 1
Wholesale | 366 | 559 | 4,505 | 253 | 5,683
– corporate and commercial | 355 | 550 | 4,491 | 253 | 5,649
– non-bank financial institutions | 11 | 9 | 14 | — | 34
At 31 Dec 2021 1 | 366 | 559 | 6,761 | 253 | 7,939
Allowance for ECL |  |  |  |  |
Personal | — | — | (400) | — | (400)
– first lien residential mortgages | — | — | (178) | — | (178)
– second lien residential mortgages | — | — | (6) | — | (6)
– guaranteed loans in respect of residential property | — | — | (7) | — | (7)
– other personal lending which is secured | — | — | (5) | — | (5)
– credit cards | — | — | (53) | — | (53)
– other personal lending which is unsecured | — | — | (151) | — | (151)
– motor vehicle finance | — | — | — | — | —
Wholesale | (7) | (24) | (1,282) | (52) | (1,365)
– corporate and commercial | (7) | (24) | (1,274) | (52) | (1,357)
– non-bank financial institutions | — | — | (8) | — | (8)
At 31 Dec 2021 1 | (7) | (24) | (1,682) | (52) | (1,765)

1 Forborne exposures and allowances for ECL at 31 December 2021 have not been restated and agreed with the policies and disclosures presented in
the Annual Report and Accounts 2021.
Following the adoption of the EBA ‘Guidelines on the application of definition of default’, retail and wholesale loans are identified as forborne
and classified as either performing or non-performing when we modify the contractual terms due to financial difficulty of the borrower. At
31 December 2022, we reported $5,524m (31 December 2021: $925m) of performing forborne loans. The increase of $4,599m was mainly
driven by the inclusion of non-payment-related concessions in the forbearance assessment since 1 January 2022.

HSBC Holdings plc Annual Report and Accounts 2022 | 169

Forborne loans and advances to customers by geographical region
|  |  |  |  |  |  | of which:
| Europe | Asia | MENA | North America | Latin America | Total | UK | Hong Kong
| $m | $m | $m | $m | $m | $m | $m | $m
Gross carrying amount |  |  |  |  |  |  |  |
Performing forborne | 3,121 | 276 | 482 | 1,100 | 545 | 5,524 | 1,028 | 134
Non-performing forborne | 2,636 | 1,562 | 1,076 | 368 | 212 | 5,854 | 2,126 | 879
At 31 Dec 2022 | 5,757 | 1,838 | 1,558 | 1,468 | 757 | 11,378 | 3,154 | 1,013
Allowances for ECL |  |  |  |  |  |  |  |
Performing forborne | (95) | (21) | (19) | (62) | (79) | (276) | (64) | (17)
Non-performing forborne | (566) | (525) | (536) | (83) | (114) | (1,824) | (441) | (355)
At 31 Dec 2022 | (661) | (546) | (555) | (145) | (193) | (2,100) | (505) | (372)
Gross carrying amount |  |  |  |  |  |  |  |
Performing forborne | 698 | 5 | 105 | 89 | 28 | 925 | 640 | —
Non-performing forborne | 3,421 | 1,317 | 849 | 975 | 452 | 7,014 | 2,829 | 528
At 31 Dec 2021 1 | 4,119 | 1,322 | 954 | 1,064 | 480 | 7,939 | 3,469 | 528
Allowances for ECL |  |  |  |  |  |  |  |
Performing forborne | (13) | — | (9) | (8) | (1) | (31) | (10) | —
Non-performing forborne | (615) | (306) | (475) | (138) | (200) | (1,734) | (459) | (89)
At 31 Dec 2021 1 | (628) | (306) | (484) | (146) | (201) | (1,765) | (469) | (89)

1 Forborne exposures and allowances for ECL at 31 December 2021 have not been restated and agreed with the policies and disclosures presented in
the Annual Report and Accounts 2021.
Wholesale lending
This section provides further details on the regions, countries,
territories and products 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, banks, other credit commitments, financial guarantees
and similar contracts. Additionally, this section provides a
reconciliation of the opening 1 January 2022 to 31 December 2022
closing gross carrying/nominal amounts and the associated allowance
for ECL.
At 31 December 2022, wholesale lending for loans and advances to
banks and customers of $626.2bn decreased by $35.8bn since
31 December 2021. This included adverse foreign exchange
movements of $31.9bn. Excluding foreign exchange movements, the
total wholesale lending decrease of $3.9bn was driven by a $34.3bn
decline in corporate and commercial balances. This was partly offset
by a $25.9bn increase in loans and advances to banks and a $4.5bn
increase in balances from non-bank financial institutions.
The primary driver of the decline in corporate and commercial
balances was the $23.4bn reclassification of our banking business in
Canada to held for sale, and a decline of $11.3bn in Asia. In Asia, the
decline was driven from a $17.3bn decrease in Hong Kong, partly
offset by growth of $2.4bn in Australia, $1.9b in Japan and $1.7bn in
India.
Growth in loans and advances to banks was mainly driven by a
$13.0bn increase in Asia, a $10.1bn increase in Europe, and a $2.6bn
increase in MENA. In Asia, the increase can be largely attributed to
$7.9bn in Hong Kong and $1.5bn in Malaysia. In Europe, the growth
was mainly from the UK with an increase of $10.6bn.
The increase in balances from non-bank financial institutions was
driven from an increase of $3.7bn in Asia and $2.0bn in Europe. This
growth was partly offset by a decline of $1.3bn in North America, of
which $1.4bn was due to the reclassification of our banking business
in Canada to held for sale, and a $0.1bn increase in the US.
Loan commitments and financial guarantees decreased by $22.2bn
since 31 December 2021 to $392.4bn at 31 December 2022,
including a $3.0bn increase related to unsettled reverse repurchase
agreements. This also included adverse foreign exchange movements
of $21.8bn.
The allowance for ECL attributable to wholesale loans and advances
to banks and customers increased by $0.3bn to $8.7bn at
31 December 2022. This included favourable foreign exchange
movements of $0.4bn.
Excluding foreign exchange movements, the total increase in the
wholesale ECL allowance for loans and advances to customers and
banks was driven by a $0.5bn growth in corporate and commercial
allowances. The primary driver of this increase in corporate and
commercial allowance for ECL was $1.1bn in Asia, notably $1.4bn in
Hong Kong, which was partly offset by a decline of $0.4bn in
Singapore. Allowances for ECL decreased by $0.2bn in North
America, and by $0.1bn in both Europe and Latin America.
The allowance for ECL attributable to loan commitments and financial
guarantees at 31 December 2022 remained at $0.4bn from
31 December 2021.
Risk review

170 | HSBC Holdings plc Annual Report and Accounts 2022

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 | 353,010 | 85,521 | 15,696 | 129 | 454,356 | (490) | (1,909) | (5,887) | (38) | (8,324)
– agriculture, forestry and fishing | 4,805 | 1,505 | 261 | — | 6,571 | (10) | (44) | (68) | — | (122)
– mining and quarrying | 6,498 | 1,463 | 232 | 1 | 8,194 | (5) | (21) | (145) | (1) | (172)
– manufacturing | 70,187 | 15,251 | 2,016 | 49 | 87,503 | (93) | (164) | (867) | (29) | (1,153)
– electricity, gas, steam and air- conditioning supply | 15,006 | 1,799 | 277 | — | 17,082 | (11) | (31) | (67) | — | (109)
– water supply, sewerage, waste management and remediation | 2,690 | 277 | 26 | — | 2,993 | (3) | (5) | (13) | — | (21)
– construction | 9,692 | 2,742 | 791 | 7 | 13,232 | (21) | (51) | (368) | (3) | (443)
– wholesale and retail trade, repair of motor vehicles and motorcycles | 63,755 | 15,872 | 2,805 | 5 | 82,437 | (96) | (226) | (1,341) | (3) | (1,666)
– transportation and storage | 19,227 | 5,062 | 556 | — | 24,845 | (31) | (65) | (153) | — | (249)
– accommodation and food | 9,873 | 6,523 | 787 | 2 | 17,185 | (23) | (139) | (81) | (1) | (244)
– publishing, audiovisual and broadcasting | 16,609 | 1,537 | 249 | 28 | 18,423 | (22) | (36) | (58) | (1) | (117)
– real estate | 72,195 | 24,386 | 4,834 | 19 | 101,434 | (86) | (904) | (1,861) | — | (2,851)
– professional, scientific and technical activities | 15,164 | 2,229 | 542 | — | 17,935 | (21) | (51) | (200) | — | (272)
– administrative and support services | 20,592 | 3,505 | 962 | 18 | 25,077 | (25) | (90) | (293) | — | (408)
– public administration and defence, compulsory social security | 1,166 | 14 | — | — | 1,180 | — | (1) | — | — | (1)
– education | 1,346 | 181 | 87 | — | 1,614 | (4) | (5) | (22) | — | (31)
– health and care | 3,055 | 643 | 266 | — | 3,964 | (6) | (17) | (67) | — | (90)
– arts, entertainment and recreation | 1,264 | 452 | 146 | — | 1,862 | (4) | (16) | (57) | — | (77)
– other services | 10,391 | 1,547 | 589 | — | 12,527 | (26) | (30) | (219) | — | (275)
– activities of households | 730 | 14 | — | — | 744 | — | — | — | — | —
– extra-territorial organisations and bodies activities | 47 | — | — | — | 47 | — | — | — | — | —
– government | 8,699 | 506 | 270 | — | 9,475 | (3) | — | (7) | — | (10)
– asset-backed securities | 19 | 13 | — | — | 32 | — | (13) | — | — | (13)
Non-bank financial institutions | 61,752 | 4,718 | 469 | — | 66,939 | (43) | (77) | (137) | — | (257)
Loans and advances to banks | 103,042 | 1,827 | 82 | — | 104,951 | (18) | (29) | (22) | — | (69)
At 31 Dec 2022 | 517,804 | 92,066 | 16,247 | 129 | 626,246 | (551) | (2,015) | (6,046) | (38) | (8,650)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 150,592 | 28,060 | 7,070 | 31 | 185,753 | (223) | (628) | (1,718) | (1) | (2,570)
– of which: UK | 104,595 | 21,489 | 5,432 | 28 | 131,544 | (186) | (501) | (1,015) | (1) | (1,703)
Asia | 293,503 | 50,826 | 6,938 | 81 | 351,348 | (220) | (1,077) | (3,125) | (25) | (4,447)
– of which: Hong Kong | 155,513 | 28,275 | 5,338 | 57 | 189,183 | (104) | (775) | (2,136) | (22) | (3,037)
MENA | 29,512 | 3,254 | 1,530 | 17 | 34,313 | (22) | (49) | (909) | (12) | (992)
North America | 31,372 | 6,950 | 245 | — | 38,567 | (25) | (197) | (44) | — | (266)
Latin America | 12,825 | 2,976 | 464 | — | 16,265 | (61) | (64) | (250) | — | (375)
At 31 Dec 2022 | 517,804 | 92,066 | 16,247 | 129 | 626,246 | (551) | (2,015) | (6,046) | (38) | (8,650)

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 | 252,860 | 29,116 | 798 | — | 282,774 | (116) | (178) | (96) | — | (390)
Financial | 105,950 | 3,683 | 23 | — | 109,656 | (5) | (14) | (2) | — | (21)
At 31 Dec 2022 | 358,810 | 32,799 | 821 | — | 392,430 | (121) | (192) | (98) | — | (411)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 168,179 | 17,235 | 498 | — | 185,912 | (41) | (87) | (85) | — | (213)
– of which: UK | 60,532 | 9,941 | 278 | — | 70,751 | (34) | (64) | (46) | — | (144)
Asia | 67,473 | 6,081 | 114 | — | 73,668 | (54) | (53) | (9) | — | (116)
– of which: Hong Kong | 27,102 | 2,448 | 46 | — | 29,596 | (14) | (27) | (2) | — | (43)
MENA | 7,500 | 565 | 21 | — | 8,086 | (4) | (5) | (2) | — | (11)
North America | 112,695 | 8,642 | 185 | — | 121,522 | (21) | (47) | (2) | — | (70)
Latin America | 2,963 | 276 | 3 | — | 3,242 | (1) | — | — | — | (1)
At 31 Dec 2022 | 358,810 | 32,799 | 821 | — | 392,430 | (121) | (192) | (98) | — | (411)

1 Included in loans and other credit-related commitments and financial guarantees is $45bn relating to unsettled reverse repurchase agreements, which
once drawn are classified as ‘Reverse repurchase agreements – non-trading’.

HSBC Holdings plc Annual Report and Accounts 2022 | 171

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 | 400,894 | 98,911 | 13,460 | 274 | 513,539 | (665) | (1,874) | (5,601) | (64) | (8,204)
– agriculture, forestry and fishing | 6,510 | 1,026 | 362 | 1 | 7,899 | (10) | (23) | (104) | (1) | (138)
– mining and quarrying | 7,167 | 2,055 | 447 | 16 | 9,685 | (17) | (39) | (159) | (12) | (227)
– manufacturing | 75,193 | 16,443 | 2,019 | 88 | 93,743 | (110) | (176) | (931) | (31) | (1,248)
– electricity, gas, steam and air- conditioning supply | 15,255 | 1,285 | 78 | — | 16,618 | (16) | (21) | (31) | — | (68)
– water supply, sewerage, waste management and remediation | 3,376 | 468 | 51 | — | 3,895 | (5) | (4) | (20) | — | (29)
– construction | 9,506 | 3,605 | 842 | 1 | 13,954 | (24) | (44) | (439) | (1) | (508)
– wholesale and retail trade, repair of motor vehicles and motorcycles | 79,137 | 12,802 | 3,003 | 2 | 94,944 | (71) | (99) | (1,936) | (1) | (2,107)
– transportation and storage | 21,199 | 7,726 | 658 | 9 | 29,592 | (56) | (116) | (191) | — | (363)
– accommodation and food | 8,080 | 14,096 | 1,199 | 1 | 23,376 | (67) | (245) | (110) | (1) | (423)
– publishing, audiovisual and broadcasting | 16,417 | 1,804 | 222 | 28 | 18,471 | (37) | (47) | (94) | (6) | (184)
– real estate | 93,633 | 25,154 | 2,375 | 98 | 121,260 | (132) | (737) | (775) | — | (1,644)
– professional, scientific and technical activities | 16,160 | 2,888 | 637 | — | 19,685 | (26) | (40) | (172) | — | (238)
– administrative and support services | 23,186 | 4,740 | 719 | 30 | 28,675 | (40) | (84) | (296) | (11) | (431)
– public administration and defence, compulsory social security | 938 | 333 | — | — | 1,271 | (5) | (3) | — | — | (8)
– education | 1,455 | 273 | 65 | — | 1,793 | (4) | (15) | (18) | — | (37)
– health and care | 3,743 | 928 | 183 | — | 4,854 | (11) | (24) | (37) | — | (72)
– arts, entertainment and recreation | 1,620 | 826 | 152 | — | 2,598 | (6) | (44) | (42) | — | (92)
– other services | 10,123 | 1,726 | 448 | — | 12,297 | (26) | (101) | (246) | — | (373)
– activities of households | 860 | 117 | — | — | 977 | — | — | — | — | —
– extra-territorial organisations and bodies activities | 2 | — | — | — | 2 | — | — | — | — | —
– government | 7,010 | 602 | — | — | 7,612 | (2) | (2) | — | — | (4)
– asset-backed securities | 324 | 14 | — | — | 338 | — | (10) | — | — | (10)
Non-bank financial institutions | 61,086 | 3,874 | 395 | — | 65,355 | (44) | (26) | (40) | — | (110)
Loans and advances to banks | 81,636 | 1,517 | — | — | 83,153 | (14) | (3) | — | — | (17)
At 31 Dec 2021 | 543,616 | 104,302 | 13,855 | 274 | 662,047 | (723) | (1,903) | (5,641) | (64) | (8,331)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 154,575 | 31,871 | 6,741 | 30 | 193,217 | (356) | (654) | (1,806) | (9) | (2,825)
– of which: UK | 101,029 | 24,461 | 5,126 | 28 | 130,644 | (306) | (518) | (1,060) | (6) | (1,890)
Asia | 297,423 | 53,993 | 3,997 | 199 | 355,612 | (182) | (830) | (2,299) | (43) | (3,354)
– of which: Hong Kong | 165,437 | 30,305 | 1,990 | 159 | 197,891 | (85) | (650) | (836) | (21) | (1,592)
MENA | 26,135 | 5,295 | 1,682 | 22 | 33,134 | (62) | (108) | (1,028) | (11) | (1,209)
North America | 53,513 | 10,397 | 652 | — | 64,562 | (57) | (215) | (169) | — | (441)
Latin America | 11,970 | 2,746 | 783 | 23 | 15,522 | (66) | (96) | (339) | (1) | (502)
At 31 Dec 2021 | 543,616 | 104,302 | 13,855 | 274 | 662,047 | (723) | (1,903) | (5,641) | (64) | (8,331)

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 | 274,775 | 30,376 | 829 | — | 305,980 | (130) | (193) | (60) | — | (383)
Financial | 105,746 | 2,889 | 2 | — | 108,637 | (9) | (9) | (1) | — | (19)
At 31 Dec 2021 | 380,521 | 33,265 | 831 | — | 414,617 | (139) | (202) | (61) | — | (402)
By geography |  |  |  |  |  |  |  |  |  |
Europe | 189,770 | 15,585 | 673 | — | 206,028 | (67) | (76) | (47) | — | (190)
– of which: UK | 68,136 | 8,430 | 389 | — | 76,955 | (55) | (49) | (28) | — | (132)
Asia | 72,179 | 5,229 | 20 | — | 77,428 | (35) | (40) | (5) | — | (80)
– of which: Hong Kong | 31,314 | 1,517 | 10 | — | 32,841 | (11) | (17) | (2) | — | (30)
MENA | 6,335 | 1,017 | 19 | — | 7,371 | (10) | (18) | (3) | — | (31)
North America | 109,851 | 11,350 | 91 | — | 121,292 | (24) | (66) | (1) | — | (91)
Latin America | 2,386 | 84 | 28 | — | 2,498 | (3) | (2) | (5) | — | (10)
At 31 Dec 2021 | 380,521 | 33,265 | 831 | — | 414,617 | (139) | (202) | (61) | — | (402)

1 Included in loans and other credit-related commitments and financial guarantees is $42bn relating to unsettled reverse repurchase agreements, which
once drawn are classified as ‘Reverse repurchase agreements – non-trading’.
Risk review

172 | HSBC Holdings plc Annual Report and Accounts 2022

Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
(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
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2022 | 881,742 | (862) | 137,541 | (2,105) | 14,686 | (5,702) | 274 | (64) | 1,034,243 | (8,733)
Transfers of financial instruments | (58,188) | (299) | 49,569 | 943 | 8,619 | (644) | — | — | — | —
– transfers from stage 1 to stage 2 | (157,553) | 201 | 157,553 | (201) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 100,839 | (482) | (100,839) | 482 | — | — | — | — | — | —
– transfers to stage 3 | (1,831) | 7 | (8,100) | 771 | 9,931 | (778) |  |  | — | —
– transfers from stage 3 | 357 | (25) | 955 | (109) | (1,312) | 134 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 241 | — | (370) | — | (64) | — | — | — | (193)
New financial assets originated or purchased | 352,985 | (277) | — | — | — | — | 26 | (2) | 353,011 | (279)
Assets derecognised (including final repayments) | (250,014) | 54 | (33,850) | 73 | (1,763) | 292 | (97) | — | (285,724) | 419
Changes to risk parameters – further lending/repayments | (34,321) | 64 | (11,501) | 128 | (1,491) | 292 | (61) | 5 | (47,374) | 489
Change in risk parameters – credit quality | — | 321 | — | (994) | — | (2,197) | — | 32 | — | (2,838)
Changes to models used for ECL calculation | — | 6 | — | (57) | — | — | — | — | — | (51)
Assets written off | — | — | — | — | (1,579) | 1,579 | (10) | 10 | (1,589) | 1,589
Credit-related modifications that resulted in derecognition | — | — | — | — | (32) | 9 | — | — | (32) | 9
Foreign exchange and other 1 | (60,421) | 80 | (16,984) | 175 | (1,372) | 291 | (3) | (19) | (78,780) | 527
At 31 Dec 2022 | 831,783 | (672) | 124,775 | (2,207) | 17,068 | (6,144) | 129 | (38) | 973,755 | (9,061)
ECL income statement change for the period |  | 409 |  | (1,220) |  | (1,677) |  | 35 |  | (2,453)
Recoveries |  |  |  |  |  |  |  |  |  | 33
Others |  |  |  |  |  |  |  |  |  | (23)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | (2,443)

1 Total includes $33.1bn 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 $204m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups
held for sale’ on page 389.
As shown in the above table, the allowance for ECL for loans and
advances to customers and banks and relevant loan commitments
and financial guarantees increased by $328m during the period from
$8,733m at 31 December 2021 to $9,061m at 31 December 2022.
This increase was primarily driven by:
•$2,838m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between
stages;
•$193m relating to the net remeasurement impact of stage
transfers; and
•$51m of changes to models used for ECL calculation.
These were partly offset by:
•$1,589m of assets written off;
•$629m relating to volume movements, which included the ECL
allowance associated with new originations, assets derecognised
and further lending/repayments; and
•foreign exchange and other movements of $527m.
The ECL charge for the period of $2,453m presented in the previous
table consisted of $2,838m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages, $193m relating to the net
remeasurement impact of stage transfers and $51m in changes to
models used for ECL calculation. This was partly offset by $629m
relating to underlying net book volume movement.
During the period, there was a net transfer to stage 2 of $56,714m
gross carrying/nominal amounts. The movement reflected the
increased level of uncertainty around the macroeconomic outlook
during the period. It was primarily driven by $29,049m in Asia, due to
deterioration in the macroeconomic outlook affecting real estate
portfolios booked in Hong Kong, and $20,860m in Europe, mainly
driven by deterioration in the macroeconomic outlook affecting
corporate and commercial portfolios in France.

HSBC Holdings plc Annual Report and Accounts 2022 | 173

Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees
(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
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2021 | 841,105 | (1,465) | 196,662 | (2,998) | 14,662 | (6,041) | 279 | (113) | 1,052,708 | (10,617)
Transfers of financial instruments | 19,285 | (638) | (23,361) | 888 | 4,076 | (250) | — | — | — | —
– transfers from stage 1 to stage 2 | (135,932) | 238 | 135,932 | (238) | — | — | — | — | — | —
– transfers from stage 2 to stage 1 | 156,346 | (875) | (156,346) | 875 | — | — | — | — | — | —
– transfers to stage 3 | (1,363) | 17 | (3,410) | 276 | 4,773 | (293) | — | — | — | —
– transfers from stage 3 | 234 | (18) | 463 | (25) | (697) | 43 | — | — | — | —
Net remeasurement of ECL arising from transfer of stage | — | 400 | — | (233) | — | (27) | — | — | — | 140
New financial assets originated or purchased | 307,150 | (342) | — | — | — | — | 124 | — | 307,274 | (342)
Assets derecognised (including final repayments) | (221,160) | 55 | (26,136) | 70 | (1,514) | 239 | (10) | 6 | (248,820) | 370
Changes to risk parameters – further lending/repayments | (47,766) | 307 | (6,014) | 384 | (987) | 525 | (108) | 12 | (54,875) | 1,228
Changes to risk parameters – credit quality | — | 793 | — | (234) | — | (1,347) | — | 28 | — | (760)
Changes to models used for ECL calculation | — | (15) | — | (33) | — | — | — | — | — | (48)
Assets written off | — | — | — | — | (1,085) | 1,085 | (7) | 7 | (1,092) | 1,092
Credit-related modifications that resulted in derecognition | — | — | — | — | (125) | — | — | — | (125) | —
Foreign exchange | (16,157) | 9 | (2,560) | 26 | (341) | 112 | (4) | 1 | (19,062) | 148
Others | (715) | 34 | (1,050) | 25 | — | 2 | — | (5) | (1,765) | 56
At 31 Dec 2021 | 881,742 | (862) | 137,541 | (2,105) | 14,686 | (5,702) | 274 | (64) | 1,034,243 | (8,733)
ECL income statement change for the period |  | 1,198 |  | (46) |  | (610) |  | 46 |  | 588
Recoveries |  |  |  |  |  |  |  |  |  | 54
Others |  |  |  |  |  |  |  |  |  | (102)
Total ECL income statement change for the period |  |  |  |  |  |  |  |  |  | 540

Wholesale lending – distribution of financial instruments to which the impairment requirements of IFRS 9 are applied by credit quality
| Gross carrying/nominal amount | Allowance for ECL | Net
| Strong | Good | Satisfactory | Sub- standard | Credit impaired | Total
| $m | $m | $m | $m | $m | $m | $m | $m
By geography |  |  |  |  |  |  |  |
Europe | 60,016 | 49,831 | 58,580 | 10,224 | 7,102 | 185,753 | (2,570) | 183,183
– of which: UK | 44,515 | 38,521 | 36,934 | 6,115 | 5,459 | 131,544 | (1,703) | 129,841
Asia | 167,720 | 81,907 | 84,973 | 9,735 | 7,013 | 351,348 | (4,447) | 346,901
– of which: Hong Kong | 77,227 | 44,479 | 54,500 | 7,581 | 5,396 | 189,183 | (3,037) | 186,146
MENA | 15,132 | 5,349 | 11,170 | 1,113 | 1,549 | 34,313 | (992) | 33,321
North America | 7,445 | 13,390 | 12,856 | 4,630 | 246 | 38,567 | (266) | 38,301
Latin America | 1,722 | 6,277 | 5,941 | 1,859 | 466 | 16,265 | (375) | 15,890
At 31 Dec 2022 | 252,035 | 156,754 | 173,520 | 27,561 | 16,376 | 626,246 | (8,650) | 617,596
Percentage of total credit quality | 40.3% | 25.0% | 27.7% | 4.4% | 2.6% | 100.0% |  |

By geography |  |  |  |  |  |  |  |
Europe | 48,758 | 49,254 | 74,240 | 14,196 | 6,769 | 193,217 | (2,825) | 190,392
– of which: UK | 30,390 | 37,212 | 48,694 | 9,192 | 5,156 | 130,644 | (1,890) | 128,754
Asia | 155,072 | 95,626 | 96,046 | 4,670 | 4,198 | 355,612 | (3,354) | 352,258
– of which: Hong Kong | 74,440 | 54,703 | 63,301 | 3,297 | 2,150 | 197,891 | (1,592) | 196,299
MENA | 12,264 | 7,004 | 10,321 | 1,844 | 1,701 | 33,134 | (1,209) | 31,925
North America | 11,683 | 24,663 | 22,022 | 5,543 | 651 | 64,562 | (441) | 64,121
Latin America | 993 | 5,736 | 5,638 | 2,349 | 806 | 15,522 | (502) | 15,020
At 31 Dec 2021 | 228,770 | 182,283 | 208,267 | 28,602 | 14,125 | 662,047 | (8,331) | 653,716
Percentage of total credit quality | 34.6% | 27.5% | 31.5% | 4.3% | 2.1% | 100.0% |  |

Our risk rating system facilitates the internal ratings-based approach under the Basel framework adopted by the Group to support calculation of
our minimum credit regulatory capital requirement. The credit quality classifications can be found on page 146.
Risk review

174 | HSBC Holdings plc Annual Report and Accounts 2022

Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost
|  | Gross carrying amount | Allowance for ECL |  |
| Basel one-year PD range | Stage 1 | Stage 2 | Stage 3 | POC I | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total | ECL coverage | Mapped external rating
| % | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m | % |
Corporate and commercial |  | 353,010 | 85,521 | 15,696 | 129 | 454,356 | (490) | (1,909) | (5,887) | (38) | (8,324) | 1.8 |
– CRR 1 | 0.000 to 0.053 | 35,630 | 330 | — | — | 35,960 | (6) | (1) | — | — | (7) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 87,465 | 3,234 | — | — | 90,699 | (28) | (15) | — | — | (43) | — | A+ to A-
– CRR 3 | 0.170 to 0.740 | 115,116 | 17,731 | — | — | 132,847 | (129) | (122) | — | — | (251) | 0.2 | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 74,229 | 21,550 | — | — | 95,779 | (155) | (210) | — | — | (365) | 0.4 | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 36,707 | 21,649 | — | — | 58,356 | (146) | (361) | — | — | (507) | 0.9 | BB- to B
– CRR 6 | 4.915 to 8.860 | 2,513 | 9,171 | — | — | 11,684 | (16) | (237) | — | — | (253) | 2.2 | B-
– CRR 7 | 8.861 to 15.000 | 1,164 | 5,476 | — | — | 6,640 | (8) | (337) | — | — | (345) | 5.2 | CCC+
– CRR 8 | 15.001 to 99.999 | 186 | 6,380 | — | — | 6,566 | (2) | (626) | — | — | (628) | 9.6 | CCC to C
– CRR 9/10 | 100.000 | — | — | 15,696 | 129 | 15,825 | — | — | (5,887) | (38) | (5,925) | 37.4 | D
Non-bank financial institutions |  | 61,752 | 4,718 | 469 | — | 66,939 | (43) | (77) | (137) | — | (257) | 0.4 |
– CRR 1 | 0.000 to 0.053 | 15,082 | 421 | — | — | 15,503 | (2) | (1) | — | — | (3) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 16,350 | 498 | — | — | 16,848 | (3) | (1) | — | — | (4) | — | A+ to A-
– CRR 3 | 0.170 to 0.740 | 17,254 | 1,763 | — | — | 19,017 | (9) | (13) | — | — | (22) | 0.1 | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 7,074 | 717 | — | — | 7,791 | (19) | (4) | — | — | (23) | 0.3 | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 5,215 | 736 | — | — | 5,951 | (10) | (10) | — | — | (20) | 0.3 | BB- to B
– CRR 6 | 4.915 to 8.860 | 716 | 90 | — | — | 806 | — | (4) | — | — | (4) | 0.5 | B-
– CRR 7 | 8.861 to 15.000 | 46 | 32 | — | — | 78 | — | (3) | — | — | (3) | 3.8 | CCC+
– CRR 8 | 15.001 to 99.999 | 15 | 461 | — | — | 476 | — | (41) | — | — | (41) | 8.6 | CCC to C
– CRR 9/10 | 100.000 | — | — | 469 | — | 469 | — | — | (137) | — | (137) | 29.2 | D
Banks |  | 103,042 | 1,827 | 82 | — | 104,951 | (18) | (29) | (22) | — | (69) | 0.1 |
– CRR 1 | 0.000 to 0.053 | 79,188 | 120 | — | — | 79,308 | (8) | — | — | — | (8) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 13,508 | 209 | — | — | 13,717 | (2) | — | — | — | (2) | — | A+ to A-
– CRR 3 | 0.170 to 0.740 | 4,465 | 425 | — | — | 4,890 | (3) | — | — | — | (3) | 0.1 | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 2,154 | 5 | — | — | 2,159 | (1) | — | — | — | (1) | — | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 3,312 | 172 | — | — | 3,484 | (4) | (1) | — | — | (5) | 0.1 | BB- to B
– CRR 6 | 4.915 to 8.860 | — | 5 | — | — | 5 | — | — | — | — | — | — | B-
– CRR 7 | 8.861 to 15.000 | 1 | 862 | — | — | 863 | — | (27) | — | — | (27) | 3.1 | CCC+
– CRR 8 | 15.001 to 99.999 | 414 | 29 | — | — | 443 | — | (1) | — | — | (1) | 0.2 | CCC to C
– CRR 9/10 | 100.000 | — | — | 82 | — | 82 | — | — | (22) | — | (22) | 26.8 | D
At 31 Dec 2022 |  | 517,804 | 92,066 | 16,247 | 129 | 626,246 | (551) | (2,015) | (6,046) | (38) | (8,650) | 1.4 |

HSBC Holdings plc Annual Report and Accounts 2022 | 175

Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost (continued)
| Basel one-year PD range | Gross carrying amount | Allowance for ECL | ECL coverage | Mapped external rating
| Stage 1 | Stage 2 | Stage 3 | POC I | Total | Stage 1 | Stage 2 | Stage 3 | POCI | Total
| % | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m | % |
Corporate and commercial |  | 400,894 | 98,911 | 13,460 | 274 | 513,539 | (665) | (1,874) | (5,601) | (64) | (8,204) | 1.6 |
– CRR 1 | 0.000 to 0.053 | 40,583 | 599 | — | — | 41,182 | (7) | (1) | — | — | (8) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 78,794 | 4,843 | — | — | 83,637 | (26) | (43) | — | — | (69) | 0.1 | A+ to A-
– CRR 3 | 0.170 to 0.740 | 139,739 | 19,199 | — | — | 158,938 | (165) | (145) | — | — | (310) | 0.2 | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 91,268 | 23,365 | — | — | 114,633 | (218) | (258) | — | — | (476) | 0.4 | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 45,850 | 28,375 | — | — | 74,225 | (185) | (424) | — | — | (609) | 0.8 | BB- to B
– CRR 6 | 4.915 to 8.860 | 3,280 | 11,197 | — | — | 14,477 | (22) | (242) | — | — | (264) | 1.8 | B-
– CRR 7 | 8.861 to 15.000 | 1,101 | 4,406 | — | — | 5,507 | (24) | (167) | — | — | (191) | 3.5 | CCC+
– CRR 8 | 15.001 to 99.999 | 279 | 6,927 | — | 4 | 7,210 | (18) | (594) | — | — | (612) | 8.5 | CCC to C
– CRR 9/10 | 100.000 | — | — | 13,460 | 270 | 13,730 | — | — | (5,601) | (64) | (5,665) | 41.3 | D
Non-bank financial institutions |  | 61,086 | 3,874 | 395 | — | 65,355 | (44) | (26) | (40) | — | (110) | 0.2 |
– CRR 1 | 0.000 to 0.053 | 14,370 | 122 | — | — | 14,492 | (2) | (1) | — | — | (3) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 16,438 | 43 | — | — | 16,481 | (5) | — | — | — | (5) | — | A+ to A-
– CRR 3 | 0.170 to 0.740 | 18,282 | 1,026 | — | — | 19,308 | (11) | (4) | — | — | (15) | 0.1 | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 6,835 | 1,204 | — | — | 8,039 | (15) | (11) | — | — | (26) | 0.3 | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 5,053 | 1,297 | — | — | 6,350 | (11) | (4) | — | — | (15) | 0.2 | BB- to B
– CRR 6 | 4.915 to 8.860 | 102 | 98 | — | — | 200 | — | (5) | — | — | (5) | 2.5 | B-
– CRR 7 | 8.861 to 15.000 | 5 | 25 | — | — | 30 | — | (1) | — | — | (1) | 3.3 | CCC+
– CRR 8 | 15.001 to 99.999 | 1 | 59 | — | — | 60 | — | — | — | — | — | — | CCC to C
– CRR 9/10 | 100.000 | — | — | 395 | — | 395 | — | — | (40) | — | (40) | 10.1 | D
Banks |  | 81,636 | 1,517 | — | — | 83,153 | (14) | (3) | — | — | (17) | — |
– CRR 1 | 0.000 to 0.053 | 61,275 | 10 | — | — | 61,285 | (4) | — | — | — | (4) | — | AA- and above
– CRR 2 | 0.054 to 0.169 | 11,628 | 65 | — | — | 11,693 | (3) | — | — | — | (3) | — | A+ to A-
– CRR 3 | 0.170 to 0.740 | 3,935 | 102 | — | — | 4,037 | (2) | — | — | — | (2) | — | BBB+ to BBB-
– CRR 4 | 0.741 to 1.927 | 4,232 | 180 | — | — | 4,412 | (5) | — | — | — | (5) | 0.1 | BB+ to BB-
– CRR 5 | 1.928 to 4.914 | 556 | 52 | — | — | 608 | — | (1) | — | — | (1) | 0.2 | BB- to B
– CRR 6 | 4.915 to 8.860 | 9 | 541 | — | — | 550 | — | — | — | — | — | — | B-
– CRR 7 | 8.861 to 15.000 | 1 | 564 | — | — | 565 | — | — | — | — | — | — | CCC+
– CRR 8 | 15.001 to 99.999 | — | 3 | — | — | 3 | — | (2) | — | — | (2) | 66.7 | CCC to C
– CRR 9/10 | 100.000 | — | — | — | — | — | — | — | — | — | — | — | D
At 31 Dec 2021 |  | 543,616 | 104,302 | 13,855 | 274 | 662,047 | (723) | (1,903) | (5,641) | (64) | (8,331) | 1.3 |

Risk review

176 | HSBC Holdings plc Annual Report and Accounts 2022

Commercial real estate
Commercial real estate lending includes the financing of corporate,
institutional and high net worth customers who are investing primarily
in income-producing assets and, to a lesser extent, in their
construction and development. The portfolio is globally diversified
with larger concentrations in Hong Kong, the UK, mainland China and
the US.
Our global exposure is centred largely on cities with economic,
political or cultural significance. In more developed markets, our
exposure mainly comprises the financing of investment assets, the
redevelopment of existing stock and the augmentation of both
commercial and residential markets to support economic and
population growth. In less developed commercial real estate markets,
our exposures comprise lending for development assets on relatively
short tenors with a particular focus on supporting larger, better
capitalised developers involved in residential construction or assets
supporting economic expansion.
Excluding adverse foreign exchange movements of $3.8bn,
commercial real estate lending decreased by $14.9bn, mainly due to
the reclassification of assets held for sale of our banking operations in
Canada of $7.1bn, compounded by loan repayments in Hong Kong of
$6.7bn and France of $0.7bn.

Commercial real estate lending to customers
|  |  |  |  |  |  | of which:
| Europe | Asia | MENA | North America | Latin America | Total | UK | Hong Kong
| $m | $m | $m | $m | $m | $m | $m | $m
Gross loans and advances |  |  |  |  |  |  |  |
Stage 1 | 17,318 | 46,757 | 1,115 | 1,534 | 880 | 67,604 | 12,209 | 35,963
Stage 2 | 3,590 | 16,337 | 364 | 798 | 44 | 21,133 | 3,008 | 11,092
Stage 3 | 980 | 3,320 | 286 | 8 | 54 | 4,648 | 827 | 3,029
POCI | — | 19 | — | — | — | 19 | — | 19
At 31 Dec 2022 | 21,888 | 66,433 | 1,765 | 2,340 | 978 | 93,404 | 16,044 | 50,103
– of which: forborne loans | 359 | 763 | 472 | 173 | 47 | 1,814 | 336 | 654
Allowance for ECL | (369) | (2,095) | (159) | (12) | (31) | (2,666) | (323) | (1,879)

Gross loans and advances |  |  |  |  |  |  |  |
Stage 1 | 20,317 | 56,734 | 781 | 8,328 | 1,073 | 87,233 | 14,235 | 42,951
Stage 2 | 3,505 | 17,103 | 569 | 1,265 | 218 | 22,660 | 2,781 | 13,300
Stage 3 | 1,062 | 543 | 206 | 9 | 249 | 2,069 | 905 | 435
POCI | — | 98 | — | — | — | 98 | — | 98
At 31 Dec 2021 | 24,884 | 74,478 | 1,556 | 9,602 | 1,540 | 112,060 | 17,921 | 56,784
– of which: forborne loans 1 | 440 | 251 | 145 | — | — | 836 | 436 | 170
Allowance for ECL | (450) | (693) | (158) | (26) | (130) | (1,457) | (366) | (604)

1 Forborne gross loans and advances at 31 December 2021 have not been restated, and agreed with the policies and disclosures presented in the
Annual Report and Accounts 2021.
Refinance risk in commercial real estate
Commercial real estate lending tends to require the repayment of a
significant proportion of the principal at maturity. Typically, a customer
will arrange repayment through the acquisition of a new loan to settle
the existing debt. Refinance risk is the risk that a customer, being
unable to repay the debt on maturity, fails to refinance it at
commercial terms. We monitor our commercial real estate portfolio
closely, assessing indicators for signs of potential issues with
refinancing.

Commercial real estate gross loans and advances to customers maturity analysis
|  |  |  |  |  |  | of which:
| Europe | Asia | MENA | North America | Latin America | Total | UK | Hong Kong
| $m | $m | $m | $m | $m | $m | $m | $m
On demand, overdrafts or revolving |  |  |  |  |  |  |  |
< 1 year | 10,996 | 23,492 | 434 | 196 | 299 | 35,417 | 9,211 | 18,698
1–2 years | 5,197 | 18,052 | 255 | 280 | 117 | 23,901 | 3,678 | 13,917
2–5 years | 4,031 | 21,818 | 694 | 1,832 | 462 | 28,837 | 2,472 | 14,978
> 5 years | 1,664 | 3,071 | 382 | 32 | 100 | 5,249 | 683 | 2,510
At 31 Dec 2022 | 21,888 | 66,433 | 1,765 | 2,340 | 978 | 93,404 | 16,044 | 50,103

On demand, overdrafts or revolving |  |  |  |  |  |  |  |
< 1 year | 12,980 | 26,736 | 478 | 5,961 | 336 | 46,491 | 10,546 | 20,466
1–2 years | 4,794 | 18,192 | 159 | 1,098 | 280 | 24,523 | 3,921 | 14,399
2–5 years | 5,352 | 26,668 | 631 | 2,297 | 559 | 35,507 | 2,805 | 19,562
> 5 years | 1,758 | 2,882 | 288 | 246 | 365 | 5,539 | 649 | 2,357
At 31 Dec 2021 | 24,884 | 74,478 | 1,556 | 9,602 | 1,540 | 112,060 | 17,921 | 56,784

HSBC Holdings plc Annual Report and Accounts 2022 | 177

The following table presents the Group’s exposure to borrowers
classified in the commercial real estate sector where the ultimate
parent is based in mainland China, as well as all commercial real
estate exposures booked on mainland China balance sheets. The
exposures at 31 December 2022 are split by country/territory and
credit quality including allowances for ECL by stage.

Mainland China commercial real estate
| Hong Kong | Mainland China | Rest of the Group | Total
| (audited)1 | (audited)1 | (unaudited)1 | (unaudited)1
| $m | $m | $m | $m
Loans and advances to customers 2 | 9,129 | 5,752 | 860 | 15,741
Guarantees issued and others 3 | 249 | 755 | 18 | 1,022
Total mainland China commercial real estate exposure at 31 Dec 2022 | 9,378 | 6,507 | 878 | 16,763
Distribution of mainland China commercial real estate exposure by credit quality |  |  |  |
– Strong | 1,425 | 2,118 | 220 | 3,763
– Good | 697 | 1,087 | 370 | 2,154
– Satisfactory | 1,269 | 2,248 | 77 | 3,594
– Sub-standard | 2,887 | 779 | 193 | 3,859
– Credit impaired | 3,100 | 275 | 18 | 3,393
At 31 Dec 2022 | 9,378 | 6,507 | 878 | 16,763
Allowance for ECL by credit quality |  |  |  |
– Strong | — | (5) | — | (5)
– Good | — | (8) | (1) | (9)
– Satisfactory | (20) | (81) | — | (101)
– Sub-standard | (458) | (42) | (3) | (503)
– Credit impaired | (1,268) | (105) | — | (1,373)
At 31 Dec 2022 | (1,746) | (241) | (4) | (1,991)
Allowance for ECL by stage distribution |  |  |  |
– Stage 1 | (1) | (9) | (1) | (11)
– Stage 2 | (477) | (127) | (3) | (607)
– Stage 3 | (1,268) | (105) | — | (1,373)
– POCI | — | — | — | —
At 31 Dec 2022 | (1,746) | (241) | (4) | (1,991)
ECL coverage % | 18.6 | 3.7 | 0.5 | 11.9

1 Disclosures in respect of mainland China commercial real estate exposures in Hong Kong and mainland China form part of the scope of the audit of
the Group’s Annual Report and Accounts 2022. Amounts disclosed for mainland China commercial real estate exposures elsewhere in the Group have
not been audited but are provided for completeness.
2 Amounts represent gross carrying amount.
3 Amounts represent nominal amount for guarantees and other contingent liabilities.
Risk review

178 | HSBC Holdings plc Annual Report and Accounts 2022

Mainland China commercial real estate
| Hong Kong 1 | Mainland China | Rest of the Group | Total
| (audited)2 | (audited)2 | (unaudited)2 | (unaudited)2
| $m | $m | $m | $m
Loans and advances to customers 3 | 11,484 | 6,811 | 410 | 18,705
Guarantees issued and others 4 | 166 | 2,376 | 79 | 2,621
Total mainland China commercial real estate exposure at 31 Dec 2021 | 11,650 | 9,187 | 489 | 21,326
Distribution of mainland China commercial real estate exposure by credit quality |  |  |  |
– Strong | 3,543 | 3,864 | 155 | 7,562
– Good | 2,652 | 2,354 | 73 | 5,079
– Satisfactory | 3,383 | 2,855 | 106 | 6,344
– Sub-standard | 1,570 | 12 | 155 | 1,737
– Credit impaired | 502 | 102 | — | 604
At 31 Dec 2021 | 11,650 | 9,187 | 489 | 21,326
Allowance for ECL by credit quality |  |  |  |
– Strong | (15) | (7) | — | (22)
– Good | (37) | (10) | — | (47)
– Satisfactory | (382) | (20) | (2) | (404)
– Sub-standard | (24) | (1) | — | (25)
– Credit impaired | (102) | (11) | — | (113)
At 31 Dec 2021 | (560) | (49) | (2) | (611)
Allowance for ECL by stage distribution |  |  |  |
– Stage 1 | (2) | (11) | (1) | (14)
– Stage 2 | (456) | (27) | (1) | (484)
– Stage 3 | (102) | (11) | — | (113)
– POCI | — | — | — | —
At 31 Dec 2021 | (560) | (49) | (2) | (611)
ECL coverage % | 4.8 | 0.5 | 0.4 | 2.9

1 Comparatives have been restated to reflect an exposure reclassification from ‘guarantees and others‘ to ‘loans and advances to customers‘, which
better reflects the nature of product.
2 Disclosures in respect of mainland China commercial real estate exposures in Hong Kong and mainland China form part of the scope of the audit of
the Group’s Annual Report and Accounts 2022. Amounts disclosed for mainland China commercial real estate exposures elsewhere in the Group have
not been audited but are provided for completeness.
3 Amounts represent gross carrying amount.
4 Amounts represent nominal amount for guarantees and other contingent liabilities.
Commercial real estate financing refers to lending that focuses on
commercial development and investment in real estate and covers
commercial, residential and industrial assets. Commercial real estate
financing can also be provided to a corporate or financial entity for the
purchase or financing of a property which supports the overall
operations of the business.
The exposures in the table are related to companies whose primary
activities are focused on residential, commercial and mixed-use real
estate activities. Lending is generally focused on tier 1 and 2 cities.
The exposures in the table above had 57% (31 December 2021: 89%)
of exposure booked with a credit quality of ‘satisfactory’ or above.
This deterioration reflects increased funding risks and weaker sales
performance for a number of our customers over the period.
Facilities booked in Hong Kong are exposures which represent
relatively higher risk within the mainland China commercial real estate
portfolio. This portfolio had 36% (31 December 2021: 82%) of
exposure booked with a credit quality of ‘satisfactory’ or above,
reflecting sustained credit deterioration in this book over the course of
the year. At 31 December 2022, the Group had allowances for ECL of
$1.7bn (31 December 2021: $0.6bn) held against mainland China
commercial real estate exposures booked in Hong Kong .
Over one third of the unimpaired exposure in the Hong Kong portfolio
reflects lending to state owned enterprises, and much of the
remaining is to relatively strong privately owned enterprises. This is
reflected in the relatively low ECL allowance in this part of the
portfolio.
Regulatory and policy developments in the latter part of 2022 appear
to have stabilised the sector. Sustained liquidity support and improved
domestic residential demand will be necessary to support a recovery.
The Group has additional exposures to mainland China commercial
real estate as a result of lending to multinational corporates, which is
not incorporated in the table above.

HSBC Holdings plc Annual Report and Accounts 2022 | 179

Collateral and other credit enhancements
(Audited)
Although collateral can be an important mitigant of credit risk, it is the
Group’s practice to lend on the basis of the customer’s ability to meet
their obligations out of cash flow resources rather than placing
primary reliance on collateral and other credit risk enhancements.
Depending on the customer’s standing and the type of product,
facilities may be provided without any collateral or other credit
enhancements. For other lending, a charge over collateral is obtained
and considered in determining the credit decision and pricing. In the
event of default, the Group may utilise the collateral as a source of
repayment.
Depending on its form, collateral can have a significant financial effect
in mitigating our exposure to credit risk. Where there is sufficient
collateral, an expected credit loss is not recognised. This is the case
for reverse 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, the Group’s 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 fixed first
charges on real estate, and 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 342.
Commercial real estate loans and advances
The value of commercial real estate collateral is determined by using
a combination of external and internal valuations
and physical inspections. For commercial real estate, where the
facility exceeds regulatory threshold requirements, Group policy
requires an independent review of the valuation at least every three
years, or more frequently as the need arises.
In Hong Kong, market practice is typically for lending to major
property companies to be either secured by guarantees or unsecured.
In Europe, facilities of a working capital nature are generally not
secured by a first fixed charge, and are therefore disclosed as not
collateralised.
Risk review

180 | HSBC Holdings plc Annual Report and Accounts 2022

Wholesale lending – commercial real estate loans and advances to customers including loan commitments by level of collateral for key countries/territories (by stage)
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Not collateralised | 44,052 | 0.1 | 5,960 | 0.3 | 20,286 | —
Fully collateralised | 53,475 | 0.1 | 10,293 | 0.1 | 27,926 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 29,486 | 0.1 | 2,900 | 0.2 | 21,185 | —
– 51% to 75% | 18,530 | 0.1 | 6,361 | 0.1 | 5,365 | 0.1
– 76% to 90% | 2,941 | 0.1 | 556 | 0.2 | 995 | —
– 91% to 100% | 2,518 | 0.2 | 476 | 0.2 | 381 | —
Partially collateralised (A): | 4,923 | 0.1 | 1,920 | 0.2 | 804 | —
– collateral value on A | 2,800 |  | 1,113 |  | 584 |
Total | 102,450 | 0.1 | 18,173 | 0.2 | 49,016 | —
Stage 2 |  |  |  |  |  |
Not collateralised | 9,804 | 5.7 | 2,511 | 1.5 | 4,673 | 10.5
Fully collateralised | 15,423 | 1.6 | 2,025 | 0.9 | 7,457 | 1.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 5,945 | 1.6 | 664 | 0.9 | 3,539 | 1.4
– 51% to 75% | 6,821 | 1.1 | 1,197 | 0.9 | 3,536 | 1.0
– 76% to 90% | 908 | 2.1 | 140 | 1.4 | 134 | 0.1
– 91% to 100% | 1,749 | 3.6 | 24 | 0.4 | 248 | 0.2
Partially collateralised (B): | 1,624 | 1.6 | 179 | 1.1 | 390 | 2.8
– collateral value on B | 997 |  | 144 |  | 249 |
Total | 26,851 | 3.1 | 4,715 | 1.3 | 12,520 | 4.7
Stage 3 |  |  |  |  |  |
Not collateralised | 2,612 | 53.7 | 295 | 35.3 | 2,123 | 56.9
Fully collateralised | 1,617 | 10.8 | 372 | 6.5 | 864 | 5.2
LTV ratio: |  |  |  |  |  |
– less than 50% | 544 | 16.5 | 53 | 3.8 | 318 | 2.2
– 51% to 75% | 594 | 4.4 | 291 | 2.1 | 205 | 3.4
– 76% to 90% | 315 | 4.1 | 11 | 18.2 | 264 | 1.9
– 91% to 100% | 164 | 28.7 | 17 | 76.5 | 77 | 32.5
Partially collateralised (C): | 513 | 54.2 | 176 | 68.8 | 73 | 61.6
– collateral value on C | 293 |  | 72 |  | 39 |
Total | 4,742 | 39.1 | 843 | 29.5 | 3,060 | 42.5
POCI |  |  |  |  |  |
Not collateralised | — | — | — | — | — | —
Fully collateralised | — | — | — | — | — | —
LTV ratio: |  |  |  |  |  |
– less than 50% | — | — | — | — | — | —
– 51% to 75% | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | —
– 91% to 100% | — | — | — | — | — | —
Partially collateralised (D): | 19 | — | — | — | 19 | —
– collateral value on D | 8 |  | — |  | 8 |
Total | 19 | — | — | — | 19 | —
At 31 Dec 2022 | 134,062 | 2.1 | 23,731 | 1.4 | 64,615 | 2.9

HSBC Holdings plc Annual Report and Accounts 2022 | 181

Wholesale lending – commercial real estate loans and advances to customers including loan commitments by level of collateral for key countries/territories (by stage) (continued)
(Audited)
|  |  | Of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Not collateralised | 50,603 | 0.1 | 7,623 | 0.4 | 23,864 | —
Fully collateralised | 71,769 | 0.1 | 13,139 | 0.2 | 32,951 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 35,984 | 0.1 | 4,142 | 0.2 | 22,645 | —
– 51% to 75% | 26,390 | 0.1 | 6,460 | 0.2 | 8,082 | —
– 76% to 90% | 5,284 | 0.2 | 1,859 | 0.2 | 1,181 | —
– 91% to 100% | 4,111 | 0.1 | 678 | — | 1,043 | 0.1
Partially collateralised (A): | 5,429 | 0.1 | 2,018 | 0.1 | 714 | —
– collateral value on A | 2,942 |  | 874 |  | 447 |
Total | 127,801 | 0.1 | 22,780 | 0.3 | 57,529 | —
Stage 2 |  |  |  |  |  |
Not collateralised | 11,729 | 4.3 | 1,970 | 0.9 | 7,758 | 5.9
Fully collateralised | 12,741 | 1.1 | 1,131 | 2.3 | 6,385 | 0.4
LTV ratio: |  |  |  |  |  |
– less than 50% | 5,759 | 1.0 | 605 | 3.1 | 3,633 | 0.3
– 51% to 75% | 4,804 | 1.1 | 471 | 1.3 | 2,389 | 0.5
– 76% to 90% | 757 | 1.5 | 43 | — | 269 | 0.4
– 91% to 100% | 1,421 | 1.5 | 12 | — | 94 | —
Partially collateralised (B): | 1,783 | 2.7 | 366 | 0.3 | 172 | 2.9
– collateral value on B | 930 |  | 223 |  | 70 |
Total | 26,253 | 2.7 | 3,467 | 1.3 | 14,315 | 3.4
Stage 3 |  |  |  |  |  |
Not collateralised | 828 | 40.9 | 407 | 42.0 | 198 | 35.9
Fully collateralised | 1,176 | 22.0 | 346 | 5.2 | 290 | 11.0
LTV ratio: |  |  |  |  |  |
– less than 50% | 645 | 19.8 | 36 | 2.8 | 284 | 10.9
– 51% to 75% | 286 | 9.1 | 250 | 5.2 | — | —
– 76% to 90% | 62 | 14.5 | 11 | — | 2 | —
– 91% to 100% | 183 | 52.5 | 49 | 8.2 | 4 | 25.0
Partially collateralised (C): | 265 | 47.9 | 204 | 49.0 | — | —
– collateral value on C | 149 |  | 97 |  | — |
Total | 2,269 | 32.0 | 957 | 30.2 | 488 | 21.1
POCI |  |  |  |  |  |
Not collateralised | — | — | — | — | — | —
Fully collateralised | 98 | — | — | — | 98 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 98 | — | — | — | 98 | —
– 51% to 75% | — | — | — | — | — | —
– 76% to 90% | — | — | — | — | — | —
– 91% to 100% | — | — | — | — | — | —
Partially collateralised (D): | — | — | — | — | — | —
– collateral value on D | — |  | — |  | — |
Total | 98 | — | — | — | 98 | —
At 31 Dec 2021 | 156,421 | 1.0 | 27,204 | 1.5 | 72,430 | 0.8

Risk review

182 | HSBC Holdings plc Annual Report and Accounts 2022

Wholesale lending – commercial real estate loans and advances including loan commitments by level of collateral for key countries/territories
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Rated CRR/PD1 to 7 |  |  |  |  |  |
Not collateralised | 52,373 | 0.6 | 8,457 | 0.7 | 23,861 | 0.9
Fully collateralised | 68,020 | 0.3 | 12,309 | 0.3 | 34,779 | 0.1
Partially collateralised (A): | 6,479 | 0.4 | 2,098 | 0.2 | 1,194 | 0.9
– collateral value on A | 3,754 |  | 1,257 |  | 833 |
Total | 126,872 | 0.4 | 22,864 | 0.4 | 59,834 | 0.5
Rated CRR/PD8 |  |  |  |  |  |
Not collateralised | 1,483 | 19.8 | 14 | 3.6 | 1,098 | 26.0
Fully collateralised | 878 | 9.2 | 9 | 11.1 | 604 | 7.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 236 | 21.6 | 4 | 7.5 | 167 | 15.0
– 51% to 75% | 594 | 5.1 | 3 | 13.3 | 393 | 4.6
– 76% to 90% | 45 | 0.4 | — | — | 44 | 0.2
– 91% to 100% | 3 | 3.3 | 2 | 3.5 | — | —
Partially collateralised (B): | 68 | 2.9 | 1 | 8.0 | — | —
– collateral value on B | 43 |  | — |  | — |
Total | 2,429 | 15.5 | 24 | 6.6 | 1,702 | 19.3
Rated CRR/PD9 to 10 |  |  |  |  |  |
Not collateralised | 2,612 | 53.7 | 295 | 35.3 | 2,123 | 56.9
Fully collateralised | 1,617 | 10.8 | 372 | 6.5 | 864 | 5.2
LTV ratio: |  |  |  |  |  |
– less than 50% | 544 | 16.5 | 53 | 3.8 | 318 | 2.2
– 51% to 75% | 594 | 4.4 | 291 | 2.1 | 205 | 3.4
– 76% to 90% | 315 | 4.1 | 11 | 18.2 | 264 | 1.9
– 91% to 100% | 164 | 28.7 | 17 | 76.5 | 77 | 32.5
Partially collateralised (C): | 532 | 52.3 | 176 | 68.8 | 92 | 48.9
– collateral value on C | 301 |  | 72 |  | 47 |
Total | 4,761 | 39.0 | 843 | 29.5 | 3,079 | 42.2
At 31 Dec 2022 | 134,062 | 2.1 | 23,731 | 1.4 | 64,615 | 2.9

Rated CRR/PD1 to 7 |  |  |  |  |  |
Not collateralised | 61,279 | 0.5 | 9,586 | 0.5 | 30,917 | 0.6
Fully collateralised | 83,456 | 0.2 | 14,218 | 0.2 | 38,817 | 0.1
Partially collateralised (A): | 7,059 | 0.5 | 2,379 | 0.2 | 886 | 0.6
– collateral value on A | 3,729 |  | 1,092 |  | 517 |
Total | 151,794 | 0.3 | 26,183 | 0.3 | 70,620 | 0.3
Rated CRR/PD8 |  |  |  |  |  |
Not collateralised | 1,053 | 26.5 | 7 | 42.9 | 705 | 38.6
Fully collateralised | 1,054 | 3.8 | 52 | 38.5 | 519 | 2.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 503 | 4.8 | 41 | 41.5 | 378 | 0.8
– 51% to 75% | 447 | 3.1 | 8 | 25.0 | 137 | 5.8
– 76% to 90% | 60 | 1.7 | 1 | — | 4 | —
– 91% to 100% | 44 | 2.3 | 2 | — | — | —
Partially collateralised (B): | 153 | 15.0 | 5 | 20.0 | — | —
– collateral value on B | 143 |  | 5 |  | — |
Total | 2,260 | 15.1 | 64 | 37.5 | 1,224 | 23.1
Rated CRR/PD9 to 10 |  |  |  |  |  |
Not collateralised | 828 | 40.9 | 407 | 42.0 | 198 | 35.9
Fully collateralised | 1,274 | 20.3 | 346 | 5.2 | 388 | 8.2
LTV ratio: |  |  |  |  |  |
– less than 50% | 743 | 17.2 | 36 | 2.8 | 382 | 8.1
– 51% to 75% | 286 | 9.1 | 250 | 5.2 | — | —
– 76% to 90% | 62 | 14.5 | 11 | — | 2 | —
– 91% to 100% | 183 | 52.5 | 49 | 8.2 | 4 | 25.0
Partially collateralised (C): | 265 | 47.9 | 204 | 49.0 | — | —
– collateral value on C | 149 |  | 97 |  | — |
Total | 2,367 | 30.6 | 957 | 30.2 | 586 | 17.6
At 31 Dec 2021 | 156,421 | 1.0 | 27,204 | 1.5 | 72,430 | 0.8

HSBC Holdings plc Annual Report and Accounts 2022 | 183

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/territories 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.
Accordingly, the following table reports values only for customers
with CRR 8–10, recognising that these loans and advances generally
have valuations that are comparatively recent.

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)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Not collateralised | 632,847 | 0.1 | 105,126 | 0.1 | 109,919 | —
Fully collateralised | 96,434 | 0.1 | 21,192 | 0.1 | 39,165 | 0.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 36,896 | 0.1 | 6,928 | 0.1 | 15,695 | 0.1
– 51% to 75% | 29,242 | 0.1 | 7,611 | 0.1 | 13,893 | 0.1
– 76% to 90% | 9,922 | 0.1 | 1,889 | 0.1 | 4,964 | 0.1
– 91% to 100% | 20,374 | 0.1 | 4,764 | — | 4,613 | 0.1
Partially collateralised (A): | 54,836 | 0.1 | 6,480 | 0.1 | 17,704 | 0.1
– collateral value on A | 27,779 |  | 3,470 |  | 7,737 |
Total | 784,117 | 0.1 | 132,798 | 0.1 | 166,788 | 0.1
Stage 2 |  |  |  |  |  |
Not collateralised | 79,013 | 1.0 | 16,886 | 2.2 | 9,906 | 0.7
Fully collateralised | 29,618 | 1.2 | 6,511 | 1.3 | 12,693 | 1.0
LTV ratio: |  |  |  |  |  |
– less than 50% | 11,221 | 1.3 | 2,872 | 1.0 | 4,577 | 0.9
– 51% to 75% | 11,948 | 1.4 | 2,656 | 1.5 | 5,413 | 1.2
– 76% to 90% | 2,990 | 1.0 | 578 | 1.9 | 1,479 | 0.7
– 91% to 100% | 3,459 | 0.8 | 405 | 1.2 | 1,224 | 0.3
Partially collateralised (B): | 13,130 | 1.0 | 2,288 | 1.2 | 3,379 | 0.6
– collateral value on B | 6,484 |  | 1,197 |  | 1,524 |
Total | 121,761 | 1.1 | 25,685 | 1.9 | 25,978 | 0.8
Stage 3 |  |  |  |  |  |
Not collateralised | 8,278 | 38.4 | 3,783 | 17.8 | 939 | 56.0
Fully collateralised | 1,948 | 13.7 | 699 | 4.6 | 665 | 3.8
LTV ratio: |  |  |  |  |  |
– less than 50% | 678 | 18.7 | 175 | 3.4 | 175 | 1.7
– 51% to 75% | 503 | 11.3 | 336 | 6.5 | 115 | 7.8
– 76% to 90% | 402 | 4.7 | 102 | 1.0 | 268 | 0.4
– 91% to 100% | 365 | 17.5 | 86 | 3.5 | 107 | 10.3
Partially collateralised (C): | 2,120 | 37.3 | 308 | 25.6 | 777 | 30.9
– collateral value on C | 1,133 |  | 158 |  | 397 |
Total | 12,346 | 34.3 | 4,790 | 16.4 | 2,381 | 33.2
POCI |  |  |  |  |  |
Not collateralised | 64 | 18.8 | 28 | 3.6 | — | —
Fully collateralised | 24 | 91.7 | — | — | 24 | 91.7
LTV ratio: |  |  |  |  |  |
– less than 50% | — | — | — | — | — | —
– 51% to 75% | 1 | — | — | — | 1 | —
– 76% to 90% | 23 | 95.7 | — | — | 23 | 95.7
– 91% to 100% | — | — | — | — | — | —
Partially collateralised (D): | 22 | 18.2 | — | — | 14 | —
– collateral value on D | 16 |  | — |  | 13 |
Total | 110 | 34.5 | 28 | 3.6 | 38 | 57.9
At 31 Dec 2022 | 918,334 | 0.7 | 163,301 | 0.9 | 195,185 | 0.6

Risk review

184 | HSBC Holdings plc Annual Report and Accounts 2022

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) (continued)
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Not collateralised | 624,935 | 0.1 | 112,188 | 0.2 | 111,948 | —
Fully collateralised | 112,905 | 0.1 | 22,971 | 0.2 | 45,479 | 0.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 40,636 | 0.1 | 6,512 | 0.2 | 16,915 | —
– 51% to 75% | 38,709 | 0.1 | 9,431 | 0.2 | 16,533 | 0.1
– 76% to 90% | 13,284 | 0.1 | 2,556 | 0.1 | 4,920 | 0.1
– 91% to 100% | 20,276 | 0.1 | 4,472 | — | 7,111 | 0.1
Partially collateralised (A): | 64,058 | 0.1 | 8,665 | 0.1 | 20,358 | —
– collateral value on A | 30,890 |  | 4,826 |  | 9,322 |
Total | 801,898 | 0.1 | 143,824 | 0.2 | 177,785 | —
Stage 2 |  |  |  |  |  |
Not collateralised | 85,394 | 1.1 | 18,562 | 2.0 | 8,310 | 1.1
Fully collateralised | 32,019 | 1.1 | 8,231 | 1.3 | 11,503 | 0.7
LTV ratio: |  |  |  |  |  |
– less than 50% | 10,892 | 1.2 | 3,148 | 1.5 | 3,378 | 0.5
– 51% to 75% | 14,281 | 1.1 | 4,161 | 1.2 | 5,202 | 0.9
– 76% to 90% | 2,752 | 1.2 | 687 | 1.5 | 1,148 | 0.9
– 91% to 100% | 4,094 | 0.9 | 235 | 1.7 | 1,775 | 0.2
Partially collateralised (B): | 12,484 | 1.0 | 1,824 | 1.9 | 1,788 | 0.4
– collateral value on B | 6,675 |  | 937 |  | 785 |
Total | 129,897 | 1.1 | 28,617 | 1.8 | 21,601 | 0.8
Stage 3 |  |  |  |  |  |
Not collateralised | 8,122 | 47.3 | 2,979 | 21.6 | 732 | 74.7
Fully collateralised | 2,278 | 12.7 | 1,212 | 3.4 | 240 | 2.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 603 | 20.9 | 249 | 4.8 | 76 | —
– 51% to 75% | 1,110 | 5.0 | 786 | 1.4 | 110 | 3.6
– 76% to 90% | 295 | 11.5 | 115 | 9.6 | 26 | —
– 91% to 100% | 270 | 27.4 | 62 | 9.7 | 28 | 3.6
Partially collateralised (C): | 2,134 | 38.7 | 318 | 35.5 | 616 | 28.9
– collateral value on C | 1,200 |  | 186 |  | 358 |
Total | 12,534 | 39.6 | 4,509 | 17.7 | 1,588 | 46.0
POCI |  |  |  |  |  |
Not collateralised | 114 | 36.0 | 28 | 21.4 | 4 | —
Fully collateralised | 61 | 34.4 | — | — | 57 | 36.8
LTV ratio: |  |  |  |  |  |
– less than 50% | — | — | — | — | — | —
– 51% to 75% | 57 | 36.8 | — | — | 57 | 36.8
– 76% to 90% | — | — | — | — | — | —
– 91% to 100% | 4 | — | — | — | — | —
Partially collateralised (D): | 2 | 100.0 | — | — | — | —
– collateral value on D | 2 |  | — |  | — |
Total | 177 | 36.2 | 28 | 21.4 | 61 | 34.4
At 31 Dec 2021 | 944,506 | 0.8 | 176,978 | 0.9 | 201,035 | 0.5

HSBC Holdings plc Annual Report and Accounts 2022 | 185

Wholesale lending – other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral for key countries/territories
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Rated CRR/PD8 |  |  |  |  |  |
Not collateralised | 4,209 | 3.5 | 1,071 | 1.6 | 62 | 38.7
Fully collateralised | 2,208 | 3.8 | 303 | 3.3 | 171 | 12.3
LTV ratio: |  |  |  |  |  |
– less than 50% | 1,104 | 4.3 | 184 | 0.5 | 84 | 14.3
– 51% to 75% | 933 | 3.5 | 95 | 5.3 | 84 | 10.7
– 76% to 90% | 44 | 6.8 | 22 | 13.6 | — | —
– 91% to 100% | 127 | 0.8 | 2 | 10.0 | 3 | 6.7
Partially collateralised (A): | 1,298 | 2.9 | 24 | 4.2 | 9 | 11.1
– collateral value on A | 1,212 |  | 4 |  | 5 |
Total | 7,715 | 3.5 | 1,398 | 2.0 | 242 | 19.0
Rated CRR/PD9 to 10 |  |  |  |  |  |
Not collateralised | 8,342 | 38.2 | 3,810 | 17.7 | 939 | 56.0
Fully collateralised | 1,971 | 14.6 | 699 | 4.6 | 688 | 6.7
LTV ratio: |  |  |  |  |  |
– less than 50% | 677 | 18.8 | 175 | 3.4 | 175 | 1.7
– 51% to 75% | 504 | 11.3 | 336 | 6.5 | 116 | 7.8
– 76% to 90% | 425 | 9.6 | 102 | 1.0 | 290 | 7.9
– 91% to 100% | 365 | 17.5 | 86 | 3.5 | 107 | 10.3
Partially collateralised (B): | 2,143 | 37.1 | 309 | 25.6 | 792 | 30.3
– collateral value on B | 1,149 |  | 158 |  | 410 |
Total | 12,456 | 34.3 | 4,818 | 16.3 | 2,419 | 33.6
At 31 Dec 2022 | 20,171 | 22.5 | 6,216 | 13.1 | 2,661 | 32.2

Rated CRR/PD8 |  |  |  |  |  |
Not collateralised | 4,790 | 3.9 | 1,587 | 3.1 | 79 | 30.4
Fully collateralised | 1,653 | 3.9 | 259 | 6.6 | 32 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 803 | 3.5 | 113 | 6.2 | 2 | —
– 51% to 75% | 583 | 3.8 | 110 | 8.2 | 1 | —
– 76% to 90% | 116 | 5.2 | 23 | 4.3 | 29 | —
– 91% to 100% | 151 | 5.3 | 13 | — | — | —
Partially collateralised (A): | 1,253 | 3.7 | 138 | 8.0 | 11 | —
– collateral value on A | 921 |  | 40 |  | 6 |
Total | 7,696 | 3.9 | 1,984 | 3.9 | 122 | 20.5
Rated CRR/PD9 to 10 |  |  |  |  |  |
Not collateralised | 8,239 | 47.1 | 3,007 | 21.5 | 736 | 74.3
Fully collateralised | 2,335 | 13.3 | 1,212 | 3.4 | 297 | 9.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 604 | 20.9 | 249 | 4.8 | 75 | —
– 51% to 75% | 1,166 | 6.7 | 786 | 1.4 | 168 | 14.9
– 76% to 90% | 295 | 11.5 | 115 | 9.6 | 26 | —
– 91% to 100% | 270 | 27.4 | 62 | 9.7 | 28 | 3.6
Partially collateralised (B): | 2,137 | 38.7 | 318 | 35.5 | 616 | 28.9
– collateral value on B | 1,203 |  | 186 |  | 358 |
Total | 12,711 | 39.5 | 4,537 | 17.7 | 1,649 | 45.6
At 31 Dec 2021 | 20,407 | 26.1 | 6,521 | 13.5 | 1,771 | 43.8

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 summarised below:
•Some securities issued by governments, banks and other financial
institutions benefit from additional credit enhancements 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 loans and advances mainly pledged against cash collateral
are posted to satisfy margin requirements. There is limited credit
risk on cash collateral posted since in the event of default of the
counterparty this would be set off against the related liability.
Reverse repos and stock borrowing 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 378 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 33 on the
financial statements.
Risk review

186 | HSBC Holdings plc Annual Report and Accounts 2022

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 a market
factor such as an interest rate, exchange rate or asset price.
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’).
For an analysis of CVAs, see Note 12 on the financial statements.
The following table reflects by risk type the fair values and gross
notional contract amounts of derivatives cleared through an exchange,
central counterparty or non-central counterparty.

Notional contract amounts and fair values of derivatives
| 2022 | 2021
| Notional | Fair value | Notional | Fair value
| amount | Assets | Liabilities | amount | Assets | Liabilities
| $m | $m | $m | $m | $m | $m
Total OTC derivatives | 23,649,591 | 421,309 | 423,911 | 21,964,665 | 246,108 | 241,136
– total OTC derivatives cleared by central counterparties | 11,360,729 | 149,190 | 154,167 | 10,086,344 | 59,147 | 60,686
– total OTC derivatives not cleared by central counterparties | 12,288,862 | 272,119 | 269,744 | 11,878,321 | 186,961 | 180,450
Total exchange traded derivatives | 1,146,426 | 3,824 | 2,840 | 1,359,692 | 4,152 | 3,306
Gross | 24,796,017 | 425,133 | 426,751 | 23,324,357 | 250,260 | 244,442
Offset |  | (140,987) | (140,987) |  | (53,378) | (53,378)
At 31 Dec |  | 284,146 | 285,764 |  | 196,882 | 191,064

The purposes for which HSBC uses derivatives are described
in Note 15 on the financial statements.
The International Swaps and Derivatives Association (‘ISDA’) master
agreement is our preferred agreement for documenting derivatives
activity. It is common, and our preferred practice, for the parties
involved in a derivative transaction to execute a credit support annex
(‘CSA’) in conjunction with the ISDA master agreement. Under a CSA,
collateral is passed between the parties to mitigate the counterparty
risk inherent in outstanding positions. The majority of our CSAs are
with financial institutional clients.
We manage the counterparty exposure on our OTC derivative
contracts by using collateral agreements with counterparties and
netting agreements. Currently, we do not actively manage our general
OTC derivative counterparty exposure in the credit markets, although
we may manage individual exposures in certain circumstances.
We place strict policy restrictions on collateral types and as a
consequence the types of collateral received and pledged are, by
value, highly liquid and of a strong quality, being predominantly cash.
Where a collateral type is required to be approved outside the
collateral policy, approval is required from a committee of senior
representatives from Markets, Legal and Risk.
See Note 31 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 presents further disclosures related to personal lending.
It provides details of the regions, countries and products that are
driving the change observed in personal loans and advances to
customers, with the impact of foreign exchange separately identified.
Additionally, Hong Kong and UK mortgage book LTV data is provided.
This section also provides a reconciliation of the opening 1 January
2022 to 31 December 2022 closing gross carrying/nominal amounts
and associated allowance for ECL. 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.
At 31 December 2022, total personal lending for loans and advances
to customers of $415bn decreased by $63.3bn compared with
31 December 2021. This decrease included adverse foreign exchange
movements of $27.3bn. Excluding foreign exchange movements,
there was a decrease of $36bn. This decrease was due to the
reclassification to assets held for sale of our banking business in
Canada of $26.1bn and our retail banking operations in France of
$23.7bn.
The reduction was partly mitigated by growth of $8.7bn in the UK,
$2.8bn in Asia and $2.0bn in Latin America.
The allowance for ECL attributable to personal lending, excluding off-
balance sheet loan commitments and guarantees, decreased by
$0.2bn to $2.9 bn at 31 December 2022. This included favourable
foreign exchange movements of $0.1bn.
Excluding foreign exchange movements and reclassifications to held
for sale, mortgage lending balances increased by $15.4bn to $336.8bn
at 31 December 2022. The majority of the growth was in the UK by
$8.9 bn; Asia by $4.4bn, notably $3.4bn in Hong Kong and $1.6bn in
Australia; and in Latin America by $1.0bn. The allowance for ECL,
excluding foreign exchange, attributable to mortgages of $0.6 bn
decreased by $0.1bn compared with 31 December 2021.
At 31 December 2022, for certain retail lending portfolios, we
introduced enhancements in the significant increase in credit risk
(‘SICR’) approach in relation to capturing relative movements in
probability of default (‘PD’). The enhanced approach captured relative
movements in PD since origination, which resulted in a significant
migration to stage 2 from loans to customers gross carrying amounts
in stage 1.
The volume of stage 1 customer accounts with lower absolute levels
of credit risk who have exhibited some amount of relative increase in
PD since origination have migrated into stage 2, and accounts
originated with higher absolute levels of credit risk with no or
insignificant increases in PD since origination have been transferred to
stage 1, with no material overall change in risk.
The impact on ECL is immaterial due to the offsetting ECL impacts of
stage migrations and due to the LTV profiles. This is particularly
applicable to UK customers.
The enhancement of the SICR approach constitutes an improvement
towards more responsive models that better reflect the SICR since
origination. This includes consideration of the current cost of living
pressures, as markets adjust to the higher interest-rate environment.
The quality of both our Hong Kong and UK mortgage books remained
strong, with low levels of impairment allowances. The average LTV
ratio on new mortgage lending in Hong Kong was 59%, compared
with an estimated 57% for the overall mortgage portfolio. The
average LTV ratio on new lending in the UK was 67%, compared with
an estimated 50% for the overall mortgage portfolio.
Excluding foreign exchange movements and reclassifications to held
for sale, other personal lending balances at 31 December 2022
decreased by $1.4bn compared with 31 December 2021. This was
mainly from a decline of $2.0bn from Hong Kong in secured personal
lending, partly offset by an increase of $0.5bn from Latin America in
credit cards.

HSBC Holdings plc Annual Report and Accounts 2022 | 187

The allowance for ECL, excluding foreign exchange, attributable to
other personal lending of $2.3bn remained unchanged from
31 December 2021. Excluding foreign exchange, the allowance for
ECL attributable to credit cards increased by $0.1 bn, offset by a
decrease of $0.1bn in unsecured personal lending.

Total personal lending for loans and advances to customers at amortised cost 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 | 294,918 | 39,860 | 2,043 | 336,821 | (74) | (230) | (270) | (574)
– of which: interest only (including offset) | 19,636 | 4,485 | 169 | 24,290 | (3) | (46) | (41) | (90)
– affordability (including US adjustable rate mortgages) | 14,773 | 369 | 240 | 15,382 | (5) | (3) | (4) | (12)
Other personal lending | 67,863 | 9,031 | 1,297 | 78,191 | (488) | (1,275) | (535) | (2,298)
– second lien residential mortgages | 353 | 20 | 6 | 379 | (1) | (2) | (3) | (6)
– guaranteed loans in respect of residential property | 1,121 | 121 | 125 | 1,367 | (1) | (3) | (30) | (34)
– other personal lending which is secured | 31,306 | 594 | 206 | 32,106 | (15) | (10) | (30) | (55)
– credit cards | 16,705 | 4,423 | 260 | 21,388 | (225) | (777) | (160) | (1,162)
– other personal lending which is unsecured | 16,617 | 3,706 | 687 | 21,010 | (235) | (470) | (305) | (1,010)
– motor vehicle finance | 1,761 | 167 | 13 | 1,941 | (11) | (13) | (7) | (31)
At 31 Dec 2022 | 362,781 | 48,891 | 3,340 | 415,012 | (562) | (1,505) | (805) | (2,872)
By geography |  |  |  |  |  |  |  |
Europe | 143,438 | 38,186 | 1,269 | 182,893 | (151) | (706) | (282) | (1,139)
– of which: UK | 132,312 | 37,974 | 1,027 | 171,313 | (137) | (696) | (230) | (1,063)
Asia | 185,828 | 8,723 | 1,117 | 195,668 | (139) | (363) | (188) | (690)
– of which: Hong Kong | 128,218 | 4,563 | 236 | 133,017 | (59) | (255) | (39) | (353)
MENA | 5,347 | 237 | 132 | 5,716 | (33) | (42) | (70) | (145)
North America | 17,772 | 562 | 439 | 18,773 | (15) | (44) | (67) | (126)
Latin America | 10,396 | 1,183 | 383 | 11,962 | (224) | (350) | (198) | (772)
At 31 Dec 2022 | 362,781 | 48,891 | 3,340 | 415,012 | (562) | (1,505) | (805) | (2,872)

At 31 December 2022, the stage 2 personal lending balances in the
UK of $38.0bn increased by $33.3bn compared with 31 December
2021. This increase was largely due to the enhancement in the SICR
approach in relation to capturing relative movements in PD since
origination, and also, to a lesser extent, it considered cost of living
pressures. The impact on ECL was immaterial due to the offsetting
ECL impacts of stage migrations due to the low LTV profiles
applicable to these UK customers.

Total personal lending for loans and other credit-related commitments and financial guarantees 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
Europe | 53,299 | 592 | 114 | 54,005 | (11) | (1) | — | (12)
– of which: UK | 51,589 | 454 | 107 | 52,150 | (11) | (1) | — | (12)
Asia | 170,103 | 2,914 | 633 | 173,650 | (2) | — | — | (2)
– of which: Hong Kong | 128,990 | 2,176 | 624 | 131,790 | (2) | — | — | (2)
MENA | 2,328 | 20 | 2 | 2,350 | (1) | — | — | (1)
North America | 10,418 | 140 | 48 | 10,606 | (1) | — | — | (1)
Latin America | 4,496 | 31 | 3 | 4,530 | (11) | — | — | (11)
At 31 Dec 2022 | 240,644 | 3,697 | 800 | 245,141 | (26) | (1) | — | (27)

Risk review

188 | HSBC Holdings plc Annual Report and Accounts 2022

Total personal lending for loans and advances to customers at amortised cost 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 | 360,686 | 7,637 | 3,045 | 371,368 | (128) | (131) | (416) | (675)
– of which: interest only (including offset) | 28,506 | 1,795 | 255 | 30,556 | (5) | (24) | (81) | (110)
– affordability (including US adjustable rate mortgages) | 13,621 | 712 | 452 | 14,785 | (6) | (6) | (5) | (17)
Other personal lending | 96,270 | 8,802 | 1,897 | 106,969 | (530) | (1,088) | (810) | (2,428)
– second lien residential mortgages | 314 | 44 | 37 | 395 | (1) | (4) | (9) | (14)
– guaranteed loans in respect of residential property | 20,643 | 731 | 236 | 21,610 | (9) | (7) | (42) | (58)
– other personal lending which is secured | 36,533 | 1,096 | 366 | 37,995 | (21) | (15) | (120) | (156)
– credit cards | 18,623 | 3,897 | 338 | 22,858 | (246) | (675) | (214) | (1,135)
– other personal lending which is unsecured | 18,743 | 2,820 | 915 | 22,478 | (240) | (378) | (421) | (1,039)
– motor vehicle finance | 1,414 | 214 | 5 | 1,633 | (13) | (9) | (4) | (26)
At 31 Dec 2021 | 456,956 | 16,439 | 4,942 | 478,337 | (658) | (1,219) | (1,226) | (3,103)
By geography |  |  |  |  |  |  |  |
Europe | 212,284 | 5,639 | 2,148 | 220,071 | (199) | (499) | (637) | (1,335)
– of which: UK | 176,547 | 4,668 | 1,488 | 182,703 | (167) | (480) | (399) | (1,046)
Asia | 187,391 | 7,796 | 1,303 | 196,490 | (158) | (381) | (226) | (765)
– of which: Hong Kong | 125,854 | 4,959 | 202 | 131,015 | (65) | (231) | (43) | (339)
MENA | 4,965 | 252 | 202 | 5,419 | (38) | (40) | (94) | (172)
North America | 43,489 | 2,126 | 1,005 | 46,620 | (43) | (67) | (118) | (228)
Latin America | 8,827 | 626 | 284 | 9,737 | (220) | (232) | (151) | (603)
At 31 Dec 2021 | 456,956 | 16,439 | 4,942 | 478,337 | (658) | (1,219) | (1,226) | (3,103)

Total personal lending for loans and other credit-related commitments and financial guarantees 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
Europe | 57,109 | 558 | 107 | 57,774 | (11) | (1) | — | (12)
– of which: UK | 54,704 | 407 | 104 | 55,215 | (10) | (1) | — | (11)
Asia | 160,248 | 894 | 21 | 161,163 | — | — | — | —
– of which: Hong Kong | 121,597 | 292 | 19 | 121,908 | — | — | — | —
MENA | 2,568 | 30 | 16 | 2,614 | (5) | — | — | (5)
North America | 15,039 | 251 | 23 | 15,313 | (15) | (1) | — | (16)
Latin America | 3,920 | 29 | 2 | 3,951 | (6) | — | — | (6)
At 31 Dec 2021 | 238,884 | 1,762 | 169 | 240,815 | (37) | (2) | — | (39)

HSBC Holdings plc Annual Report and Accounts 2022 | 189

Exposure to UK interest-only mortgage
loans
The following information is presented for HSBC branded interest-
only mortgage loans. This excludes offset mortgages in first direct
and private banking mortgages.
At the end of 2022, the average LTV ratio of the interest-only
mortgage loans was 41% (2021: 40%) and 99% (2021: 99%) had a
LTV ratio of 75% or less.
Of the interest-only mortgage loans that expired in 2020, 83% were
repaid within 12 months of expiry with a total of 96% being repaid
within 24 months of expiry. For those expiring during 2021, 95%
were repaid within 12 months of expiry. The increase of the amount
fully repaid within the 12 months is explained by the extensions
granted as part of the FCA guidance on helping borrowers with
maturing interest-only mortgages during the pandemic, which
reduced the repayment rates within 12 months for cases maturing in
2022. Following the end of these extension in October 2021,
repayment rates have now returned to levels similar to 2019.
At 31 December 2022, interest-only mortgage loans exposures were
$14.4bn and the maturity profile is as follows:

UK interest-only mortgage loans
| $m
Expired interest-only mortgage loans | 134
Interest-only mortgage loans by maturity |
– 2023 | 219
– 2024 | 215
– 2025 | 300
– 2026 | 383
– 2027–2031 | 2,951
– post-2031 | 10,248
At 31 Dec 2022 | 14,450

Expired interest-only mortgage loans | 167
Interest-only mortgage loans by maturity |
– 2022 | 267
– 2023 | 401
– 2024 | 330
– 2025 | 420
– 2026–2030 | 3,288
– post-2030 | 10,333
At 31 Dec 2021 | 15,206

Exposure to offset mortgage in first direct
The offset mortgage in first direct is a flexible way for our customers
to take control of their finances. It works by grouping together the
customer’s mortgage, savings and current accounts to offset their
credit and debit balances against their mortgage exposure.
At 31 December 2022, exposures were worth a total $5.5bn with an
average LTV ratio of 32% (2021: $7.0bn exposure and 35% LTV ratio).
Risk review

190 | HSBC Holdings plc Annual Report and Accounts 2022

Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
(Audited) |  |
| Non-credit impaired | Credit impaired |
| Stage 1 | Stage 2 | Stage 3 | 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
| $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2022 | 695,840 | (695) | 18,201 | (1,221) | 5,111 | (1,226) | 719,152 | (3,142)
Transfers of financial instruments | (40,834) | (499) | 39,483 | 677 | 1,351 | (178) | — | —
– transfers from stage 1 to stage 2 | (68,063) | 269 | 68,063 | (269) | — | — | — | —
– transfers from stage 2 to stage 1 | 27,407 | (734) | (27,407) | 734 | — | — | — | —
– transfers to stage 3 | (561) | 2 | (1,987) | 361 | 2,548 | (363) | — | —
– transfers from stage 3 | 383 | (36) | 814 | (149) | (1,197) | 185 | — | —
Net remeasurement of ECL arising from transfer of stage | — | 498 | — | (583) | — | (88) | — | (173)
New financial assets originated or purchased | 130,632 | (271) | — | — | — | — | 130,632 | (271)
Assets derecognised (including final repayments) | (68,645) | 94 | (4,091) | 270 | (1,043) | 124 | (73,779) | 488
Changes to risk parameters – further lending/ repayments | (31,457) | 162 | 4,538 | (35) | 897 | (33) | (26,022) | 94
Change in risk parameters – credit quality | — | 82 | — | (676) | — | (822) | — | (1,416)
Changes to models used for ECL calculation | — | (2) | — | (94) | — | 13 | — | (83)
Assets written off | — | — | — | — | (1,215) | 1,215 | (1,215) | 1,215
Foreign exchange and other 1 | (82,111) | 43 | (5,543) | 156 | (961) | 190 | (88,615) | 389
At 31 Dec 2022 | 603,425 | (588) | 52,588 | (1,506) | 4,140 | (805) | 660,153 | (2,899)
ECL income statement change for the period |  | 563 |  | (1,118) |  | (806) |  | (1,361)
Recoveries |  |  |  |  |  |  |  | 283
Other |  |  |  |  |  |  |  | (3)
Total ECL income statement change for the period |  |  |  |  |  |  |  | (1,081)

1 Total includes $49.6bn of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding
allowance for ECL of $221m, reflecting business disposals as disclosed in Note 23 ‘Assets held for sale and liabilities of disposal groups held for sale’
on page 389.
As shown in the above table, the allowance for ECL for loans and
advances to customers and relevant loan commitments and financial
guarantees decreased by $243m during the period from $3,142m at
31 December 2021 to $2,899m at 31 December 2022.
This decrease was primarily driven by:
•$1,215m of assets written off;
•foreign exchange and other movements of $389m; and
•$311m relating to volume movements, which included the ECL
allowance associated with new originations, assets derecognised
and further lending/repayment.
These were partly offset by:
•$1,416m relating to underlying credit quality changes, including the
credit quality impact of financial instruments transferring between
stages;
•$173m relating to the net remeasurement impact of stage
transfers; and
•$83m of changes to models used for ECL calculation.
The ECL charge for the period of $1,361m presented in the above
table consisted of $1,416m relating to underlying credit quality
changes, including the credit quality impact of financial instruments
transferring between stages, $83m in changes to models used for
ECL calculation and $173m relating to the net remeasurement impact
of stage transfers. This was partly offset by $311m relating to
underlying net book volume movements.
During the period, there was a net transfer to stage 2 of $40,656m
gross carrying/nominal amounts. This increase was primarily driven by
$36,816m in Europe, of which $34,278m was from the UK, largely
due to enhancements in the SICR approach in relation to capturing
relative movements in PD since origination and taking into
consideration cost of living pressures. Further details are presented
on page 187.

HSBC Holdings plc Annual Report and Accounts 2022 | 191

Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
(Audited)
| Non-credit impaired | Credit impaired |
| Stage 1 | Stage 2 | Stage 3 | 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
| $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2021 | 665,346 | (866) | 26,770 | (2,405) | 5,762 | (1,503) | 697,878 | (4,774)
Transfers of financial instruments | 1,822 | (1,154) | (4,502) | 1,713 | 2,680 | (559) | — | —
– transfers from stage 1 to stage 2 | (23,701) | 289 | 23,701 | (289) | — | — | — | —
– transfers from stage 2 to stage 1 | 26,086 | (1,404) | (26,086) | 1,404 | — | — | — | —
– transfers to stage 3 | (982) | 7 | (3,068) | 734 | 4,050 | (741) | — | —
– transfers from stage 3 | 419 | (46) | 951 | (136) | (1,370) | 182 | — | —
Net remeasurement of ECL arising from transfer of stage | — | 825 | — | (363) | — | (7) | — | 455
New financial assets originated or purchased | 136,920 | (211) | — | — | — | — | 136,920 | (211)
Assets derecognised (including final repayments) | (82,998) | 119 | (5,257) | 419 | (1,236) | 219 | (89,491) | 757
Changes to risk parameters – further lending/ repayments | (13,976) | 240 | 2,380 | 114 | (281) | 51 | (11,877) | 405
Change in risk parameters – credit quality | — | 318 | — | (778) | — | (1,007) | — | (1,467)
Changes to models used for ECL calculation | — | (2) | — | — | — | 1 | — | (1)
Assets written off | — | — | — | — | (1,525) | 1,520 | (1,525) | 1,520
Foreign exchange | (9,074) | 17 | (358) | 19 | (138) | 45 | (9,570) | 81
Others 1 | (2,200) | 19 | (832) | 60 | (151) | 14 | (3,183) | 93
At 31 Dec 2021 | 695,840 | (695) | 18,201 | (1,221) | 5,111 | (1,226) | 719,152 | (3,142)
ECL income statement change for the period |  | 1,289 |  | (608) |  | (743) |  | (62)
Recoveries |  |  |  |  |  |  |  | 355
Other |  |  |  |  |  |  |  | (9)
Total ECL income statement change for the period |  |  |  |  |  |  |  | 284

1 Total includes $3.0b n of gross carrying loans and advances to customers, which were classified to assets held for sale, and a corresponding allowance
for ECL of $123m, reflecting our exit of the domestic mass market retail banking in the US.

Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost
|  | Gross carrying amount | Allowance for ECL |
| PD range 1 | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ECL coverage
| % | $m | $m | $m | $m | $m | $m | $m | $m | %
First lien residential mortgages |  | 294,918 | 39,860 | 2,043 | 336,821 | (74) | (230) | (270) | (574) | 0.2
– Band 1 | 0.000 to 0.250 | 247,330 | 21,220 | — | 268,550 | (13) | (4) | — | (17) | —
– Band 2 | 0.251 to 0.500 | 19,614 | 7,900 | — | 27,514 | (4) | (3) | — | (7) | —
– Band 3 | 0.501 to 1.500 | 21,323 | 5,691 | — | 27,014 | (18) | (7) | — | (25) | 0.1
– Band 4 | 1.501 to 5.000 | 6,594 | 2,694 | — | 9,288 | (39) | (24) | — | (63) | 0.7
– Band 5 | 5.001 to 20.000 | 34 | 1,024 | — | 1,058 | — | (40) | — | (40) | 3.8
– Band 6 | 20.001 to 99.999 | 23 | 1,331 | — | 1,354 | — | (152) | — | (152) | 11.2
– Band 7 | 100.000 | — | — | 2,043 | 2,043 | — | — | (270) | (270) | 13.2
Other personal lending |  | 67,863 | 9,031 | 1,297 | 78,191 | (488) | (1,275) | (535) | (2,298) | 2.9
– Band 1 | 0.000 to 0.250 | 30,151 | 153 | — | 30,304 | (54) | (13) | — | (67) | 0.2
– Band 2 | 0.251 to 0.500 | 7,219 | 251 | — | 7,470 | (26) | (1) | — | (27) | 0.4
– Band 3 | 0.501 to 1.500 | 17,183 | 1,499 | — | 18,682 | (82) | (44) | — | (126) | 0.7
– Band 4 | 1.501 to 5.000 | 10,342 | 2,061 | — | 12,403 | (171) | (104) | — | (275) | 2.2
– Band 5 | 5.001 to 20.000 | 2,501 | 3,692 | — | 6,193 | (154) | (520) | — | (674) | 10.9
– Band 6 | 20.001 to 99.999 | 467 | 1,375 | — | 1,842 | (1) | (593) | — | (594) | 32.2
– Band 7 | 100.000 | — | — | 1,297 | 1,297 | — | — | (535) | (535) | 41.2
At 31 Dec 2022 |  | 362,781 | 48,891 | 3,340 | 415,012 | (562) | (1,505) | (805) | (2,872) | 0.7

1 12-month point in time adjusted for multiple economic scenarios.
Risk review

192 | HSBC Holdings plc Annual Report and Accounts 2022

Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost (continued)
|  | Gross carrying amount | Allowance for ECL |
| PD range 1 | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ECL coverage
| % | $m | $m | $m | $m | $m | $m | $m | $m | %
First lien residential mortgages |  | 360,686 | 7,637 | 3,045 | 371,368 | (128) | (131) | (416) | (675) | 0.2
– Band 1 | 0.000 to 0.250 | 310,042 | 451 | — | 310,493 | (30) | (5) | — | (35) | —
– Band 2 | 0.251 to 0.500 | 19,741 | 203 | — | 19,944 | (7) | (2) | — | (9) | —
– Band 3 | 0.501 to 1.500 | 25,835 | 1,936 | — | 27,771 | (79) | (8) | — | (87) | 0.3
– Band 4 | 1.501 to 5.000 | 4,976 | 2,657 | — | 7,633 | (12) | (30) | — | (42) | 0.6
– Band 5 | 5.001 to 20.000 | 88 | 1,416 | — | 1,504 | — | (35) | — | (35) | 2.3
– Band 6 | 20.001 to 99.999 | 4 | 974 | — | 978 | — | (51) | — | (51) | 5.2
– Band 7 | 100.000 | — | — | 3,045 | 3,045 | — | — | (416) | (416) | 13.7
Other personal lending |  | 96,270 | 8,802 | 1,897 | 106,969 | (530) | (1,088) | (810) | (2,428) | 2.3
– Band 1 | 0.000 to 0.250 | 45,049 | 187 | — | 45,236 | (50) | (13) | — | (63) | 0.1
– Band 2 | 0.251 to 0.500 | 12,625 | 605 | — | 13,230 | (27) | (6) | — | (33) | 0.2
– Band 3 | 0.501 to 1.500 | 22,791 | 1,518 | — | 24,309 | (102) | (30) | — | (132) | 0.5
– Band 4 | 1.501 to 5.000 | 13,006 | 2,360 | — | 15,366 | (213) | (108) | — | (321) | 2.1
– Band 5 | 5.001 to 20.000 | 2,732 | 3,257 | — | 5,989 | (138) | (554) | — | (692) | 11.6
– Band 6 | 20.001 to 99.999 | 67 | 875 | — | 942 | — | (377) | — | (377) | 40.0
– Band 7 | 100.000 | — | — | 1,897 | 1,897 | — | — | (810) | (810) | 42.7
At 31 Dec 2021 |  | 456,956 | 16,439 | 4,942 | 478,337 | (658) | (1,219) | (1,226) | (3,103) | 0.6

1 12-month point in time adjusted for multiple economic scenarios.
Collateral on loans and advances
(Audited)
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.

HSBC Holdings plc Annual Report and Accounts 2022 | 193

Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Fully collateralised | 310,705 | — | 134,044 | — | 94,949 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 154,337 | — | 70,936 | — | 44,740 | —
– 51% to 60% | 57,386 | — | 23,226 | — | 18,027 | —
– 61% to 70% | 44,805 | — | 20,391 | — | 10,096 | —
– 71% to 80% | 25,458 | — | 12,849 | — | 4,167 | —
– 81% to 90% | 17,106 | — | 5,922 | — | 7,883 | —
– 91% to 100% | 11,613 | — | 720 | — | 10,036 | —
Partially collateralised (A): | 6,964 | — | 329 | — | 6,441 | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 6,127 | — | 73 | — | 5,953 | —
– 111% to 120% | 570 | — | 61 | — | 482 | —
– greater than 120% | 267 | 0.4 | 195 | — | 6 | —
– collateral value on A | 6,521 |  | 237 |  | 6,146 |
Total | 317,669 | — | 134,373 | — | 101,390 | —
Stage 2 |  |  |  |  |  |
Fully collateralised | 39,906 | 0.6 | 34,541 | 0.4 | 981 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 12,250 | 0.7 | 10,387 | 0.6 | 577 | —
– 51% to 60% | 7,372 | 0.5 | 6,402 | 0.4 | 171 | —
– 61% to 70% | 9,617 | 0.4 | 8,541 | 0.3 | 85 | —
– 71% to 80% | 6,770 | 0.5 | 5,922 | 0.3 | 37 | —
– 81% to 90% | 3,388 | 0.5 | 2,918 | 0.2 | 51 | 0.1
– 91% to 100% | 509 | 1.1 | 371 | 0.2 | 60 | 0.2
Partially collateralised (B): | 143 | 6.9 | 49 | 0.3 | 47 | 0.2
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 73 | 3.6 | 10 | 1.2 | 45 | 0.2
– 111% to 120% | 24 | 12.5 | 10 | — | 2 | —
– greater than 120% | 46 | 9.1 | 29 | 0.1 | — | —
– collateral value on B | 123 |  | 38 |  | 44 |
Total | 40,049 | 0.6 | 34,590 | 0.4 | 1,028 | —
Stage 3 |  |  |  |  |  |
Fully collateralised | 2,097 | 9.9 | 676 | 11.1 | 237 | 0.1
LTV ratio: |  |  |  |  |  |
– less than 50% | 1,077 | 7.2 | 448 | 9.4 | 105 | —
– 51% to 60% | 330 | 7.6 | 110 | 9.7 | 26 | 0.1
– 61% to 70% | 207 | 12.6 | 48 | 15.9 | 11 | 0.7
– 71% to 80% | 212 | 14.7 | 33 | 19.7 | 25 | 0.1
– 81% to 90% | 147 | 17.8 | 10 | 24.5 | 27 | —
– 91% to 100% | 124 | 18.1 | 27 | 22.5 | 43 | —
Partially collateralised (C): | 133 | 46.9 | 12 | 9.8 | 1 | 0.3
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 37 | 24.3 | 10 | 3.7 | 1 | 0.4
– 111% to 120% | 17 | 32.7 | — | 64.9 | — | —
– greater than 120% | 79 | 60.5 | 2 | 36.2 | — | —
– collateral value on C | 79 |  | 4 |  | 1 |
Total | 2,230 | 12.1 | 688 | 11.1 | 238 | 0.1
At 31 Dec 2022 | 359,948 | 0.2 | 169,651 | 0.1 | 102,656 | —

Risk review

194 | HSBC Holdings plc Annual Report and Accounts 2022

Personal lending – residential mortgage loans including loan commitments by level of collateral for key countries/territories by stage (continued)
(Audited)
|  |  | of which:
| Total | UK | Hong Kong
| Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage | Gross carrying/ nominal amount | ECL coverage
| $m | % | $m | % | $m | %
Stage 1 |  |  |  |  |  |
Fully collateralised | 377,454 | — | 168,737 | — | 98,020 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 190,370 | — | 81,582 | — | 61,234 | —
– 51% to 60% | 64,217 | — | 28,555 | — | 12,070 | —
– 61% to 70% | 51,842 | — | 25,949 | — | 4,649 | —
– 71% to 80% | 46,932 | 0.1 | 24,114 | — | 8,360 | —
– 81% to 90% | 18,778 | 0.1 | 7,899 | — | 8,420 | —
– 91% to 100% | 5,315 | 0.1 | 638 | — | 3,287 | —
Partially collateralised (A): | 682 | 0.3 | 358 | — | 30 | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 254 | 0.6 | 104 | — | 26 | —
– 111% to 120% | 98 | 0.4 | 60 | — | 1 | —
– greater than 120% | 330 | 0.1 | 194 | — | 3 | —
– collateral value on A | 484 |  | 235 |  | 28 |
Total | 378,136 | — | 169,095 | — | 98,050 | —
Stage 2 |  |  |  |  |  |
Fully collateralised | 7,710 | 1.7 | 2,738 | 2.1 | 1,166 | —
LTV ratio: |  |  |  |  |  |
– less than 50% | 4,380 | 1.5 | 1,846 | 1.6 | 905 | —
– 51% to 60% | 1,317 | 1.4 | 397 | 2.4 | 106 | —
– 61% to 70% | 1,016 | 1.6 | 282 | 3.0 | 34 | —
– 71% to 80% | 725 | 2.3 | 175 | 4.7 | 50 | —
– 81% to 90% | 208 | 4.3 | 32 | 5.6 | 58 | —
– 91% to 100% | 64 | 4.1 | 6 | 1.9 | 13 | —
Partially collateralised (B): | 24 | 13.6 | 3 | 7.7 | — | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 7 | 18.6 | 1 | 1.0 | — | —
– 111% to 120% | 8 | 16.6 | — | — | — | —
– greater than 120% | 9 | 6.7 | 2 | 11.1 | — | —
– collateral value on B | 20 |  | 2 |  | — |
Total | 7,734 | 1.7 | 2,741 | 2.1 | 1,166 | —
Stage 3 |  |  |  |  |  |
Fully collateralised | 2,853 | 11.5 | 954 | 14.2 | 68 | 0.3
LTV ratio: |  |  |  |  |  |
– less than 50% | 1,490 | 9.2 | 635 | 13.0 | 48 | 0.5
– 51% to 60% | 443 | 8.6 | 129 | 14.0 | 10 | 0.1
– 61% to 70% | 371 | 10.9 | 79 | 16.2 | 2 | 0.1
– 71% to 80% | 256 | 15.4 | 67 | 19.1 | 3 | —
– 81% to 90% | 171 | 20.4 | 21 | 25.2 | 4 | —
– 91% to 100% | 122 | 32.2 | 23 | 18.6 | 1 | —
Partially collateralised (C): | 220 | 39.6 | 7 | 30.8 | — | —
LTV ratio: |  |  |  |  |  |
– 101% to 110% | 56 | 27.5 | 4 | 22.3 | — | —
– 111% to 120% | 29 | 29.2 | — | — | — | —
– greater than 120% | 135 | 46.9 | 3 | 45.5 | — | —
– collateral value on C | 143 |  | 6 |  | — |
Total | 3,073 | 13.5 | 961 | 14.4 | 68 | 0.3
At 31 Dec 2021 | 388,943 | 0.2 | 172,797 | 0.1 | 99,284 | —

HSBC Holdings plc Annual Report and Accounts 2022 | 195

Supplementary information

Wholesale lending – loans and advances to customers at amortised cost by country/territory
| Gross carrying amount | Allowance for ECL
| Corporate and commercial | Of which: real estate 1 | Non-bank financial institutions | Total | Corporate and commercial | Of which: real estate 1 | Non-bank financial institutions | Total
| $m | $m | $m | $m | $m | $m | $m | $m
Europe | 146,236 | 19,814 | 18,198 | 164,434 | (2,376) | (370) | (139) | (2,515)
– UK | 104,775 | 14,309 | 12,663 | 117,438 | (1,522) | (329) | (130) | (1,652)
– France | 27,571 | 4,216 | 4,152 | 31,723 | (622) | (36) | (4) | (626)
– Germany | 6,603 | 252 | 713 | 7,316 | (154) | — | (3) | (157)
– Switzerland | 988 | 635 | 298 | 1,286 | (8) | — | — | (8)
– other | 6,299 | 402 | 372 | 6,671 | (70) | (5) | (2) | (72)
Asia | 245,872 | 73,164 | 38,863 | 284,735 | (4,361) | (2,197) | (77) | (4,438)
– Hong Kong | 145,411 | 56,161 | 20,812 | 166,223 | (3,001) | (1,966) | (36) | (3,037)
– Australia | 11,641 | 3,106 | 1,157 | 12,798 | (97) | (1) | — | (97)
– India | 9,052 | 1,711 | 4,267 | 13,319 | (80) | (22) | (10) | (90)
– Indonesia | 3,214 | 85 | 226 | 3,440 | (187) | (1) | — | (187)
– mainland China | 31,790 | 5,752 | 8,908 | 40,698 | (328) | (167) | (30) | (358)
– Malaysia | 5,986 | 1,081 | 180 | 6,166 | (133) | (15) | — | (133)
– Singapore | 15,904 | 3,812 | 1,192 | 17,096 | (388) | (12) | (1) | (389)
– Taiwan | 4,700 | 20 | 65 | 4,765 | (1) | — | — | (1)
– other | 18,174 | 1,436 | 2,056 | 20,230 | (146) | (13) | — | (146)
Middle East and North Africa (excluding Saudi Arabia) | 21,565 | 1,766 | 324 | 21,889 | (983) | (158) | (3) | (986)
– Egypt | 1,261 | 77 | 101 | 1,362 | (117) | (5) | (1) | (118)
– UAE | 13,503 | 1,569 | 149 | 13,652 | (673) | (152) | — | (673)
– other | 6,801 | 120 | 74 | 6,875 | (193) | (1) | (2) | (195)
North America | 28,619 | 5,783 | 8,791 | 37,410 | (230) | (102) | (37) | (267)
– US | 28,249 | 5,714 | 8,640 | 36,889 | (214) | (94) | (26) | (240)
– Canada 2 | — | — | — | — | — | — | — | —
– other | 370 | 69 | 151 | 521 | (16) | (8) | (11) | (27)
Latin America | 12,064 | 907 | 763 | 12,827 | (374) | (24) | (1) | (375)
– Mexico | 9,784 | 903 | 717 | 10,501 | (335) | (24) | (1) | (336)
– other | 2,280 | 4 | 46 | 2,326 | (39) | — | — | (39)
At 31 Dec 2022 | 454,356 | 101,434 | 66,939 | 521,295 | (8,324) | (2,851) | (257) | (8,581)

Europe | 163,341 | 23,137 | 17,818 | 181,159 | (2,770) | (546) | (41) | (2,811)
– UK | 115,386 | 16,233 | 11,306 | 126,692 | (1,855) | (489) | (32) | (1,887)
– France | 34,488 | 5,520 | 4,391 | 38,879 | (654) | (47) | (2) | (656)
– Germany | 6,746 | 306 | 987 | 7,733 | (120) | — | (3) | (123)
– Switzerland | 1,188 | 731 | 688 | 1,876 | (8) | — | — | (8)
– other | 5,533 | 347 | 446 | 5,979 | (133) | (10) | (4) | (137)
Asia | 263,821 | 81,453 | 36,321 | 300,142 | (3,297) | (731) | (44) | (3,341)
– Hong Kong | 162,684 | 62,792 | 20,182 | 182,866 | (1,585) | (624) | (7) | (1,592)
– Australia | 9,937 | 2,596 | 717 | 10,654 | (108) | (3) | — | (108)
– India | 8,221 | 1,786 | 4,003 | 12,224 | (84) | (29) | (8) | (92)
– Indonesia | 3,436 | 86 | 226 | 3,662 | (246) | (2) | (1) | (247)
– mainland China | 33,555 | 6,811 | 9,359 | 42,914 | (198) | (41) | (28) | (226)
– Malaysia | 7,229 | 1,741 | 197 | 7,426 | (172) | (21) | — | (172)
– Singapore | 16,401 | 4,158 | 782 | 17,183 | (792) | (5) | — | (792)
– Taiwan | 6,291 | 31 | 47 | 6,338 | — | — | — | —
– other | 16,067 | 1,452 | 808 | 16,875 | (112) | (6) | — | (112)
Middle East and North Africa (excluding Saudi Arabia) | 21,963 | 1,555 | 376 | 22,339 | (1,207) | (158) | (3) | (1,210)
– Egypt | 1,788 | 69 | 152 | 1,940 | (161) | (7) | — | (161)
– UAE | 12,942 | 1,370 | 190 | 13,132 | (811) | (149) | — | (811)
– other | 7,233 | 116 | 34 | 7,267 | (235) | (2) | (3) | (238)
North America | 52,577 | 13,639 | 10,197 | 62,774 | (427) | (87) | (18) | (445)
– US | 27,002 | 5,895 | 8,511 | 35,513 | (207) | (64) | (1) | (208)
– Canada | 25,048 | 7,650 | 1,546 | 26,594 | (198) | (15) | (6) | (204)
– other | 527 | 94 | 140 | 667 | (22) | (8) | (11) | (33)
Latin America | 11,837 | 1,476 | 643 | 12,480 | (503) | (122) | (4) | (507)
– Mexico | 9,561 | 1,475 | 618 | 10,179 | (452) | (122) | (4) | (456)
– other | 2,276 | 1 | 25 | 2,301 | (51) | — | — | (51)
At 31 Dec 2021 | 513,539 | 121,260 | 65,355 | 578,894 | (8,204) | (1,644) | (110) | (8,314)

1 Real estate lending within this disclosure corresponds solely to the industry of the borrower. Commercial real estate on page 177 includes borrowers
in multiple industries investing in income-producing assets and to a lesser extent, their construction and development.
2 Classified as held for sale at 31 December 2022.
Risk review

196 | HSBC Holdings plc Annual Report and Accounts 2022

Personal lending – loans and advances to customers at amortised cost by country/territory
| Gross carrying amount | Allowance for ECL
| First lien residential mortgages | Other personal | Of which: credit cards | Total | First lien residential mortgages | Other personal | Of which: credit cards | Total
| $m | $m | $m | $m | $m | $m | $m | $m
Europe | 159,063 | 23,830 | 6,665 | 182,893 | (265) | (874) | (451) | (1,139)
– UK | 154,519 | 16,794 | 6,622 | 171,313 | (226) | (837) | (449) | (1,063)
– France 1 | 30 | 76 | 9 | 106 | (14) | (8) | — | (22)
– Germany | — | 234 | — | 234 | — | — | — | —
– Switzerland | 1,378 | 5,094 | — | 6,472 | — | (22) | — | (22)
– other | 3,136 | 1,632 | 34 | 4,768 | (25) | (7) | (2) | (32)
Asia | 151,058 | 44,610 | 11,805 | 195,668 | (50) | (640) | (423) | (690)
– Hong Kong | 101,478 | 31,539 | 8,645 | 133,017 | (1) | (352) | (258) | (353)
– Australia | 21,372 | 456 | 396 | 21,828 | (11) | (19) | (18) | (30)
– India | 1,078 | 590 | 162 | 1,668 | (4) | (18) | (13) | (22)
– Indonesia | 70 | 278 | 141 | 348 | (1) | (17) | (12) | (18)
– mainland China | 9,305 | 921 | 378 | 10,226 | (3) | (62) | (49) | (65)
– Malaysia | 2,292 | 2,437 | 843 | 4,729 | (27) | (93) | (31) | (120)
– Singapore | 7,501 | 6,264 | 422 | 13,765 | — | (36) | (14) | (36)
– Taiwan | 5,428 | 1,189 | 284 | 6,617 | — | (18) | (5) | (18)
– other | 2,534 | 936 | 534 | 3,470 | (3) | (25) | (23) | (28)
Middle East and North Africa (excluding Saudi Arabia) | 2,450 | 3,266 | 735 | 5,716 | (22) | (123) | (52) | (145)
– Egypt | — | 310 | 83 | 310 | — | (2) | (1) | (2)
– UAE | 2,104 | 1,340 | 426 | 3,444 | (14) | (83) | (41) | (97)
– other | 346 | 1,616 | 226 | 1,962 | (8) | (38) | (10) | (46)
North America | 17,907 | 866 | 256 | 18,773 | (91) | (35) | (24) | (126)
– US | 16,847 | 704 | 213 | 17,551 | (10) | (30) | (23) | (40)
– Canada 2 | — | — | — | — | — | — | — | —
– other | 1,060 | 162 | 43 | 1,222 | (81) | (5) | (1) | (86)
Latin America | 6,343 | 5,619 | 1,927 | 11,962 | (146) | (626) | (212) | (772)
– Mexico | 6,124 | 4,894 | 1,615 | 11,018 | (145) | (593) | (196) | (738)
– other | 219 | 725 | 312 | 944 | (1) | (33) | (16) | (34)
At 31 Dec 2022 | 336,821 | 78,191 | 21,388 | 415,012 | (574) | (2,298) | (1,162) | (2,872)

Europe | 170,818 | 49,253 | 8,624 | 220,071 | (329) | (1,006) | (437) | (1,335)
– UK | 163,549 | 19,154 | 8,213 | 182,703 | (223) | (823) | (434) | (1,046)
– France 1 | 3,124 | 22,908 | 366 | 26,032 | (38) | (91) | (3) | (129)
– Germany | — | 282 | — | 282 | — | — | — | —
– Switzerland | 1,367 | 6,615 | — | 7,982 | — | (75) | — | (75)
– other | 2,778 | 294 | 45 | 3,072 | (68) | (17) | — | (85)
Asia | 149,709 | 46,781 | 11,413 | 196,490 | (59) | (706) | (428) | (765)
– Hong Kong | 98,019 | 32,996 | 8,154 | 131,015 | (1) | (338) | (217) | (339)
– Australia | 21,149 | 504 | 427 | 21,653 | (5) | (33) | (32) | (38)
– India | 981 | 543 | 181 | 1,524 | (10) | (30) | (20) | (40)
– Indonesia | 76 | 272 | 147 | 348 | (1) | (20) | (14) | (21)
– mainland China | 10,525 | 1,103 | 563 | 11,628 | (4) | (72) | (66) | (76)
– Malaysia | 2,532 | 2,657 | 791 | 5,189 | (33) | (122) | (34) | (155)
– Singapore | 7,811 | 6,649 | 367 | 14,460 | — | (40) | (13) | (40)
– Taiwan | 5,672 | 1,188 | 271 | 6,860 | — | (17) | (5) | (17)
– other | 2,944 | 869 | 512 | 3,813 | (5) | (34) | (27) | (39)
Middle East and North Africa (excluding Saudi Arabia) | 2,262 | 3,157 | 761 | 5,419 | (26) | (146) | (60) | (172)
– Egypt | — | 368 | 98 | 368 | — | (3) | (1) | (3)
– UAE | 1,924 | 1,232 | 417 | 3,156 | (18) | (88) | (39) | (106)
– other | 338 | 1,557 | 246 | 1,895 | (8) | (55) | (20) | (63)
North America | 43,529 | 3,091 | 555 | 46,620 | (141) | (87) | (47) | (228)
– US | 16,642 | 799 | 232 | 17,441 | (12) | (53) | (36) | (65)
– Canada | 25,773 | 2,123 | 284 | 27,896 | (33) | (27) | (8) | (60)
– other | 1,114 | 169 | 39 | 1,283 | (96) | (7) | (3) | (103)
Latin America | 5,050 | 4,687 | 1,505 | 9,737 | (120) | (483) | (163) | (603)
– Mexico | 4,882 | 4,006 | 1,172 | 8,888 | (119) | (450) | (148) | (569)
– other | 168 | 681 | 333 | 849 | (1) | (33) | (15) | (34)
At 31 Dec 2021 | 371,368 | 106,969 | 22,858 | 478,337 | (675) | (2,428) | (1,135) | (3,103)

1 Included in other personal lending at 31 December 2022 is nil (31 December 2021: $19,972m) guaranteed by Crédit Logement as our retail banking
business in France has been classified as held for sale.
2 Classified as held for sale at 31 December 2022.

HSBC Holdings plc Annual Report and Accounts 2022 | 197

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business
| Gross carrying/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
Loans and advances to customers at amortised cost | 777,543 | 139,130 | 19,505 | 129 | 936,307 | (1,095) | (3,491) | (6,829) | (38) | (11,453)
– WPB | 373,889 | 49,096 | 3,502 | — | 426,487 | (572) | (1,512) | (850) | — | (2,934)
– CMB | 232,296 | 69,784 | 12,794 | 112 | 314,986 | (435) | (1,529) | (4,891) | (38) | (6,893)
– GBM | 171,033 | 20,207 | 3,209 | 17 | 194,466 | (88) | (437) | (1,088) | — | (1,613)
– Corporate Centre | 325 | 43 | — | — | 368 | — | (13) | — | — | (13)
Loans and advances to banks at amortised cost | 103,042 | 1,827 | 82 | — | 104,951 | (18) | (29) | (22) | — | (69)
– WPB | 26,111 | 377 | — | — | 26,488 | (3) | (1) | — | — | (4)
– CMB | 23,735 | 257 | 4 | — | 23,996 | (5) | — | (2) | — | (7)
– GBM | 47,128 | 1,050 | 78 | — | 48,256 | (9) | (28) | (20) | — | (57)
– Corporate Centre | 6,068 | 143 | — | — | 6,211 | (1) | — | — | — | (1)
Other financial assets measured at amortised cost | 996,489 | 17,166 | 797 | 46 | 1,014,498 | (124) | (188) | (234) | (7) | (553)
– WPB | 248,708 | 5,644 | 458 | 46 | 254,856 | (57) | (96) | (130) | (7) | (290)
– CMB | 184,459 | 10,883 | 253 | — | 195,595 | (37) | (84) | (91) | — | (212)
– GBM | 486,224 | 637 | 78 | — | 486,939 | (28) | (8) | (13) | — | (49)
– Corporate Centre | 77,098 | 2 | 8 | — | 77,108 | (2) | — | — | — | (2)
Total gross carrying amount on-balance sheet at 31 Dec 2022 | 1,877,074 | 158,123 | 20,384 | 175 | 2,055,756 | (1,237) | (3,708) | (7,085) | (45) | (12,075)
Loans and other credit-related commitments | 583,383 | 34,033 | 1,372 | — | 618,788 | (141) | (180) | (65) | — | (386)
– WPB | 238,161 | 4,377 | 769 | — | 243,307 | (25) | (1) | — | — | (26)
– CMB | 121,909 | 18,376 | 512 | — | 140,797 | (78) | (128) | (55) | — | (261)
– GBM | 223,065 | 11,279 | 91 | — | 234,435 | (38) | (51) | (10) | — | (99)
– Corporate Centre | 248 | 1 | — | — | 249 | — | — | — | — | —
Financial guarantees | 16,071 | 2,463 | 249 | — | 18,783 | (6) | (13) | (33) | — | (52)
– WPB | 1,196 | 11 | 1 | — | 1,208 | — | — | — | — | —
– CMB | 6,665 | 1,524 | 128 | — | 8,317 | (5) | (8) | (26) | — | (39)
– GBM | 8,210 | 928 | 120 | — | 9,258 | (1) | (5) | (7) | — | (13)
– Corporate Centre | — | — | — | — | — | — | — | — | — | —
Total nominal amount off-balance sheet at 31 Dec 2022 | 599,454 | 36,496 | 1,621 | — | 637,571 | (147) | (193) | (98) | — | (438)
WPB | 113,557 | 1,213 | — | 33 | 114,803 | (18) | (26) | — | (6) | (50)
CMB | 70,728 | 736 | — | 4 | 71,468 | (9) | (15) | — | (1) | (25)
GBM | 75,951 | 434 | — | 1 | 76,386 | (11) | (8) | — | — | (19)
Corporate Centre | 3,347 | 299 | — | — | 3,646 | (31) | (19) | (1) | — | (51)
Debt instruments measured at FVOCI at 31 Dec 2022 | 263,583 | 2,682 | — | 38 | 266,303 | (69) | (68) | (1) | (7) | (145)

Risk review

198 | HSBC Holdings plc Annual Report and Accounts 2022

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied – by global business (continued)
| Gross carrying/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
Loans and advances to customers at amortised cost | 918,936 | 119,224 | 18,797 | 274 | 1,057,231 | (1,367) | (3,119) | (6,867) | (64) | (11,417)
– WPB | 469,477 | 17,285 | 5,211 | — | 491,973 | (664) | (1,247) | (1,276) | — | (3,187)
– CMB | 267,517 | 76,798 | 11,462 | 245 | 356,022 | (571) | (1,369) | (4,904) | (53) | (6,897)
– GBM | 181,247 | 25,085 | 2,124 | 29 | 208,485 | (132) | (493) | (687) | (11) | (1,323)
– Corporate Centre | 695 | 56 | — | — | 751 | — | (10) | — | — | (10)
Loans and advances to banks at amortised cost | 81,636 | 1,517 | — | — | 83,153 | (14) | (3) | — | — | (17)
– WPB | 20,464 | 481 | — | — | 20,945 | (1) | (1) | — | — | (2)
– CMB | 15,269 | 352 | — | — | 15,621 | (1) | — | — | — | (1)
– GBM | 36,875 | 654 | — | — | 37,529 | (10) | (2) | — | — | (12)
– Corporate Centre | 9,028 | 30 | — | — | 9,058 | (2) | — | — | — | (2)
Other financial assets measured at amortised cost | 875,016 | 4,988 | 304 | 43 | 880,351 | (91) | (54) | (42) | (6) | (193)
– WPB | 207,335 | 1,407 | 175 | 43 | 208,960 | (51) | (44) | (14) | (6) | (115)
– CMB | 163,457 | 2,370 | 61 | — | 165,888 | (12) | (8) | (20) | — | (40)
– GBM | 409,808 | 1,204 | 62 | — | 411,074 | (28) | (2) | (8) | — | (38)
– Corporate Centre | 94,416 | 7 | 6 | — | 94,429 | — | — | — | — | —
Total gross carrying amount on-balance sheet at 31 Dec 2021 | 1,875,588 | 125,729 | 19,101 | 317 | 2,020,735 | (1,472) | (3,176) | (6,909) | (70) | (11,627)
Loans and other credit-related commitments | 594,473 | 32,389 | 775 | — | 627,637 | (165) | (174) | (40) | — | (379)
– WPB | 235,722 | 2,111 | 153 | — | 237,986 | (37) | (3) | — | — | (40)
– CMB | 126,728 | 17,490 | 555 | — | 144,773 | (80) | (118) | (37) | — | (235)
– GBM | 231,890 | 12,788 | 67 | — | 244,745 | (48) | (53) | (3) | — | (104)
– Corporate Centre | 133 | — | — | — | 133 | — | — | — | — | —
Financial guarantees | 24,932 | 2,638 | 225 | — | 27,795 | (11) | (30) | (21) | — | (62)
– WPB | 1,295 | 15 | 1 | — | 1,311 | — | (1) | — | — | (1)
– CMB | 6,105 | 1,606 | 126 | — | 7,837 | (7) | (16) | (17) | — | (40)
– GBM | 17,531 | 1,017 | 98 | — | 18,646 | (4) | (13) | (4) | — | (21)
– Corporate Centre | 1 | — | — | — | 1 | — | — | — | — | —
Total nominal amount off-balance sheet at 31 Dec 2021 | 619,405 | 35,027 | 1,000 | — | 655,432 | (176) | (204) | (61) | — | (441)
WPB | 143,373 | 718 | — | 35 | 144,126 | (20) | (7) | — | (5) | (32)
CMB | 86,247 | 471 | — | 10 | 86,728 | (11) | (1) | — | (1) | (13)
GBM | 111,473 | 526 | — | 1 | 112,000 | (13) | (2) | — | — | (15)
Corporate Centre | 4,038 | 311 | — | — | 4,349 | (25) | (11) | — | — | (36)
Debt instruments measured at FVOCI at 31 Dec 2021 | 345,131 | 2,026 | — | 46 | 347,203 | (69) | (21) | — | (6) | (96)

HSBC Holdings plc Annual Report and Accounts 2022 | 199

Loans and advances to customers and banks metrics
| Gross carrying amount | of which: stage 3 and POCI | Allowance for ECL | of which: stage 3 and POCI | Change in ECL | Write-offs | Recoveries
| $m | $m | $m | $m | $m | $m | $m
First lien residential mortgages | 336,821 | 2,043 | (574) | (270) | 180 | (48) | 26
– second lien residential mortgages | 379 | 6 | (6) | (3) | 9 | (1) | 4
– guaranteed loans in respect of residential property | 1,367 | 125 | (34) | (30) | (11) | (9) | 2
– other personal lending which is secured | 32,106 | 206 | (55) | (30) | (16) | (8) | 1
– credit cards | 21,388 | 260 | (1,162) | (160) | (638) | (471) | 126
– other personal lending which is unsecured | 21,010 | 687 | (1,010) | (305) | (655) | (660) | 119
– motor vehicle finance | 1,941 | 13 | (31) | (7) | 39 | (18) | 5
Other personal lending | 78,191 | 1,297 | (2,298) | (535) | (1,272) | (1,167) | 257
Personal lending | 415,012 | 3,340 | (2,872) | (805) | (1,092) | (1,215) | 283
– agriculture, forestry and fishing | 6,571 | 261 | (122) | (68) | (32) | (42) | —
– mining and quarrying | 8,194 | 233 | (172) | (146) | (24) | (46) | —
– manufacturing | 87,503 | 2,065 | (1,153) | (896) | (191) | (171) | 3
– electricity, gas, steam and air-conditioning supply | 17,082 | 277 | (109) | (67) | (75) | (16) | —
– water supply, sewerage, waste management and remediation | 2,993 | 26 | (21) | (13) | 3 | (1) | —
– construction | 13,232 | 798 | (443) | (371) | (93) | (136) | 6
– wholesale and retail trade, repair of motor vehicles and motorcycles | 82,437 | 2,810 | (1,666) | (1,344) | (344) | (667) | 8
– transportation and storage | 24,845 | 556 | (249) | (153) | (13) | (82) | 1
– accommodation and food | 17,185 | 789 | (244) | (82) | 103 | (29) | —
– publishing, audiovisual and broadcasting | 18,423 | 277 | (117) | (59) | 9 | (47) | 1
– real estate | 101,434 | 4,853 | (2,851) | (1,861) | (1,537) | (174) | 2
– professional, scientific and technical activities | 17,935 | 542 | (272) | (200) | (81) | (31) | 1
– administrative and support services | 25,077 | 980 | (408) | (293) | (27) | (27) | 1
– public administration and defence, compulsory social security | 1,180 | — | (1) | — | 5 | — | —
– education | 1,614 | 87 | (31) | (22) | 1 | (3) | —
– health and care | 3,964 | 266 | (90) | (67) | (30) | (7) | 1
– arts, entertainment and recreation | 1,862 | 146 | (77) | (57) | 1 | (17) | —
– other services | 12,527 | 589 | (275) | (219) | 120 | (92) | 7
– activities of households | 744 | — | — | — | — | — | —
– extra-territorial organisations and bodies activities | 47 | — | — | — | 1 | — | 1
– government | 9,475 | 270 | (10) | (7) | (5) | — | —
– asset-backed securities | 32 | — | (13) | — | (4) | — | —
Corporate and commercial | 454,356 | 15,825 | (8,324) | (5,925) | (2,213) | (1,588) | 32
Non-bank financial institutions | 66,939 | 469 | (257) | (137) | (165) | (1) | 1
Wholesale lending | 521,295 | 16,294 | (8,581) | (6,062) | (2,378) | (1,589) | 33
Loans and advances to customers | 936,307 | 19,634 | (11,453) | (6,867) | (3,470) | (2,804) | 316
Loans and advances to banks | 104,951 | 82 | (69) | (22) | (53) | — | —
At 31 Dec 2022 | 1,041,258 | 19,716 | (11,522) | (6,889) | (3,523) | (2,804) | 316

Risk review

200 | HSBC Holdings plc Annual Report and Accounts 2022

Loans and advances to customers and banks metrics (continued)
| Gross carrying amount | of which: stage 3 and POCI | Allowance for ECL | of which: stage 3 and POCI | Change in ECL | Write-offs | Recoveries
| $m | $m | $m | $m | $m | $m | $m
First lien residential mortgages | 371,368 | 3,045 | (675) | (416) | — | (70) | 31
– second lien residential mortgages | 395 | 37 | (14) | (9) | 12 | (1) | 6
– guaranteed loans in respect of residential property | 21,610 | 236 | (58) | (42) | (5) | (8) | 2
– other personal lending which is secured | 37,995 | 366 | (156) | (120) | (11) | (11) | 1
– credit cards | 22,858 | 338 | (1,135) | (214) | 172 | (751) | 153
– other personal lending which is unsecured | 22,478 | 915 | (1,039) | (421) | 135 | (659) | 156
– motor vehicle finance | 1,633 | 5 | (26) | (4) | (22) | (20) | 6
Other personal lending | 106,969 | 1,897 | (2,428) | (810) | 281 | (1,450) | 324
Personal lending | 478,337 | 4,942 | (3,103) | (1,226) | 281 | (1,520) | 355
– agriculture, forestry and fishing | 7,899 | 363 | (138) | (105) | 61 | (5) | —
– mining and quarrying | 9,685 | 463 | (227) | (171) | 72 | (57) | (1)
– manufacturing | 93,743 | 2,107 | (1,248) | (962) | 102 | (222) | 7
– electricity, gas, steam and air-conditioning supply | 16,618 | 78 | (68) | (31) | 5 | — | —
– water supply, sewerage, waste management and remediation | 3,895 | 51 | (29) | (20) | 3 | (7) | —
– construction | 13,954 | 843 | (508) | (440) | (13) | (94) | 9
– wholesale and retail trade, repair of motor vehicles and motorcycles | 94,944 | 3,005 | (2,107) | (1,937) | 163 | (238) | 15
– transportation and storage | 29,592 | 667 | (363) | (191) | 100 | (10) | 2
– accommodation and food | 23,376 | 1,200 | (423) | (111) | 12 | (17) | 6
– publishing, audiovisual and broadcasting | 18,471 | 250 | (184) | (100) | (12) | (4) | 1
– real estate | 121,260 | 2,473 | (1,644) | (775) | (674) | (152) | 5
– professional, scientific and technical activities | 19,685 | 637 | (238) | (172) | 97 | (39) | 1
– administrative and support services | 28,675 | 749 | (431) | (307) | 48 | (37) | —
– public administration and defence, compulsory social security | 1,271 | — | (8) | — | 6 | — | 1
– education | 1,793 | 65 | (37) | (18) | 1 | (1) | —
– health and care | 4,854 | 183 | (72) | (37) | 44 | (69) | 1
– arts, entertainment and recreation | 2,598 | 152 | (92) | (42) | 27 | (26) | —
– other services | 12,297 | 448 | (373) | (246) | (59) | (109) | 6
– activities of households | 977 | — | — | — | — | — | —
– extra-territorial organisations and bodies activities | 2 | — | — | — | 1 | — | 1
– government | 7,612 | — | (4) | — | (6) | — | —
– asset-backed securities | 338 | — | (10) | — | 3 | — | —
Corporate and commercial | 513,539 | 13,734 | (8,204) | (5,665) | (19) | (1,087) | 54
Non-bank financial institutions | 65,355 | 395 | (110) | (40) | 129 | (5) | —
Wholesale lending | 578,894 | 14,129 | (8,314) | (5,705) | 110 | (1,092) | 54
Loans and advances to customers | 1,057,231 | 19,071 | (11,417) | (6,931) | 391 | (2,612) | 409
Loans and advances to banks | 83,153 | — | (17) | — | 22 | — | —
At 31 Dec 2021 | 1,140,384 | 19,071 | (11,434) | (6,931) | 413 | (2,612) | 409

HSBC Holdings
(Audited)
Risk in HSBC Holdings is overseen by the HSBC Holdings Asset and
Liability Management Committee. The major risks faced by HSBC
Holdings are credit risk, liquidity risk and market risk (in the form of
interest rate risk and foreign exchange risk).
Credit risk in HSBC Holdings primarily arises from transactions with
Group subsidiaries and its investments in those subsidiaries.
In HSBC Holdings, the maximum exposure to credit risk arises from
two components:
•financial instruments on the balance sheet (see page 332); and
•financial guarantees and similar contracts, where the maximum
exposure is the maximum that we would have to pay if the
guarantees were called upon (see Note 33).
In the case of our derivative balances, we have amounts with a legally
enforceable right of offset in the case of counterparty default that are
not included in the carrying value. These offsets also include collateral
received in cash and other financial assets.
The total offset relating to our derivative balances was $3.1bn at
31 December 2022 (2021: $1.6bn).
The credit quality of loans and advances and financial investments,
both of which consist of intra-Group lending and US Treasury bills and
bonds, is assessed as ‘strong’, with 100% of the exposure being
neither past due nor impaired (2021: 100%). For further details of
credit quality classification, see page 146.

HSBC Holdings plc Annual Report and Accounts 2022 | 201

Treasury risk

Contents

202 | Overview
202 | Treasury risk management
204 | Other Group risks
205 | Capital risk in 2022
209 | Liquidity and funding risk in 2022
212 | Structural foreign exchange risk in 2022
213 | Interest rate risk in the banking book in 2022

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 or transactional foreign exchange exposures
and changes in market interest rates, together with pension and
insurance risk.
Treasury risk arises from changes to the respective resources and risk
profiles driven by customer behaviour, management decisions or the
external environment.
Approach and policy
(Audited)
Our objective in the management of treasury risk is to maintain
appropriate levels of capital, liquidity, funding, foreign exchange and
market risk to support our business strategy, and meet our regulatory
and stress testing-related requirements.
Our approach to treasury management is driven by our strategic and
organisational requirements, taking into account the regulatory,
economic and commercial environment. We aim to maintain a strong
capital and liquidity base to support the risks inherent in our business
and invest in accordance with our strategy, meeting both consolidated
and local regulatory requirements at all times.
Our policy is underpinned by our risk management framework. The
risk management framework incorporates a number of measures
aligned to our assessment of risks for both internal and regulatory
purposes. These risks include credit, market, operational, pensions,
structural and transactional foreign exchange risk, and interest rate
risk in the banking book.
For further details, refer to our Pillar 3 Disclosures at 31 December
2022.
Treasury risk management
Key developments in 2022
•All of the Group’s material operating entities were above
regulatory minimum levels of capital, liquidity and funding at
31 December 2022.
•Our CET1 position decreased from 15.8% at 31 December 2021 to
14.2% at 31 December 2022. This included a 0.8 percentage point
impact from new regulatory requirements and a 0.7 percentage
point decrease from the fall in the fair value of securities.
•The Board approved a new interest rate risk in the banking book
(‘IRRBB’) strategy in September, with the objective of increasing
our stabilisation of net interest income (‘NII’), with consideration
given to any capital or other constraints, and then adopting a
managed approach based on interest rates and outlook.
•We took steps to reduce the duration risk of the Global Treasury
hold-to-collect-and-sell portfolio, which is accounted for at fair
value through other comprehensive income (‘FVOCI‘), primarily to
dampen the capital impact from rising interest rates. T his risk
r eduction lowered the hold-to-collect-and-sell stressed value at risk
(‘VaR’) exposure of this portfolio from $3.63bn at the end of 2021
to $2.15bn at the end of 2022. For further details of the calculation
of this exposure and the use of this metric in our interest rate risk
management framework, see page 215.
•We implemented a new hold-to-collect business model to better
reflect our management strategy to stabilise NII. This portfolio of
high-quality liquid assets will form a material part of our liquid
asset buffer going forward, as well as being a hedge to our
structural interest rate risk.
•We enhanced monitoring and forecasting as a result of the Russia-
Ukraine war, although there were no direct material capital or
liquidity impacts.
•The HBUK section of the HSBC Bank (UK) Pension Scheme’s
trustee funding level remained stable during the volatility in the UK
gilt markets in September and October, as a result of its proactive
pension scheme management, low-risk investment strategy and
limited leverage in its liability-driven investment funds.
Refinements relating to the scheme‘s inflation hedging strategy
ensured continued effectiveness in the high-inflation environment.
•HSBC Overseas Holdings (UK) Limited entered into an agreement
to sell its banking business in Canada to Royal Bank of Canada,
subject to regulatory and governmental approvals. The transaction
is expected to complete in late 2023. As a consequence of the
gain on the sale and disposal of risk-weighted assets (‘RWAs‘)
from our banking business in Canada, we expect an increase of
approximately 1.3 percentage points in CET1 capital before any
distribution. In addition, the hedging activity in respect to this
transaction reduced the full-year 2022 ratio by 0.06 percentage
point. This impact will revert on completion of sale.
•HSBC Continental Europe signed a framework agreement with
Promontoria MMB SAS (‘My Money Group’) and its subsidiary
Banque des Caraïbes SA for the sale of its retail banking business
in France. The sale, which is subject to regulatory and
governmental approvals, is anticipated to complete in the second
half of 2023. The impact of classifying the disposal as held for sale
resulted in a 0.3 percentage point reduction in the Group‘s CET1
ratio, which will be partly offset by the reduction in RWAs upon
closing.
•We identified an error in the RWA calculations of the European
resolution group whereby $35bn of non-capital MREL instruments
issued by the Asian and US resolution groups and held by the
European resolution group were excluded from these calculations
and were only deducted from MREL, whereas the relevant UK
legislation requires these instruments to be both risk-weighted and
deducted from MREL. In rectifying this error, we changed our
treatment of $35bn of non-capital MREL investments held by the
European resolution group from entities outside its group to
deduct them from the European resolution group’s own funds
rather than from solely its MREL, allowing us to exclude them
from RWAs. The change in treatment significantly reduced the
European resolution group’s total capital and increased its leverage
ratio at 31 December 2022, although the European resolution
group has no capital requirements. For further details regarding
MREL, see ‘Assessment and risk appetite’ on page 203.
•We performed our inaugural resolvability self-assessment to meet
the Bank of England requirements, which came into effect on
1 January 2022. This was incorporated into the Bank of England’s
publication of its findings on its first assessment of the
resolvability of the eight major UK firms, as part of the
Resolvability Assessment Framework.
For quantitative disclosures on capital ratios, own funds and RWAs,
see pages 205 to 207. For quantitative disclosures on liquidity and
funding metrics, see pages 209 to 210. For quantitative disclosures
on interest rate risk in the banking book, see pages 213 to 215.
Risk review

202 | HSBC Holdings plc Annual Report and Accounts 2022

Governance and structure
The Global Head of Traded and Treasury Risk Management and Risk
Analytics is the accountable risk steward for all treasury risks. The
Group Treasurer is the risk owner for all treasury risks, with the
exception of pension risk and insurance risk. The Group Treasurer co-
owns pension risk with the Group Head of Performance, Reward and
Employee Relations. Insurance risk is owned by the Chief Executive
Officer for Global Insurance.
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 Group Executive Committee and the
Group Risk Committee (‘GRC’). Global Treasury actively manages
these risks on an ongoing basis, supported by the Holdings Asset and
Liability Management Committee (‘ALCO’) and local ALCOs, overseen
by Treasury Risk Management and Risk Management Meetings.
Pension risk is overseen by a network of local and regional pension
risk management meetings. The Global Pensions Risk Management
Meeting provides oversight of all pension plans sponsored by HSBC
globally, and is chaired by the accountable risk steward. Insurance risk
is overseen by the Global Insurance Risk Management Meeting,
chaired by the Chief Risk Officer for Global Insurance.
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’),
the leverage ratio and double leverage. Our internal capital adequacy
assessment process (‘ICAAP’) is an assessment of the Group’s
capital position, outlining both regulatory and internal capital resources
and requirements resulting from HSBC’s 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 consolidated capital risk appetite and target
ratios, as well as enables the assessment and determination of capital
requirements by regulators. Subsidiaries prepare ICAAPs in line with
global guidance, while considering their local regulatory regimes to
determine their own risk appetites and ratios.
HSBC Holdings is the provider of equity capital and MREL-eligible
debt to its subsidiaries, and also provides them with non-equity capital
where necessary. 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 our existing structure and business model,
HSBC has three resolution groups – the European resolution group,
the Asian resolution group and the US resolution group. There are
some smaller entities that fall outside these resolution groups.
HSBC Holdings seeks to maintain a prudent balance between the
composition of its capital and its investments in subsidiaries.
As a matter of long-standing policy, the holding company retains a
substantial holdings capital buffer comprising high-quality liquid assets
(‘HQLA’), which at 31 December 2022 was in excess of $24 bn.
We aim to ensure that management has oversight of our liquidity and
funding risks at Group and entity level through robust governance, in
line with our risk management framework. We manage liquidity and
funding risk at an operating entity level in accordance with globally
consistent policies, procedures and reporting standards. This ensures
that obligations can be met in a timely manner, in the jurisdiction
where they fall due.
Operating entities are required to meet internal minimum
requirements and any applicable regulatory requirements at all times.
These requirements are assessed through our internal liquidity
adequacy assessment process (‘ILAAP’), which ensures that
operating entities have robust strategies, policies, processes and
systems for the identification, measurement, management and
monitoring of liquidity risk over an appropriate set of time horizons,
including intra-day. The ILAAP informs the validation of risk tolerance
and the setting of risk appetite. It also assesses the capability to
manage liquidity and funding effectively in each major entity. These
metrics are set and managed locally but are subject to robust global
review and challenge to ensure consistency of approach and
application of the Group’s policies and controls.
Planning and performance
Capital and RWA plans form part of the annual financial resource plan
that is approved by the Board. Capital and RWA forecasts are
submitted to the Group Executive Committee 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
Group Chief Financial Officer, supported by the 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.
Our strategy is to allocate capital to businesses and entities to
support growth objectives where returns above internal hurdle levels
have been identified and in order to meet their regulatory and
economic capital needs. We evaluate and manage business returns
by using a return on average tangible equity measure.
Funding and liquidity plans also form part of the financial resource
plan that is approved by the Board. The Board-level appetite measures
are the 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 changes and
continue to evaluate the impact of these upon our capital and liquidity
requirements, particularly those related to the UK’s implementation of
the outstanding measures to be implemented from the Basel III
reforms (‘Basel 3.1‘).
Regulatory developments
Our capital adequacy ratios were affected by regulatory developments
in 2022, including changes to internal-ratings based (’IRB’) modelling
requirements and the UK’s implementation of the revisions to the
Capital Requirements Regulation and Directive (’CRR II’). The PRA’s
final rules on NSFR were implemented and have been reflected in
disclosures since the first quarter of 2022.
Future changes to our ratios will occur with the implementation of
Basel 3.1. The PRA has published its consultation paper on the UK’s
implementation, with a proposed implementation date of 1 January
2025. We currently do not foresee a material net impact on our ratios
from the initial implementation. The RWA output floor under Basel 3.1
is proposed to be subject to a five-year transitional provision. Any
impact from the output floor would be towards the end of the
transition period.
Regulatory reporting processes and controls
The quality of regulatory reporting remains a key priority for
management and regulators. We are progressing with a
comprehensive programme to strengthen our processes, improve
consistency and enhance controls across our prudential regulatory
reporting, focusing on PRA requirements initially. We commissioned a
number of independent external reviews, some at the request of our
regulators, including one on our credit risk RWA reporting process,
which concluded in December 2022. These reviews have so far

HSBC Holdings plc Annual Report and Accounts 2022 | 203

resulted in enhancements to our RWAs and the LCR through
improvements in reporting accuracy, which have been reflected in our
year-end regulatory reported ratios. Our prudential regulatory
reporting programme is being phased over a number of years,
prioritising RWA, capital and liquidity reporting in the early stages of
the programme. While this programme continues, there may be
further impacts on some of our regulatory ratios, such as the CET1,
LCR and NSFR, as we implement recommended changes and
continue to enhance our controls across the process.
Stress testing and recovery and resolution planning
The Group uses stress testing to inform management of the capital
and liquidity needed to withstand internal and external shocks,
including a global economic downturn or a systems failure. Stress
testing results are also used to inform risk mitigation actions,
allocation of financial resources, and recovery and resolution planning,
as well as to re-evaluate business plans where analysis shows capital,
liquidity and/or returns do not meet their target.
In addition to a range of internal stress tests, we are subject to
supervisory stress testing in many jurisdictions. These include the
programmes of the Bank of England, the US Federal Reserve Board,
the European Banking Authority, the European Central Bank and the
Hong Kong Monetary Authority. The results of regulatory stress
testing and our internal stress tests are used when assessing our
internal capital and liquidity requirements through the ICAAP and
ILAAP. The outcomes of stress testing exercises carried out by the
PRA and other regulators feed into the setting of regulatory minimum
ratios and buffers.
We maintain recovery plans for the Group and material entities, which
set out potential options management could take in a range of stress
scenarios that could result in a breach of capital or liquidity buffers.
The Group recovery plan sets out the framework and governance
arrangements to support restoring HSBC to a stable and viable
position, and so lowering the probability of failure from either
idiosyncratic company-specific stress or systemic market-wide issues.
Our material entities’ recovery plans provide detailed actions that
management would consider taking in a stress scenario should their
positions deteriorate and threaten to breach risk appetite and
regulatory minimum levels. This is to help ensure that HSBC entities
can stabilise their financial position and recover from financial losses
in a stress environment.
The Group also has capabilities, resources and arrangements in place
to address the unlikely event that HSBC might not be recoverable and
would therefore need to be resolved by regulators. The Group
performed the inaugural Resolvability Assessment Framework self-
assessment during 2021 to meet the Bank of England’s
requirements, which came into effect on 1 January 2022.
Overall, HSBC’s recovery and resolution planning helps safeguard the
Group’s financial and operational stability. The Group is committed to
further developing its recovery and resolution capabilities, including in
relation to the Bank of England’s Resolvability Assessment
Framework.
Measurement of interest rate risk in the
banking book processes
Assessment and risk appetite
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 in order to hedge positions held with trading intent. Interest rate
risk that can be economically hedged may be transferred to Global
Treasury. Hedging is generally executed through interest rate
derivatives or fixed-rate government bonds. Any interest rate risk that
Global Treasury cannot economically hedge is not transferred and will
remain within the global business where the risks originate.
Global Treasury uses a number of measures to monitor and control
interest rate risk in the banking book, including:
•net interest income sensitivity; and
•economic value of equity sensitivity.
Net interest income sensitivity
A principal part of our management of non-traded interest rate risk is
to monitor the sensitivity of expected net interest income (‘NII’) under
varying interest rate scenarios (i.e. simulation modelling), where all
other economic variables are held constant. This monitoring is
undertaken at an entity level, where entities calculate 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, except for certain mortgage products where balances are
impacted by interest-rate sensitive prepayments. These sensitivity
calculations do not incorporate actions that would be taken by Global
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.
Economic value of equity sensitivity
Economic value of equity (‘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.
Further details of HSBC’s risk management of interest rate risk in the
banking book can be found in the Group’s Pillar 3 Disclosures at
31 December 2022.
Other Group risks
Non-trading book foreign exchange
exposures
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 US dollar as our
presentation currency in our consolidated financial statements
because the US dollar and currencies linked to it form the major
currency bloc in which we transact and fund our business. Therefore,
our consolidated balance sheet is affected by exchange differences
between the US dollar and all the non-US dollar functional currencies
of underlying foreign operations.
Our structural foreign exchange exposures are managed with the
primary objective of ensuring, where practical, that our consolidated
capital ratios and the capital ratios of individual banking subsidiaries
are largely protected from the effect of changes in exchange rates.
We hedge structural foreign exchange positions where it is capital
efficient to do so, and subject to approved limits. This is achieved
through a combination of net investment hedges and economic
hedges. Hedging positions are monitored and rebalanced periodically
to manage RWA or downside risks associated with HSBC’s foreign
currency investments.
For further details of our structural foreign exchange exposures, see
page 212.
Risk review

204 | HSBC Holdings plc Annual Report and Accounts 2022

Transactional foreign exchange exposures
Transactional foreign exchange risk arises primarily from day-to-day
transactions in the banking book generating profit and loss or fair
value through other comprehensive income (‘FVOCI’) reserves in a
currency other than the reporting currency of the operating entity.
Transactional foreign exchange exposure generated through profit and
loss is periodically transferred to Markets and Securities Services and
managed within limits with the exception of limited residual foreign
exchange exposure arising from timing differences or for other
reasons. Transactional foreign exchange exposure generated through
OCI reserves is managed by Global Treasury within agreed appetite.
HSBC Holdings risk management
As a financial services holding company, HSBC Holdings has limited
market risk activities. Its activities predominantly involve maintaining
sufficient capital resources to support the Group’s diverse activities;
allocating these capital resources across the Group’s businesses;
earning dividend and interest income on its investments in the
businesses; payment of operating expenses; providing dividend
payments to its equity shareholders and interest payments to
providers of debt capital; and maintaining a supply of short-term liquid
assets for deployment under extraordinary circumstances.
The main market risks to which HSBC Holdings is exposed are
banking book interest rate risk and foreign currency risk. Exposure to
these risks arises from short-term cash balances, funding positions
held, loans to subsidiaries, investments in long-term financial assets,
financial liabilities including debt capital issued, and structural foreign
exchange hedges. The objective of HSBC Holdings’ market risk
management strategy is to manage volatility in capital resources, cash
flows and distributable reserves that could be caused by movements
in market parameters. Market risk for HSBC Holdings is monitored by
Holdings ALCO in accordance with its risk appetite statement.
HSBC Holdings uses interest rate swaps and cross-currency interest
rate swaps to manage the interest rate risk and foreign currency risk
arising from its long-term debt issues. It also uses forward foreign
exchange contracts to manage its structural foreign exchange
exposures.
For quantitative disclosures on interest rate risk in the banking book,
see pages 213 to 215.
Pension risk management processes
Our global pensions strategy is to move from defined benefit to
defined contribution plans, where local law allows and it is considered
competitive to do so.
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, the Group 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 expectations, causing
an increase in the value of plan liabilities; and
•plan members living longer than expected (known as longevity
risk).
Pension risk is assessed using an economic capital model that takes
into account potential variations in these factors. The impact of these
variations on both pension assets and pension liabilities is assessed
using a one-in-200-year stress test. Scenario analysis and other stress
tests are also used to support pension risk management, including
the review of de-risking opportunities.
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 is
established between asset classes of the defined benefit plan. 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.
In addition, some of the Group’s pension plans hold longevity swap
contracts. These arrangements provide long-term protection to the
relevant plans against costs resulting from pensioners or their
dependants living longer than initially expected. The most sizeable
plan to do this is the HSBC Bank (UK) Pension Scheme, which holds
longevity swaps covering approximately 60% of the plan’s pensioner
liabilities.
Capital risk in 2022
Capital overview

Capital adequacy metrics
| At
| 31 Dec | 31 Dec
| 2022 | 2021
Risk-weighted assets (‘RWAs’) ($bn) |  |
Credit risk | 679.1 | 680.6
Counterparty credit risk | 37.1 | 35.9
Market risk | 37.6 | 32.9
Operational risk | 85.9 | 88.9
Total RWAs | 839.7 | 838.3
Capital on a transitional basis ($bn) |  |
Common equity tier 1 (‘CET1’) capital | 119.3 | 132.6
Tier 1 capital | 139.1 | 156.3
Total capital | 162.4 | 177.8
Capital ratios on a transitional basis (%) |  |
Common equity tier 1 ratio | 14.2 | 15.8
Tier 1 ratio | 16.6 | 18.6
Total capital ratio | 19.3 | 21.2
Capital on an end point basis ($bn) |  |
Common equity tier 1 (‘CET1’) capital | 119.3 | 132.6
Tier 1 capital | 139.1 | 155.0
Total capital | 157.2 | 167.5
Capital ratios on an end point basis (%) |  |
Common equity tier 1 ratio | 14.2 | 15.8
Tier 1 ratio | 16.6 | 18.5
Total capital ratio | 18.7 | 20.0
Liquidity coverage ratio (‘LCR’)1 |  |
Total high-quality liquid assets ($bn) | 647.0 | 688.2
Total net cash outflow ($bn) | 490.8 | 495.1
LCR ratio (%) | 131.8 | 139.0
Net stable funding ratio (‘NSFR’)1 |  |
Total available stable funding ($bn) | 1,552.0 | N/A
Total required stable funding ($bn) | 1,138.4 | N/A
NSFR ratio (%) | 136.3 | N/A

1 The LCR and NSFR ratios presented in the above table are based on
average value. The LCR is the average of the preceding 12 months.
The NSFR is the average of the preceding four quarters. The prior
periods for LCR have been restated for consistency. We have not
restated the prior periods for NSFR as no comparatives are available.

HSBC Holdings plc Annual Report and Accounts 2022 | 205

References to EU regulations and directives (including technical
standards) should, as applicable, be read as references to the UK’s
version of such regulation 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 previous table are calculated in
accordance with the revised Capital Requirements Regulation and
Directive, as implemented (‘CRR II’). The table presents them under
the transitional arrangements in CRR II for capital instruments and
after their expiry, known as the end point. The end point figures in the
table above include the benefit of the regulatory transitional
arrangements in CRR II for IFRS 9, which are more fully described
below. Where applicable, they also reflect government relief schemes
intended to mitigate the impact of the Covid-19 pandemic.
At 31 December 2022, our common equity tier 1 (‘CET1’) capital ratio
decreased to 14.2% from 15.8% at 31 December 2021. This primarily
reflected a decrease of $13.3bn in our CET1 capital. The key drivers of
the fall in our CET1 ratio were:
•a 0.8 percentage point impact from new regulatory requirements,
which reduced CET1 capital by $3.5bn and increased risk-weighted
assets (‘RWAs’) by $27.1bn at implementation;
•a 0.7 percentage point decrease from a $5.6 bn fall in the fair value
through other comprehensive income (‘FVOCI’);
•a 0.4 percentage point impact from RWA growth, offset by
favourable foreign currency translations; and
•a 0.3 percentage point impact from the $2.0bn impairment on the
reclassification of our French retail operations to held for sale.
Profits and other movements added $4.4bn to CET1 capital and a
0.7 percentage point to the CET1 ratio. This included capital
deductions for deferred tax, dividends and the share buy-back.
Our Pillar 2A requirement at 31 December 2022, as per the PRA’s
Individual Capital Requirement based on a point-in-time assessment,
was 2.6% of RWAs, of which 1.5% was required to be met by CET1.
Structural foreign exchange risk is now capitalised in RWAs under
Pillar 1 and assessed for Pillar 2A in the same manner as other risks.

Own funds disclosure
(Audited) | At
|  | 31 Dec | 31 Dec
|  | 2022 | 2021
Ref* |  | $m | $m
| Common equity tier 1 (‘CET1’) capital: instruments and reserves |  |
1 | Capital instruments and the related share premium accounts | 23,406 | 23,513
| – ordinary shares | 23,406 | 23,513
2 | Retained earnings 1 | 127,155 | 121,059
3 | Accumulated other comprehensive income (and other reserves)1 | 4,105 | 8,273
5 | Minority interests (amount allowed in consolidated CET1) | 4,444 | 4,186
5a | Independently reviewed net profits net of any foreseeable charge or dividend | 8,633 | 5,887
6 | Common equity tier 1 capital before regulatory adjustments 2 | 167,743 | 162,918
28 | Total regulatory adjustments to common equity tier 2 | (48,452) | (30,353)
29 | Common equity tier 1 capital | 119,291 | 132,565
36 | Additional tier 1 capital before regulatory adjustments | 19,836 | 23,787
43 | Total regulatory adjustments to additional tier 1 capital | (60) | (60)
44 | Additional tier 1 capital | 19,776 | 23,727
45 | Tier 1 capital | 139,067 | 156,292
51 | Tier 2 capital before regulatory adjustments | 24,779 | 23,018
57 | Total regulatory adjustments to tier 2 capital | (1,423) | (1,524)
58 | Tier 2 capital | 23,356 | 21,494
59 | Total capital | 162,423 | 177,786

*The references identify lines prescribed in the Prudential Regulatory Authority (‘PRA’) template, which are applicable and where there is a value.
1 To comply with new disclosures guidance from the PRA, with effect from 1 January 2022 we report changes in ‘Retained earnings’ during 2022
separately in ‘Accumulated other comprehensive income’. As this change has no impact on CET1 capital, we have not restated prior periods.
2 From 30 September 2022, investments in non-financial institution subsidiaries or participations have been measured on an equity accounting basis in
compliance with UK regulatory requirements. This change increased ‘Common equity tier 1 capital before regulatory adjustments’ and ‘Total
regulatory adjustments to common equity tier’ by $13.2b n, with no impact on CET1 capital as at 31 December 2022. As this change has immaterial
impact on CET1 capital as at 31 December 2021, we have not restated the comparatives.
Throughout 2022, we complied with the PRA’s regulatory capital
adequacy requirements, including those relating to stress testing.
Regulatory and other developments
We expect the recently announced reduction of the Hong Kong
Monetary Authority’s risk weight floor for residential mortgages from
25% to 15% to improve our CET1 ratio by 0.1 percentage points with
effect from 1 January 2023. This reduction will be partly offset by a
change to the sourcing and risk-weighting of balances we
proportionally consolidate for our associates.
During 2023, our CET1 ratio will continue to be affected by strategic
decisions we have taken.
Based on our capital position on 31 December 2022, we would
expect that on completing the planned sale of our banking operations
in Canada, branch operations in Greece, and our retail banking
operations in France, we would improve our CET1 ratio by around
1.4 percentage points, net of the impact from foreign exchange
hedges related to the proceeds from the planned sale of our Canada
business. The exact timing and impact on our capital position of these
transactions may change as the balance sheets being disposed evolve
in 2023.
Risk review

206 | HSBC Holdings plc Annual Report and Accounts 2022

Risk-weighted assets

RWAs by global business
| WPB | CMB | GBM | Corporate Centre | Total
| $bn | $bn | $bn | $bn | $bn
Credit risk | 149.3 | 307.4 | 146.2 | 76.2 | 679.1
Counterparty credit risk | 0.9 | 0.7 | 33.8 | 1.7 | 37.1
Market risk | 1.6 | 1.1 | 23.6 | 11.3 | 37.6
Operational risk | 31.1 | 25.6 | 29.9 | (0.7) | 85.9
At 31 Dec 2022 | 182.9 | 334.8 | 233.5 | 88.5 | 839.7

At 31 Dec 2021 | 178.3 | 332.9 | 236.2 | 90.9 | 838.3

RWAs by geographical region
| Europe | Asia | MENA | North America | Latin America | Total
| $bn | $bn | $bn | $bn | $bn | $bn
Credit risk | 180.3 | 330.2 | 49.8 | 87.4 | 31.4 | 679.1
Counterparty credit risk | 18.9 | 10.4 | 2.7 | 4.2 | 0.9 | 37.1
Market risk 1 | 28.2 | 28.6 | 2.6 | 4.2 | 1.2 | 37.6
Operational risk | 23.8 | 40.1 | 5.9 | 10.7 | 5.4 | 85.9
At 31 Dec 2022 | 251.2 | 409.3 | 61.0 | 106.5 | 38.9 | 839.7

At 31 Dec 2021 | 261.1 | 396.3 | 60.2 | 110.4 | 35.9 | 838.3

1 RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.

RWA movement by global business by key driver
| Credit risk, counterparty credit risk and operational risk |  |
| WPB | CMB | GBM | Corporate Centre | Market risk | Total RWAs
| $bn | $bn | $bn | $bn | $bn | $bn
RWAs at 1 Jan 2022 | 176.6 | 332.0 | 215.9 | 80.9 | 32.9 | 838.3
Asset size | 6.5 | 13.7 | (3.5) | (0.6) | 4.8 | 20.9
Asset quality | 1.6 | (1.1) | 3.4 | (0.8) | — | 3.1
Model updates | (3.1) | 1.0 | (0.7) | (0.1) | — | (2.9)
Methodology and policy | 11.6 | 8.9 | 4.7 | (0.9) | (0.1) | 24.2
Acquisitions and disposals | (2.0) | — | — | — | — | (2.0)
Foreign exchange movements 1 | (9.9) | (20.8) | (9.9) | (1.3) | — | (41.9)
Total RWA movement | 4.7 | 1.7 | (6.0) | (3.7) | 4.7 | 1.4
RWAs at 31 Dec 2022 | 181.3 | 333.7 | 209.9 | 77.2 | 37.6 | 839.7

RWA movement by geographical region by key driver
| Credit risk, counterparty credit risk and operational risk |  |
| Europe | Asia | MENA | North America | Latin America | Market risk | Total RWAs
| $bn | $bn | $bn | $bn | $bn | $bn | $bn
RWAs at 1 Jan 2022 | 236.5 | 371.0 | 57.9 | 105.1 | 34.9 | 32.9 | 838.3
Asset size | 1.5 | 3.9 | 3.6 | 1.9 | 5.2 | 4.8 | 20.9
Asset quality | (2.6) | 7.1 | — | (1.7) | 0.3 | — | 3.1
Model updates | (3.0) | 0.2 | 0.1 | (0.2) | — | — | (2.9)
Methodology and policy | 11.2 | 10.5 | 1.4 | 1.0 | 0.2 | (0.1) | 24.2
Acquisitions and disposals | — | — | (0.2) | (1.8) | — | — | (2.0)
Foreign exchange movements 1 | (20.6) | (12.0) | (4.4) | (2.0) | (2.9) | — | (41.9)
Total RWA movement | (13.5) | 9.7 | 0.5 | (2.8) | 2.8 | 4.7 | 1.4
RWAs at 31 Dec 2022 | 223.0 | 380.7 | 58.4 | 102.3 | 37.7 | 37.6 | 839.7

1 Foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars for non-US dollar branches, subsidiaries, joint
ventures and associates.
Risk-weighted assets (‘RWAs’) rose by $1.4 bn during the year. An
increase of $43.3 bn, driven by regulatory change and lending growth,
was partly offset by a decrease of $41.9 bn due to favourable foreign
currency translation differences. At 31 December 2022, our
cumulative RWA saves as part of our transformation programme
were $128bn.
Asset size
The $20.9 bn increase in RWAs due to asset size movement included
an increase of $4.8 bn in market risk RWAs, mostly attributable to
heightened market risk volatility, and an increase in transactional and
structural foreign exchange exposures. The $13.7 bn increase in CMB
RWAs reflected corporate loan growth in Europe, Asia and North
America.

HSBC Holdings plc Annual Report and Accounts 2022 | 207

GBM RWAs fell by $3.5bn due to a reduction in counterparty credit
risk of $2.8bn, driven by mark-to-market movements and
management initiatives. Lower lending in Europe further reduced
RWAs, which was partly offset by growth in Asia and Latin America.
WPB RWAs increased by $6.5 bn, primarily due to lending growth in
Asia and Latin America, largely in term lending and the mortgage
portfolio.
Asset quality
The increase of $3.1 bn RWAs was mostly driven by credit migration,
primarily in Europe and Asia and partly offset against portfolio mix
changes.
Model updates
The $3.1bn RWA decrease in WPB was mostly due to the
implementation of a credit card model in Hong Kong and a retail
model in France. A reduction of $1.6bn RWAs in GBM was driven by
the introduction of a counterparty credit risk equity model in Europe.
This was mostly offset by a $2.1bn increase in RWAs in GBM and
CMB due to a commercial property loan model in Asia.
Methodology and policy
The $24.2 bn increase in RWAs was driven by the regulatory changes
of $27.1bn for revised IRB modelling requirements and the UK‘s
implementation of the CRR II rules.
These increases were partly offset by reductions predominantly due
to data enhancements driven by internal and external reviews of our
regulatory reporting processes, and the reversal of the beneficial
changes to the treatment of software assets in Corporate Centre.
Acquisitions and disposals
The $2.0bn RWA decrease was mainly due to the $1.8bn sale of WPB
retail branches in US.
Leverage ratio 1

| At
| 31 Dec | 31 Dec
| 2022 | 2021
| $bn | $bn
Tier 1 capital | 139.1 | 155.0
Total leverage ratio exposure | 2,417.2 | 2,962.7
| % | %
Leverage ratio | 5.8 | 5.2

1 The CRR II regulatory transitional arrangements for IFRS 9 are applied in the leverage ratio calculation. This calculation is in line with the UK leverage
rules that were implemented on 1 January 2022, and excludes central bank claims. Comparatives for 2021 are reported based on the disclosure rules
in force at that time, and include claims on central banks.
Our leverage ratio was 5.8% at 31 December 2022, up from 5.2% at
31 December 2021. The improvement was mainly due to the
exclusion of central bank claims following the implementation of the
UK leverage ratio framework from 1 January 2022, and foreign
exchange translation movement. This was partly offset by a decline in
tier 1 capital.
At 31 December 2022, our UK minimum leverage ratio requirement of
3.25% was supplemented by a leverage ratio buffer of 0.8%, which
consists of an additional leverage ratio buffer of 0.7% and a
countercyclical leverage ratio buffer of 0.1%. These buffers translated
into capital values of $16.9 bn and $2.4 bn respectively. We exceeded
these leverage requirements.
Regulatory transitional arrangements for
IFRS 9 ‘Financial Instruments’
We have adopted the regulatory transitional arrangements in CRR II
for IFRS 9, including paragraph four of article 473a. Our capital and
ratios are presented under these arrangements throughout the tables
in this section, including in the end point figures. Without their
application, our CET1 ratio would be 14.2%.
The IFRS 9 regulatory transitional arrangements allow banks to add
back to their capital base a proportion of the impact that IFRS 9 has
upon their loan loss allowances. The impact is defined as:
•the increase in loan loss allowances on day one of IFRS 9
adoption; and
•any subsequent increase in ECL in the non-credit-impaired book
thereafter.
Any add-back must be tax affected and accompanied by a
recalculation of deferred tax, exposure and RWAs. The impact is
calculated separately for portfolios using the standardised (‘STD’) and
internal ratings-based (‘IRB’) approaches. For IRB portfolios, there is
no add-back to capital unless loan loss allowances exceed regulatory
12-month expected losses.
The EU’s CRR ‘Quick Fix’ relief package increased the 2022 scalar
from 25% to 75% the relief that banks may take for loan loss
allowances recognised since 1 January 2020 on the
non-credit-impaired book.
In the current period, the add-back to CET1 capital amounted to
$0.4bn under the STD approach with a tax impact of $0.1bn. At
31 December 2021, the add-back to the capital base under the STD
approach was $1.0bn with a tax impact of $0.2bn.
Pillar 3 disclosure requirements
Pillar 3 of the Basel regulatory framework is related to market
discipline and aims to make financial services firms more transparent
by requiring publication of wide-ranging information on their risks,
capital and management. Our Pillar 3 Disclosures at 31 December
2022 is published on our website at www.hsbc.com/investors.
Risk review

208 | HSBC Holdings plc Annual Report and Accounts 2022

Liquidity and funding risk in 2022
Liquidity metrics
At 31 December 2022, all of the Group’s material operating entities
were above regulatory minimum liquidity and funding levels.
Each entity maintains sufficient unencumbered liquid assets to
comply with local and regulatory requirements. The liquidity value of
these assets for each entity is shown in the following table, along
with the individual LCR ratio on a local regulatory requirements basis
wherever applicable. Where local regulatory requirements are not
applicable, the PRA LCR is shown. The local basis may differ from
PRA measures due to differences in the way regulators have
implemented the Basel III standards.
Each entity maintains a sufficient stable funding profile and is
assessed using the NSFR or other appropriate metrics.
In addition to regulatory metrics, we use a wide set of measures to
manage our liquidity and funding profile.
The Group liquidity and funding position on an average basis is
analysed in the following sections.

Operating entities’ liquidity 1
| At 31 December 2022
| LCR | HQLA | Net outflows | NSFR
| % | $bn | $bn | %
HSBC UK Bank plc (ring-fenced bank)2 | 226 | 136 | 60 | 164
HSBC Bank plc (non-ring-fenced bank)3,4 | 143 | 128 | 90 | 115
The Hongkong and Shanghai Banking Corporation – Hong Kong branch 5 | 179 | 147 | 82 | 130
HSBC Singapore 6 | 247 | 21 | 9 | 173
Hang Seng Bank | 228 | 50 | 22 | 156
HSBC Bank China | 183 | 23 | 13 | 132
HSBC Bank USA | 164 | 85 | 52 | 131
HSBC Continental Europe 7,8 | 151 | 55 | 37 | 132
HSBC Bank Middle East Ltd – UAE branch | 239 | 12 | 5 | 158
HSBC Canada 7 | 149 | 22 | 15 | 122
HSBC Mexico | 155 | 8 | 5 | 129

| At 31 December 2021
HSBC UK Bank plc (ring-fenced bank)2 | 222 | 143 | 64 | 176
HSBC Bank plc (non-ring-fenced bank)3,4 | 142 | 118 | 84 | 115
The Hongkong and Shanghai Banking Corporation – Hong Kong branch 5 | 190 | 139 | 74 | 136
HSBC Singapore 6 | 277 | 19 | 7 | 165
Hang Seng Bank | 200 | 48 | 24 | 145
HSBC Bank China | 155 | 23 | 15 | 143
HSBC Bank USA | 169 | 104 | 62 | 145
HSBC Continental Europe 7 | 142 | 56 | 39 | 131
HSBC Bank Middle East Ltd – UAE branch | 203 | 12 | 6 | 154
HSBC Canada 7 | 154 | 25 | 16 | 125
HSBC Mexico | 210 | 9 | 4 | 138

1 The LCR and NSFR ratios presented in the above table are based on average values. The LCR is the average of the preceding 12 months. The NSFR is
the average of the preceding four quarters. Prior period numbers have been restated for consistency.
2 HSBC UK Bank plc refers to the HSBC UK liquidity group, which comprises four legal entities: HSBC UK Bank plc, Marks and Spencer Financial
Services plc, HSBC Private Bank (UK) Ltd and HSBC Trust Company (UK) Limited, managed as a single operating entity, in line with the application of
UK liquidity regulation as agreed with the PRA.
3 HSBC Bank plc includes overseas branches and special purpose entities consolidated by HSBC for financial statements purposes.
4 HSBC Bank plc implemented a strategic data enhancement that resulted in a reclassification of some securities. This reclassification drove a reduction
in total HQLA and corresponding LCR as of 31 December 2022. Prior period numbers have been restated for consistency.
5 The Hongkong and Shanghai Banking Corporation – Hong Kong branch represents the material activities of The Hongkong and Shanghai Banking
Corporation Limited.
6 HSBC Singapore includes HSBC Bank Singapore Limited and The Hongkong and Shanghai Banking Corporation – Singapore branch. Liquidity and
funding risk is monitored and controlled at country level in line with the local regulator’s approval. Prior period numbers have been restated for
consistency.
7 HSBC Continental Europe and HSBC Canada represent the consolidated banking operations of the Group in France and Canada, respectively. HSBC
Continental Europe and HSBC Canada are each managed as single distinct operating entities for liquidity purposes.
8 In response to the requirement for an intermediate parent undertaking in line with EU Capital Requirements Directive (’CRD V’), HSBC Continental
Europe acquired control of HSBC Germany and HSBC Bank Malta on 30 November 2022. The averages for LCR and NSFR includes the impact of the
inclusion of two entities for November 2022 and December 2022.

HSBC Holdings plc Annual Report and Accounts 2022 | 209

Consolidated liquidity metrics
Net stable funding ratio
From 1 January 2022, we started managing funding risk based on the
PRA’s NSFR rules. The Group’s NSFR at 31 December 22, calculated
from the average of the four preceding quarters average, was 136%.

| At 1
| 31 Dec | 30 Jun | 31 Dec
| 2022 | 2022 | 2021
| $bn | $bn | $bn
Total available stable funding ($bn) | 1,552 | 1,567 | N/A
Total required stable funding ($bn) | 1,138 | 1,139 | N/A
NSFR ratio (%) | 136 | 138 | N/A

1 Group NSFR numbers above are based on average values. The NSFR
number is the average of the preceding quarters.
Liquidity coverage ratio
At 31 December 2022, the average HQLA held at entity level
amounted to $812bn (31 December 2021: $861bn). Since 2021, we
have implemented a revised approach to the application of the
requirements under the European Commission Delegated Regulation
(EU) 2015/61 and PRA rule book. This revised approach was used to
reflect the impact of limitations in the transferability of entity liquidity
around the Group, and resulted in an adjustment of $165bn to LCR
HQLA and $9bn to LCR inflows on an average basis. The change in
methodology was designed to better incorporate local regulatory
restrictions on the transferability of liquidity.

| At 1
| 31 Dec | 30 Jun | 31 Dec
| 2022 | 2022 | 2021
| $bn | $bn | $bn
High-quality liquid assets (in entities) | 812 | 848 | 861
EC Delegated Act adjustment for transfer restrictions 2 | (174) | (181) | (176)
Group LCR HQLA | 647 | 676 | 688
Net outflows | 491 | 500 | 495
Liquidity coverage ratio | 132% | 135% | 139%

1 Group LCR numbers above are based on average values. The LCR is
the average of the preceding 12 months.
2 This includes adjustments made to high-quality liquid assets and
inflows in entities to reflect liquidity transfer restrictions.
Liquid assets
After the $165bn adjustment, the average Group LCR HQLA of
$647bn (31 December 2021: $688bn) was held in a range of asset
classes and currencies. Of these, 97% were eligible as level 1
(31 December 2021: 93%).
The following tables reflect the composition of the average liquidity
pool by asset type and currency at 31 December 2022.

Liquidity pool by asset type 1
| Liquidity pool | Cash | Level 1 2 | Level 2 2
| $bn | $bn | $bn | $bn
Cash and balance at central bank | 344 | 344 | — | —
Central and local government bonds | 288 | — | 272 | 16
Regional government public sector entities | 2 | — | 2 | —
International organisation and multilateral developments banks | 9 | — | 9 | —
Covered bonds | 2 | — | — | 2
Other | 2 | — | 1 | 1
Total at 31 Dec 2022 | 647 | 344 | 284 | 19
Total at 31 Dec 2021 | 688 | 390 | 251 | 47

1 Group liquid assets numbers are based on average values.
2 As defined in EU regulations, level 1 assets means ‘assets of
extremely high liquidity and credit quality’, and level 2 assets means
‘assets of high liquidity and credit quality’.

Liquidity pool by currency 1
| $ | £ | € | HK$ | Other | Total
| $bn | $bn | $bn | $bn | $bn | $bn
Liquidity pool at 31 Dec 2022 | 167 | 191 | 98 | 54 | 137 | 647
Liquidity pool at 31 Dec 2021 | 176 | 206 | 117 | 67 | 122 | 688

1 Group liquid assets numbers are based on average values.
Sources of funding
Our primary sources of funding are customer current accounts and
savings deposits payable on demand or at short notice. We issue
secured and unsecured wholesale securities to supplement customer
deposits, meet regulatory obligations and to change the currency mix,
maturity profile or location of our liabilities.
The following ‘Funding sources’ and ‘Funding uses’ tables provide a
view of how our consolidated balance sheet is funded. In practice, all
the principal operating entities are required to manage liquidity and
funding risk on a stand-alone basis.
The tables analyse 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 a net balancing
source or deployment of funds.

Funding sources
(Audited)
| 2022 | 2021
| $m | $m
Customer accounts | 1,570,303 | 1,710,574
Deposits by banks | 66,722 | 101,152
Repurchase agreements – non-trading | 127,747 | 126,670
Debt securities in issue | 78,149 | 78,557
Cash collateral, margin and settlement accounts | 88,468 | 65,452
Liabilities of disposal groups held for sale 1 | 114,597 | 9,005
Subordinated liabilities | 22,290 | 20,487
Financial liabilities designated at fair value | 127,327 | 145,502
Liabilities under insurance contracts | 114,844 | 112,745
Trading liabilities | 72,353 | 84,904
– repos | 16,254 | 11,004
– stock lending | 3,541 | 2,332
– other trading liabilities | 52,558 | 71,568
Total equity | 196,028 | 206,777
Other balance sheet liabilities | 387,702 | 296,114
At 31 Dec | 2,966,530 | 2,957,939

Funding uses
(Audited)
| 2022 | 2021
| $m | $m
Loans and advances to customers | 924,854 | 1,045,814
Loans and advances to banks | 104,882 | 83,136
Reverse repurchase agreements – non-trading | 253,754 | 241,648
Cash collateral, margin and settlement accounts | 82,986 | 59,884
Assets held for sale 1 | 115,919 | 3,411
Trading assets | 218,093 | 248,842
– reverse repos | 14,797 | 14,994
– stock borrowing | 10,706 | 8,082
– other trading assets | 192,590 | 225,766
Financial investments | 425,564 | 446,274
Cash and balances with central banks | 327,002 | 403,018
Other balance sheet assets | 513,476 | 425,912
At 31 Dec | 2,966,530 | 2,957,939

1 ‘Liabilities of disposal groups held for sale’ includes $85b n and $27b n
and ‘Assets held for sale’ includes $90b n and $23b n, in respect of
planned sale of our banking business in Canada and planned sale of our
retail banking operations in France respectively, that were classified as
assets held for sale during 2022.
Risk review

210 | HSBC Holdings plc Annual Report and Accounts 2022

Wholesale term debt maturity profile
The maturity profile of our wholesale term debt obligations is set out
in the following table. The balances in the table are not directly
comparable with those in the consolidated balance sheet because the
table presents gross cash flows relating to principal payments and not
the balance sheet carrying value, which includes debt securities and
subordinated liabilities measured at fair value.

Wholesale funding cash flows payable by HSBC under financial liabilities by remaining contractual maturities 1
| Due not more than 1 month | Due over 1 month but not more than 3 months | Due over 3 months but not more than 6 months | Due over 6 months but not more than 9 months | Due over 9 months but not more than 1 year | Due over 1 year but not more than 2 years | Due over 2 years but not more than 5 years | Due over 5 years | Total
| $m | $m | $m | $m | $m | $m | $m | $m | $m
Debt securities issued | 11,959 | 11,266 | 12,532 | 8,225 | 8,212 | 26,669 | 52,435 | 52,952 | 184,250
– unsecured CDs and CP | 3,821 | 6,017 | 7,088 | 4,137 | 3,123 | 1,264 | 707 | 1,004 | 27,161
– unsecured senior MTNs | 5,973 | 2,351 | 3,534 | 1,363 | 3,238 | 19,229 | 44,023 | 44,021 | 123,732
– unsecured senior structured notes | 1,264 | 1,421 | 1,247 | 1,850 | 1,627 | 4,463 | 2,609 | 5,990 | 20,471
– secured covered bonds | — | — | — | — | — | — | 602 | — | 602
– secured asset-backed commercial paper | 690 | — | — | — | — | — | — | — | 690
– secured ABS | 15 | 28 | 40 | 38 | 36 | 123 | 656 | 220 | 1,156
– others | 196 | 1,449 | 623 | 837 | 188 | 1,590 | 3,838 | 1,717 | 10,438
Subordinated liabilities | — | — | 11 | 160 | — | 2,000 | 5,581 | 25,189 | 32,941
– subordinated debt securities | — | — | 11 | 160 | — | 2,000 | 5,581 | 23,446 | 31,198
– preferred securities | — | — | — | — | — | — | — | 1,743 | 1,743
At 31 Dec 2022 | 11,959 | 11,266 | 12,543 | 8,385 | 8,212 | 28,669 | 58,016 | 78,141 | 217,191
Debt securities issued | 17,602 | 14,593 | 9,293 | 9,249 | 5,233 | 25,058 | 55,388 | 56,639 | 193,055
– unsecured CDs and CP | 4,586 | 6,795 | 4,281 | 2,837 | 1,189 | 947 | 834 | 931 | 22,400
– unsecured senior MTNs | 8,542 | 4,140 | 2,633 | 2,078 | 2,074 | 14,932 | 45,063 | 45,259 | 124,721
– unsecured senior structured notes | 2,090 | 1,610 | 1,017 | 975 | 1,206 | 2,996 | 3,382 | 8,604 | 21,880
– secured covered bonds | — | 1,137 | — | 997 | — | 2,417 | 1,997 | — | 6,548
– secured asset-backed commercial paper | 956 | — | — | — | — | — | — | — | 956
– secured ABS | 1 | 133 | 33 | 31 | 193 | 896 | 1,696 | 98 | 3,081
– others | 1,427 | 778 | 1,329 | 2,331 | 571 | 2,870 | 2,416 | 1,747 | 13,469
Subordinated liabilities | — | — | 11 | — | — | 417 | 7,023 | 21,274 | 28,725
– subordinated debt securities | — | — | 11 | — | — | 417 | 7,023 | 19,427 | 26,878
– preferred securities | — | — | — | — | — | — | — | 1,847 | 1,847
At 31 Dec 2021 | 17,602 | 14,593 | 9,304 | 9,249 | 5,233 | 25,475 | 62,411 | 77,913 | 221,780

1 Excludes financial liabilities of disposal groups.

HSBC Holdings plc Annual Report and Accounts 2022 | 211

Structural foreign exchange risk in 2022
Structural foreign exchange exposures represent net assets or capital investments in subsidiaries, branches, joint arrangements or associates,
together with any associated hedges, the functional currencies of which are currencies other than the US dollar. Exchange differences on
structural exposures are usually recognised in ‘other comprehensive income’.

Net structural foreign exchange exposures
| 2022
Currency of structural exposure | Net investment in foreign operations (excl non- controlling interest) | Net investment hedges | Structural foreign exchange exposures (pre- economic hedges) | Economic hedges – structural FX hedges 1 | Economic hedges – equity securities (AT1)2 | Net structural foreign exchange exposures
$m | $m | $m | $m | $m | $m
Hong Kong dollars | 47,204 | (4,597) | 42,607 | (8,363) | — | 34,244
Pounds sterling | 39,535 | (14,000) | 25,535 | — | (1,205) | 24,330
Chinese renminbi | 35,801 | (3,532) | 32,269 | (994) | — | 31,275
Euros | 15,182 | (777) | 14,405 | — | (2,402) | 12,003
Canadian dollars | 4,402 | (811) | 3,591 | — | — | 3,591
Indian rupees | 4,967 | (1,380) | 3,587 | — | — | 3,587
Mexican pesos | 3,989 | — | 3,989 | — | — | 3,989
Saudi riyals | 4,182 | (109) | 4,073 | — | — | 4,073
UAE dirhams | 4,534 | (731) | 3,803 | (2,285) | — | 1,518
Malaysian ringgit | 2,715 | — | 2,715 | — | — | 2,715
Singapore dollars | 3,108 | (358) | 2,750 | — | (559) | 2,191
Australian dollars | 2,264 | — | 2,264 | — | — | 2,264
Taiwanese dollars | 2,058 | (1,140) | 918 | — | — | 918
Indonesian rupiah | 1,453 | (469) | 984 | — | — | 984
Swiss francs | 1,233 | (727) | 506 | — | — | 506
Korean won | 1,283 | (817) | 466 | — | — | 466
Thai baht | 908 | — | 908 | — | — | 908
Egyptian pound | 746 | — | 746 | — | — | 746
Qatari rial | 785 | (200) | 585 | (277) | — | 308
Argentinian peso | 968 | — | 968 | — | — | 968
Others, each less than $700m | 5,135 | (495) | 4,640 | (36) | — | 4,604
At 31 Dec | 182,452 | (30,143) | 152,309 | (11,955) | (4,166) | 136,188
| 2021
Hong Kong dollars | 44,714 | (4,992) | 39,722 | (7,935) | — | 31,787
Pounds sterling | 47,935 | (15,717) | 32,218 | — | (1,353) | 30,865
Chinese renminbi | 35,879 | — | 35,879 | (1,255) | — | 34,624
Euros | 14,671 | — | 14,671 | — | (4,262) | 10,409
Canadian dollars | 5,147 | (1,093) | 4,054 | — | — | 4,054
Indian rupees | 5,106 | — | 5,106 | — | — | 5,106
Mexican pesos | 3,598 | — | 3,598 | — | — | 3,598
Saudi riyals | 4,115 | — | 4,115 | — | — | 4,115
UAE dirhams | 4,155 | (700) | 3,455 | (1,985) | — | 1,470
Malaysian ringgit | 2,713 | — | 2,713 | — | — | 2,713
Singapore dollars | 2,339 | (680) | 1,659 | — | (1,298) | 361
Australian dollars | 2,300 | — | 2,300 | — | — | 2,300
Taiwanese dollars | 2,105 | (1,019) | 1,086 | — | — | 1,086
Indonesian rupiah | 1,748 | — | 1,748 | — | — | 1,748
Swiss francs | 1,107 | (809) | 298 | — | — | 298
Korean won | 1,219 | (696) | 523 | — | — | 523
Thai baht | 859 | — | 859 | — | — | 859
Egyptian pound | 1,051 | — | 1,051 | — | — | 1,051
Qatari rial | 725 | — | 725 | (332) | — | 393
Argentinian peso | 795 | — | 795 | — | — | 795
Others, each less than $700m | 5,242 | (200) | 5,042 | (36) | — | 5,006
At 31 Dec | 187,523 | (25,906) | 161,617 | (11,543) | (6,913) | 143,161

1 Represents hedges that do not qualify as net investment hedges for accounting purposes.
2 Represents foreign currency-denominated preference share and AT1 instruments. These are accounted for at historical cost under IFRSs and do not
qualify as net investment hedges for accounting purposes. The gain or loss arising from changes in the US dollar value of these instruments is
recognised on redemption in retained earnings.
For definition of structural foreign exchange exposures, see page 205.
Risk review

212 | HSBC Holdings plc Annual Report and Accounts 2022

Interest rate risk in the banking book
in 2022
Net interest income sensitivity
The following tables set out the assessed impact to a hypothetical
base case projection of our banking book NII under the following
scenarios:
•an immediate shock of 25 basis points (‘bps’) to the current
market-implied path of interest rates across all currencies on
1 January 2023 (effects over one year and five years); and
•an immediate shock of 100bps to the current market-implied path
of interest rates across all currencies on 1 January 2023 (effects
over one year and five years).
The sensitivities shown represent a hypothetical simulation of the
base case NII, assuming a static balance sheet (specifically no
assumed migration from current account to term deposits), no
management actions from Global Treasury and a simplified 50% pass-
on assumption applied for material entities. This also incorporates the
effect of interest rate behaviouralisation, hypothetical managed rate
product pricing assumptions, prepayment of mortgages and deposit
stability. The sensitivity calculations exclude pensions, insurance and
investments in subsidiaries.
The NII sensitivity analysis performed in the case of a down-shock
does not include floors to market rates, and it does not include floors
on some wholesale assets and liabilities. However, floors have been
maintained for deposits and loans to customers where this is
contractual or where negative rates would not be applied.
As market and policy rates move, the degree to which these changes
are passed on to customers will vary based on a number of factors,
including the absolute level of market rates, regulatory and contractual
frameworks, and competitive dynamics. To aid comparability between
markets, we have simplified the basis of preparation for our
disclosure, and have used a 50% pass-on assumption for major
entities on certain interest bearing deposits. Our pass-through asset
assumptions are largely in line with our contractual agreements or
established market practice, which typically results in a significant
portion of interest rate changes being passed on.
The one-year and five-year NII sensitivities in the down-shock
scenarios decreased at 31 December 2022 at Group level when
compared with 31 December 2021. This was driven by changes in the
forecasted yield curves and changes in balance sheet composition.
Immediate interest rate rises of 25bps and 100bps would increase
projected NII for the 12 months to 31 December 2023 by $884m and
$3,535m, respectively. Immediate interest rate falls of 25bps and
100bps would decrease projected NII for the 12 months to
31 December 2023 by $973m and $3,969m, respectively.
The sensitivity of NII for 12 months decreased by $1,879m in the plus
100bps parallel shock and by $1,792m in the minus 100bps parallel
shock, comparing 31 December 2022 with 31 December 2021. The
decrease in the sensitivity of NII for 12 months in the plus 100bps
parallel shock was mainly driven by changes in market pricing,
reflecting current market expectations of main policy rates. The key
drivers of the reduction in NII sensitivity are the reduced effects of
flooring as rates have moved higher, deposit migration, and
management actions.
The sensitivities broken down by currency in the tables below do not
include the impact of vanilla foreign exchange swaps to optimise cash
management across the Group.
For further details of measurement of interest rate risk in the banking
book, see page 204.

NII sensitivity to an instantaneous change in yield curves (12 months) – 1 year NII sensitivity by currency
| Currency |
| $ | HK$ | £ | € | Other | Total
| $m | $m | $m | $m | $m | $m
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 December 2022) |  |  |  |  |  |
+25bps parallel | (66) | 107 | 245 | 167 | 431 | 884
-25bps parallel | 64 | (115) | (289) | (194) | (439) | (973)
+100bps parallel | (267) | 413 | 1,026 | 674 | 1,689 | 3,535
-100bps parallel | 236 | (476) | (1,177) | (765) | (1,787) | (3,969)
Change in Jan 2022 to Dec 2022 (based on balance sheet at 31 December 2021) |  |  |  |  |  |
+25bps parallel | 125 | 265 | 420 | 106 | 393 | 1,309
-25bps parallel | (257) | (536) | (594) | (170) | (395) | (1,952)
+100bps parallel | 458 | 1,054 | 1,739 | 632 | 1,532 | 5,414
-100bps parallel | (466) | (1,020) | (2,070) | (595) | (1,610) | (5,761)

.

NII sensitivity to an instantaneous change in yield curves (5 years) – Cumulative 5 years NII sensitivity by currency
| Currency |
| $ | HK$ | £ | € | Other | Total
| $m | $m | $m | $m | $m | $m
Change in Jan 2023 to Dec 2027 (based on balance sheet at 31 December 2022) |  |  |  |  |  |
+25bps parallel | 192 | 668 | 2,315 | 924 | 2,500 | 6,599
-25bps parallel | (282) | (688) | (2,336) | (1,044) | (2,498) | (6,848)
+100bps parallel | 673 | 2,401 | 9,254 | 3,764 | 9,765 | 25,857
-100bps parallel | (1,522) | (3,004) | (9,454) | (4,173) | (10,317) | (28,470)
Change in Jan 2022 to Dec 2026 (based on balance sheet at 31 December 2021) |  |  |  |  |  |
+25bps parallel | 1,026 | 1,410 | 3,333 | 827 | 2,510 | 9,106
-25bps parallel | (1,701) | (2,887) | (4,216) | (997) | (2,600) | (12,401)
+100bps parallel | 3,922 | 4,870 | 13,389 | 3,919 | 9,841 | 35,941
-100bps parallel | (5,060) | (7,052) | (14,893) | (3,571) | (10,481) | (41,057)

The net interest income sensitivities arising from the scenarios presented in the tables above are not directly comparable. This is due to timing
differences relating to interest rate changes and the repricing of assets and liabilities.

HSBC Holdings plc Annual Report and Accounts 2022 | 213

NII sensitivity to an instantaneous change in yield curves (5 years) – NII sensitivity by years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total
| $m | $m | $m | $m | $m | $m
Change in Jan 2023 to Dec 2027 (based on balance sheet at 31 December 2022) |  |  |  |  |  |
+25bps parallel | 884 | 1,145 | 1,378 | 1,550 | 1,642 | 6,599
-25bps parallel | (973) | (1,178) | (1,420) | (1,579) | (1,699) | (6,848)
+100bps parallel | 3,535 | 4,565 | 5,367 | 5,962 | 6,429 | 25,857
-100bps parallel | (3,969) | (4,944) | (5,925) | (6,565) | (7,067) | (28,470)
Change in Jan 2022 to Dec 2026 (based on balance sheet at 31 December 2021) |  |  |  |  |  |
+25bps parallel | 1,309 | 1,758 | 1,896 | 2,002 | 2,141 | 9,106
-25bps parallel | (1,952) | (2,324) | (2,593) | (2,687) | (2,845) | (12,401)
+100bps parallel | 5,414 | 6,738 | 7,492 | 7,937 | 8,359 | 35,941
-100bps parallel | (5,761) | (7,664) | (8,675) | (9,354) | (9,603) | (41,057)

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 fair value through
other comprehensive income, debt instruments measured at
amortised cost, and exposures arising from our insurance operations.
Value at risk of non-trading portfolios
Value at risk (‘VaR’) is a technique for estimating 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 the market risk management of non-
trading portfolios to have a complete picture of risk, complementing
risk sensitivity analysis.
Our models are predominantly based on historical simulation that
incorporates the following features:
•historical market rates and prices, which are calculated with
reference to interest rates, credit spreads and the associated
volatilities;
•potential market movements that are calculated with reference to
data from the past two years; and
•calculations to a 99% confidence level and using a one-day holding
period.
Although a valuable guide to risk, VaR is used for non-trading
portfolios with awareness of its limitations. For example:
•The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events, particularly
those that are extreme in nature. As the model is calibrated on the
last 500 business days, it does not adjust instantaneously to a
change in the market regime.
•The use of a one-day holding period for risk management purposes
of non-trading books is only an indication of exposure and not
indicative of the time period required to hedge or liquidate
positions.
•The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
The interest rate risk on the fixed-rate securities issued by HSBC
Holdings is not included in the Group non-trading VaR. The
management of this risk is described on page 217. Non-trading VaR
also excludes the equity risk on securities held at fair value and non-
trading book foreign exchange risk.
The VaR for non-trading activity at 31 December 2022 was lower than
at 31 December 2021.
The daily levels of total non-trading VaR in 2022 are set out in the
graph below.

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

Risk review

214 | HSBC Holdings plc Annual Report and Accounts 2022

The Group non-trading VaR for 2022 is shown in the table below.

Non-trading VaR, 99% 1 day
(Audited)
| Interest rate | Credit spread | Portfolio diversification 1 | Total 2
| $m | $m | $m | $m
Balance at 31 Dec 2022 | 159.8 | 56.6 | (45.3) | 171.1
Average | 134.6 | 56.9 | (35.9) | 155.6
Maximum | 225.5 | 84.7 |  | 265.3
Minimum | 98.3 | 43.4 |  | 106.3
Balance at 31 Dec 2021 | 216.4 | 70.3 | (66.3) | 220.4
Average | 200.7 | 76.9 | (40.3) | 237.3
Maximum | 248.7 | 99.3 | — | 298.8
Minimum | 163.3 | 64.7 | — | 193.5

1 Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in
unsystematic market risk that occurs when combining a number of different risk types – such as interest rate and credit spreads – 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 and minimum occurs on different days for different risk types, it is not meaningful
to calculate a portfolio diversification benefit for these measures.
2 The total VaR is non-additive across risk types due to diversification effects.
The decrease at the end of February was primarily driven by Covid-19
scenarios moving out of the two-year historical scenario window used
to calculate VaR. Non-trading VaR remained at relatively low levels
throughout the next two quarters, with an increase in duration risk
exposure in Global Treasury during November driving an increase in
both interest rate and total VaR. The average portfolio diversification
effect between interest rate and credit spread exposure remained
relatively stable between 2021 and 2022.
Sensitivity of capital and reserves
Hold-to-collect-and-sell stressed VaR is a quantification of the
potential losses to a 99% confidence level of the portfolio of high-
quality liquid assets held under a hold-to-collect-and-sell business
model in Global Treasury. The portfolio is accounted for at fair value
through other comprehensive income together with the derivatives
held in designated hedging relationships with these securities. The
mark-to-market of this portfolio therefore has an impact on CET1.
Stressed VaR is quantified based on the worst losses over a one-year
period going back to the beginning of 2007 and the assumed holding
period is 60 days. At the end of December 2022, the stressed VaR of
the portfolio was $2.15bn (2021: $3.63bn). The decrease was
primarily due to actions taken to reduce the overall duration risk of the
portfolio in order to dampen the capital impact from higher interest
rates.
Alongside our monitoring of the stressed VaR of this portfolio, we
also monitor the sensitivity of reported cash flow hedging reserves to
interest rate movements on a yearly basis by assessing the expected
reduction in valuation of cash flow hedges due to parallel movements
of plus or minus 100bps in all yield curves.
The following table describes the sensitivity of our cash flow hedge
reported reserves to the stipulated movements in yield curves at the
year end. The sensitivities are indicative and based on simplified
scenarios. These particular exposures form only a part of our overall
interest rate exposure. We apply flooring on negative rates in the
minus 100bps scenario in this assessment. However, due to
increases in interest rates in most major markets, the effect of this
flooring is immaterial at the end of 2022.
Comparing 31 December 2022 with 31 December 2021, the
sensitivity of the cash flow hedging reserve increased by $368m in
the plus 100bps scenario and increased by $375m in the minus
100bps scenario. Although our largest exposure by currency remained
fixed rate pound sterling hedges transacted in HSBC UK Bank plc, the
increase in sensitivity during 2022 was driven by increases in hedge
exposure in a variety of other currencies including US dollars and
Hong Kong dollars.

Sensitivity of cash flow hedging reported reserves to interest rate movements
| $m
At 31 Dec 2022 |
+100 basis point parallel move in all yield curves | (1,899)
As a percentage of total shareholders’ equity | (1.01)%
-100 basis point parallel move in all yield curves | 1,912
As a percentage of total shareholders’ equity | 1.02%
At 31 Dec 2021 |
+100 basis point parallel move in all yield curves | (1,531)
As a percentage of total shareholders’ equity | (0.77)%
-100 basis point parallel move in all yield curves | 1,537
As a percentage of total shareholders’ equity | 0.78%

Third-party assets in Markets Treasury
Third-party assets in Markets Treasury decreased by 3% compared
with 31 December 2021. The net decrease of $22bn was partly
reflective of a reduction in our commercial surplus during the year, as
well as the impact of foreign exchange rates and interest rates, as
central banks tightened monetary policy during 2022. The increase of
$31bn in ‘Other’ was largely driven by the reclassification of our
banking business in Canada to held for sale.

HSBC Holdings plc Annual Report and Accounts 2022 | 215

Third-party assets in Markets Treasury
| 2022 | 2021
| $m | $m
Cash and balances at central banks | 317,479 | 379,106
Trading assets | 498 | 329
Loans and advances: |  |
– to banks | 67,612 | 47,363
– to customers | 2,102 | 371
Reverse repurchase agreements | 53,016 | 47,067
Financial investments | 319,852 | 338,692
Other | 36,192 | 5,451
At 31 Dec | 796,751 | 818,379

Defined benefit pension plans
Market risk arises within our defined benefit pension plans to the
extent that the obligations of the plans are not fully matched by
assets with determinable cash flows.
For details of our defined benefit plans, including asset allocation, see
Note 5 on the financial statements, and for pension risk management,
see page 205.
.
Additional market risk measures applicable
only to the parent company
HSBC Holdings monitors and manages foreign exchange risk and
interest rate risk. In order to manage interest rate risk, HSBC Holdings
uses the projected sensitivity of its NII to future changes in yield
curves and the interest rate repricing gap tables.
During 2022, HSBC Holdings hedged $22.7bn of previously unhedged
issuances. The impact can be observed in the NII sensitivity tables
with a change from positive to negative sensitivities due to increases
in interest rates.
Foreign exchange risk
HSBC Holdings’ foreign exchange exposures derive almost entirely
from the execution of structural foreign exchange hedges on behalf of
the Group as its business-as-usual foreign exchange exposures are
managed within tight risk limits. At 31 December 2022, HSBC
Holdings had forward foreign exchange contracts of
$30.1bn (2021: $25.9bn) to manage the Group’s structural foreign
exchange exposures.
For further details of our structural foreign exchange exposures, see
page 212.
Sensitivity of net interest income
HSBC Holdings monitors NII sensitivity over 12-month and five-year
time horizons, reflecting the longer-term perspective on interest rate
risk management appropriate to a financial services holding company.
These sensitivities assume that any issuance where HSBC Holdings
has an option to reimburse at a future call date is called at this date.
The tables below set out the effect on HSBC Holdings’ future NII of
the following scenarios:
•an immediate shock of 25bps to the current market-implied path of
interest rates across all currencies on 1 January 2023; and
•an immediate shock of 100bps to the current market-implied path
of interest rates across all currencies on 1 January 2023.
The NII sensitivities shown are indicative and based on simplified
scenarios. Immediate interest rate rises of 25bps and 100bps would
decrease projected NII for the 12 months to 31 December 2023 by
$60m and $240m respectively. Conversely, falls of 25bps and 100bps
would increase projected NII for the 12 months to 31 December 2023
by $60m and $240m respectively.

NII sensitivity to an instantaneous change in yield curves (12 months)
| $ | HK$ | £ | € | Other | Total
| $m | $m | $m | $m | $m | $m
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 December 2022) |  |  |  |  |  |
+25bps | (66) | — | 4 | 2 | — | (60)
-25bps | 66 | — | (4) | (2) | — | 60
+100bps | (265) | — | 16 | 9 | — | (240)
-100bps | 265 | — | (16) | (9) | — | 240
Change in Jan 2022 to Dec 2022 (based on balance sheet at 31 December 2021) |  |  |  |  |  |
+25bps | 16 | — | 8 | 4 | — | 29
-25bps | (16) | — | (8) | (4) | — | (28)
+100bps | 65 | — | 31 | 16 | — | 113
-100bps | (64) | — | (31) | (14) | — | (109)

NII sensitivity to an instantaneous change in yield curves (5 years)
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total
| $m | $m | $m | $m | $m | $m
Change in Jan 2023 to Dec 2023 (based on balance sheet at 31 December 2022) |  |  |  |  |  |
+25bps | (60) | (41) | (36) | (37) | (38) | (212)
-25bps | 60 | 41 | 36 | 37 | 38 | 212
+100bps | (240) | (162) | (143) | (148) | (154) | (847)
-100bps | 240 | 162 | 143 | 148 | 154 | 847
Change in Jan 2022 to Dec 2022 (based on balance sheet at 31 December 2021) |  |  |  |  | — |
+25bps | 29 | 44 | 45 | 38 | 28 | 184
-25bps | (28) | (44) | (45) | (38) | (28) | (183)
+100bps | 113 | 177 | 180 | 152 | 112 | 733
-100bps | (109) | (174) | (174) | (148) | (109) | (715)

Risk review

216 | HSBC Holdings plc Annual Report and Accounts 2022

The figures represent hypothetical movements in NII based on our
projected yield curve scenarios, HSBC Holdings’ current interest rate
risk profile and assumed changes to that profile during the next five
years.
The sensitivities represent our assessment of the change to a
hypothetical base case based on a static balance sheet assumption,
and do not take into account the effect of actions that could be taken
to mitigate this interest rate risk.
Interest rate repricing gap table
The interest rate risk on the fixed-rate securities issued by HSBC
Holdings is not included within the Group VaR, but is managed on a
repricing gap basis. The following ‘Repricing gap analysis of HSBC
Holdings’ table analyses the full term structure of interest rate
mismatches within HSBC Holdings’ balance sheet where debt
issuances are reflected based on either the next repricing date if
floating rate or the maturity/call date (whichever is first) if fixed rate.

Repricing gap analysis of HSBC Holdings
| Total | Up to 1 year | From over 1 to 5 years | From over 5 to 10 years | More than 10 years | Non-interest bearing
| $m | $m | $m | $m | $m | $m
Cash at bank and in hand: |  |  |  |  |  |
– balances with HSBC undertakings | 2,590 | 2,590 |  |  |  |
Derivatives | 2,811 |  |  |  |  | 2,811
Loans and advances to HSBC undertakings | 76,516 | 22,545 | 29,759 | 20,347 | 2,000 | 1,865
Financial investments in HSBC undertakings | 26,194 | 22,917 | 3,268 |  |  | 9
Investments in subsidiaries | 163,211 | 5,425 | 8,395 | 600 |  | 148,791
Other assets | 1,850 |  |  |  |  | 1,850
Total assets | 273,172 | 53,477 | 41,422 | 20,947 | 2,000 | 155,326
Amounts owed to HSBC undertakings | (111) |  |  |  |  | (111)
Financial liabilities designated at fair values | (32,418) | (5,925) | (10,801) | (14,942) | (750) |
Derivatives | (1,220) |  |  |  |  | (1,220)
Debt securities in issue | (67,483) | (11,244) | (34,917) | (19,322) | (2,000) |
Other liabilities | (4,551) |  |  |  |  | (4,551)
Subordinated liabilities | (17,059) | (1,131) | (3,705) | (1,780) | (10,443) |
Total equity | (150,330) | (2,446) | (11,096) | (8,721) |  | (128,067)
Total liabilities and equity | (273,172) | (20,746) | (60,519) | (44,765) | (13,193) | (133,949)
Off-balance sheet items attracting interest rate sensitivity |  | (18,797) | (10,871) | 1,434 | 6,184 | 308
Net interest rate risk gap at 31 Dec 2022 |  | 13,952 | (8,226) | (22,384) | (5,009) | 21,667
Cumulative interest rate gap |  | 13,952 | 5,726 | (16,658) | (21,667) |
Cash at bank and in hand: |  |  |  |  |  |
– balances with HSBC undertakings | 2,590 | 2,590 |  |  |  |
Derivatives | 2,811 |  |  |  |  | 2,811
Loans and advances to HSBC undertakings | 76,516 | 22,545 | 29,759 | 20,347 | 2,000 | 1,865
Financial investments in HSBC undertakings | 26,194 | 22,917 | 3,268 |  |  | 9
Investments in subsidiaries | 163,211 | 5,425 | 8,395 | 600 |  | 148,791
Other assets | 1,850 |  |  |  |  | 1,850
Total assets | 273,172 | 53,477 | 41,422 | 20,947 | 2,000 | 155,326
Amounts owed to HSBC undertakings | (111) |  |  |  |  | (111)
Financial liabilities designated at fair values | (32,418) | (5,925) | (10,801) | (14,942) | (750) |
Derivatives | (1,220) |  |  |  |  | (1,220)
Debt securities in issue | (67,483) | (11,244) | (34,917) | (19,322) | (2,000) |
Other liabilities | (4,551) |  |  |  |  | (4,551)
Subordinated liabilities | (17,059) | (1,131) | (3,705) | (1,780) | (10,443) |
Total equity | (150,330) | (2,446) | (11,096) | (8,721) |  | (128,067)
Total liabilities and equity | (273,172) | (20,746) | (60,519) | (44,765) | (13,193) | (133,949)
Off-balance sheet items attracting interest rate sensitivity |  | (18,797) | (10,871) | 1,434 | 6,184 | 308
Net interest rate risk gap at 31 Dec 2021 1 |  | 13,952 | (8,226) | (22,384) | (5,009) | 21,667
Cumulative interest rate gap |  | 13,952 | 5,726 | (16,658) | (21,667) |

1 Investments in subsidiaries and equity have been allocated based on call dates for any callable bonds. The prior year figures have been amended to
reflect this.

HSBC Holdings plc Annual Report and Accounts 2022 | 217

Market risk

Contents

218 | Overview
218 | Market risk management
219 | Market risk in 2022
219 | Trading portfolios
220 | Market risk balance sheet linkages

Overview
Market risk is the risk of an adverse financial impact on trading
activities arising from changes in market parameters such as interest
rates, foreign exchange rates, asset prices, volatilities, correlations
and credit spreads. Exposure to market risk is separated into two
portfolios: trading portfolios and non-trading portfolios.
For further details of market risk in non-trading portfolios, page 214, of
the Annual Report and Accounts 2022.
Market risk management
Key developments in 2022
There were no material changes to our policies and practices for the
management of market risk in 2022.
Governance and structure
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
Global business | GBM
Risk measure | Value at risk | Sensitivity | Stress testing

The objective of our risk management policies and measurement
techniques 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 and Compliance Officer for HSBC Holdings. These
limits are allocated across business lines and to the Group’s legal
entities. 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. Each operating entity is required to assess the
market risks arising in its business and to transfer them either to its
local Markets and Securities Services or Markets Treasury unit for
management, or to separate books managed under the supervision of
the local ALCO. The Traded Risk function enforces the controls
around trading in permissible instruments approved for each site as
well as changes that follow 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.
Key risk management processes
Monitoring and limiting market risk exposures
Our objective is to manage and control market risk exposures while
maintaining a market profile consistent with our 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 and equity prices. We use sensitivity
measures to monitor the market risk positions within each risk type.
Granular sensitivity limits are set for trading desks with consideration
of market liquidity, customer demand and capital constraints, among
other factors.
Value at risk
(Audited)
VaR is a technique for estimating 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 calculated for all trading
positions regardless of how we capitalise them. Where we do not
calculate VaR explicitly, we use alternative tools as summarised in the
‘Stress testing’ section below.
Our models are predominantly based on historical simulation that
incorporates the following features:
•historical market rates and prices, which are calculated with
reference to foreign exchange rates, commodity prices, interest
rates, equity prices and the associated volatilities;
•potential market movements that are calculated with reference to
data from the past two years; and
•calculations to a 99% confidence level and using a one-day holding
period.
The models also incorporate the effect of option features on the
underlying exposures. The nature of the VaR models means that an
increase in observed market volatility will lead to an increase in VaR
without any changes in the underlying positions.
VaR model limitations
Although a valuable guide to risk, VaR is used with awareness of its
limitations. For example:
•The use of historical data as a proxy for estimating future market
moves may not encompass all potential market events, particularly
those that are extreme in nature. As the model is calibrated on the
last 500 business days, it does not adjust instantaneously to a
change in the market regime.
•The use of a one-day holding period for risk management purposes
of trading books assumes that this short period is sufficient to
hedge or liquidate all positions.
•The use of a 99% confidence level by definition does not take into
account losses that might occur beyond this level of confidence.
•VaR is calculated on the basis of exposures outstanding at the
close of business and therefore does not reflect intra-day
exposures.
Risk not in VaR framework
The risks not in VaR (‘RNIV’) framework captures and capitalises
material market risks that are not adequately covered in the VaR
model.
Risk factors are reviewed on a regular basis and are either
incorporated directly in the VaR models, where possible, or quantified
through either the VaR-based RNIV approach or a stress test approach
within the RNIV framework. While VaR-based RNIVs are calculated by
using historical scenarios, stress-type RNIVs are estimated on the
basis of stress scenarios whose severity is calibrated to be in line
with the capital adequacy requirements. The outcome of the VaR-
based RNIV approach is included in the overall VaR calculation but
excluded from the VaR measure used for regulatory back-testing. In
addition, the stressed VaR measure also includes risk factors
considered in the VaR-based RNIV approach.
Risk review

218 | HSBC Holdings plc Annual Report and Accounts 2022

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 framework to evaluate the potential impact
on portfolio values of more extreme, although plausible, events or
movements in a set of financial variables. In such scenarios, losses
can be much greater than those predicted by VaR modelling.
Stress testing is implemented at legal entity, regional and overall
Group levels. A set of scenarios is used consistently across all regions
within the Group. The risk appetite around potential stress losses
for the Group is set and monitored against a referral limit.
Market risk reverse stress tests are designed to identify vulnerabilities
in our portfolios by looking for scenarios that lead to loss levels
considered severe for the relevant portfolio. These scenarios may be
quite local or idiosyncratic in nature, and complement the systematic
top-down stress testing.
Stress testing and reverse stress testing provide senior management
with insights regarding the ‘tail risk’ beyond VaR, for which our
appetite is limited.
Trading portfolios
Trading portfolios comprise positions held for client servicing and
market-making, with the intention of short-term resale and/or to
hedge risks resulting from such positions.
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
Group entity hierarchy.
Market risk in 2022
During 2022, financial markets were driven by concerns over high
inflation and recession risks, against the backdrop of the Russia-
Ukraine war and continued Covid-19-related pandemic restrictions in
some countries. Throughout the year, several major central banks
tightened their monetary policies at a faster pace than previously
anticipated in order to counter rising inflation. As a result, bond
markets sold off sharply and bond yields rose to multi-year highs. In
addition, a change in the UK fiscal stance in late September led to the
pound reaching record lows and to significant turmoil in the market
for long-dated UK government bonds, which was exacerbated by
rapid deleveraging of liability-driven investment funds used by pension
schemes. There was pronounced volatility in equity valuations, with
declines across most market sectors due to recession risks and
tighter liquidity conditions. Foreign exchange markets were largely
dominated by a strong US dollar, as a result of global geopolitical
instability and the relatively fast pace of monetary tightening by the
US Federal Reserve. Investor sentiment remained fragile in credit
markets, with credit spreads in both investment-grade and high-yield
debt benchmarks reaching their widest levels since the start of the
Covid-19 pandemic.
We continued to manage market risk prudently during 2022.
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
Trading VaR was predominantly generated by the Markets and
Securities Services business.
Trading VaR as at 31 December 2022 increased compared with
31 December 2021. The increase, which peaked in September 2022,
was mainly driven by interest rate risk factors across business lines,
although lower loss contributions from credit spread risks provided a
partial offset. VaR returned to normal operating range in the fourth
quarter of 2022.
The daily levels of total trading VaR during 2022 are set out in the graph below.

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

HSBC Holdings plc Annual Report and Accounts 2022 | 219

The Group trading VaR for the year is shown in the table below.

Trading VaR, 99% 1 day 1
(Audited) |  |  |  |  |  |
| Foreign exchange and commodity | Interest rate | Equity | Credit spread | Portfolio diversification 2 | Total 3
| $m | $m | $m | $m | $m | $m
Balance at 31 Dec 2022 | 15.4 | 40.0 | 18.6 | 11.9 | (36.4) | 49.5
Average | 13.6 | 29.6 | 16.1 | 16.8 | (34.0) | 42.1
Maximum | 29.2 | 73.3 | 24.8 | 27.9 |  | 78.3
Minimum | 5.7 | 20.2 | 11.5 | 9.1 |  | 29.1
Balance at 31 Dec 2021 | 9.1 | 25.9 | 15.4 | 24.8 | (36.5) | 38.8
Average | 12.9 | 33.8 | 16.7 | 19.2 | (45.5) | 37.1
Maximum | 31.8 | 51.7 | 24.3 | 29.4 |  | 53.8
Minimum | 6.7 | 18.5 | 12.1 | 12.2 |  | 27.7

1 Trading portfolios comprise positions arising from the market-making and warehousing of customer-derived positions.
2 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 – such as 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 and minimum occurs on different days for different risk types, it is not meaningful
to calculate a portfolio diversification benefit for these measures.
3 The total VaR is non-additive across risk types due to diversification effects.
The table below shows trading VaR at a 99% confidence level
compared with trading VaR at a 95% confidence level at
31 December 2022. This comparison facilitates the benchmarking
of the trading VaR, which can be stated at different confidence levels,
with financial institution peers. The 95% VaR is unaudited.

Comparison of trading VaR, 99% 1 day vs trading VaR, 95% 1 day
| Trading VaR, 99% 1 day | Trading VaR, 95% 1 day
| $m | $m
Balance at 31 Dec 2022 | 49.5 | 31.7
Average | 42.1 | 24.6
Maximum | 78.3 | 49.0
Minimum | 29.1 | 17.5
Balance at 31 Dec 2021 | 38.8 | 21.6
Average | 37.1 | 24.0
Maximum | 53.8 | 30.0
Minimum | 27.7 | 18.9

Back-testing
During 2022, the Group experienced 10 loss back-testing exceptions
against hypothetical profit and losses, of which seven exceptions
occurred in the second half of the year. The high number of
hypothetical back-testing exceptions was primarily driven by the
volatile market environment and a rapid shift in the global interest rate
regime in 2022.
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 indicative of the actual performance of the business.
Accordingly, of the 10 loss back-testing exceptions against
hypothetical profit and loss, only one corresponded to an actual profit
and loss exception.
The Group experienced four loss back-testing exceptions against
actual profit and losses during 2022. Losses were attributable to fair
value adjustments that were adopted for factors not incorporated
within valuation models, and from the impacts of restructuring of
derivative exposures under our RWA optimisation programme.
Given the heightened number of hypothetical loss back-testing
exceptions in the second half of 2022, we have undertaken a review
of our VaR model assumptions and updated the risk parameters
within the model.
Market risk balance sheet linkages
The following balance sheet lines in the Group’s consolidated position
are subject to market risk:
Trading assets and liabilities
The Group’s trading assets and liabilities are in almost all cases
originated by GBM. These assets and liabilities are treated as traded
risk for the purposes of market risk management, other than a limited
number of exceptions, primarily in Global Banking where the short-
term acquisition and disposal of the assets are linked to other non-
trading-related activities such as loan origination.
Derivative assets and liabilities
We undertake derivative 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.
Most of our derivative exposures arise from sales and trading
activities within GBM. The assets and liabilities included in trading
VaR give rise to a large proportion of the income included in net
income from financial instruments held for trading or managed on a
fair value basis. Adjustments to trading income such as valuation
adjustments are not measured by the trading VaR model.
For information on the accounting policies applied to financial
instruments at fair value, see Note 1 on the financial statements.
Risk review

220 | HSBC Holdings plc Annual Report and Accounts 2022

Climate risk TCFD

Contents

221 | Overview
222 | Climate risk management
223 | Wholesale credit risk
224 | Retail credit risk

225 | Resilience risk
225 | Regulatory compliance risk
225 | Reputational risk
226 | Insights from climate scenario analysis

Overview
Climate risk relates to the financial and non-financial impacts that may
arise as a result of climate change and the move to a greener
economy. Climate risk can materialise through:
•physical risk, which arises from the increased frequency and
severity of weather events, such as hurricanes and floods, or
chronic shifts in weather patterns;
•transition risk, which arises from the process of moving to a low-
carbon economy, including changes in government or public
policy, technology and end-demand; and
•greenwashing risk, which arises from the act of knowingly or
unknowingly misleading stakeholders regarding our strategy
relating to climate, the climate impact/benefit of a product or
service, or the climate commitments or performance of our
customers.
Approach and policy
We are affected by climate risks either directly or indirectly through
our relationships with our customers, resulting in both financial and
non-financial impacts.
We may face direct exposure to the physical impacts of climate
change, which could negatively affect our day-to-day operations. Any
detrimental impact to our customers from climate risk could
negatively impact us either through credit losses on our loan book or
losses on trading assets. We may also be impacted by reputational
concerns related to the climate action or inaction of our customers. In
addition, if we are perceived to mislead stakeholders on our business
activities or if we fail to achieve our stated net zero ambitions, we
could face greenwashing risk resulting in significant reputational
damage and potential regulatory fines, impacting our revenue
generating ability.
We have integrated climate risk into our existing risk taxonomy, and
incorporated it within the risk management framework through the
policies and controls for the existing risks where appropriate.
Our climate risk approach is aligned to our Group-wide risk
management framework and three lines of defence model, which
sets out how we identify, assess and manage our risks (for further
details of our three lines of defence framework, see page 134). This
approach provides the Board and senior management with visibility
and oversight of our key climate risks.
Our initial approach to managing climate risk was focused on
understanding physical and transition impacts across five priority risk
types: wholesale credit risk, retail credit risk, reputational risk,
resilience risk and regulatory compliance risk. In 2022, we expanded
our scope to consider climate risk impacts on our other risk types in
our risk taxonomy.
We consider greenwashing to be an important emerging risk that is
likely to increase over time as we look to develop capabilities and
products to achieve our net zero commitments, and work with our
clients to help them transition to a low-carbon economy. To reflect
this, our climate risk approach has been updated to include
greenwashing risk, and guidance has been provided to the first and
second lines of defence on the key risk factors, and how it should be
managed.
Our ambition to achieve net zero in our financed emissions also
exposes us to potential reputational, compliance and legal risks if we
fail to effectively deliver on our ambition. Achieving this ambition is
dependent on a number of known and unknown factors including the
accuracy and reliability of data, emerging methodologies and the need
to develop new tools to accurately assess emissions reductions. We
have taken initial steps to develop our capabilities to monitor our
exposures and set risk appetites, although, operationalising our
ambition is dependent on data and methodologies maturing over
time, and requires us to continue developing our internal processes
and tools to help achieve our ambition.
The tables below provide an overview of the climate risk drivers
considered within HSBC’s climate risk framework. Primary risk drivers
refer to risk drivers aligned to the Financial Stability Board’s Task
Force on Climate-related Financial Disclosures (‘TCFD’), which sets a
framework to help public companies and other organisations disclose
climate-related risks and opportunities. Thematic risk drivers are
bespoke to our internal climate risk framework.
The following table provides an overview of the physical and transition climate risk drivers.

Climate risk – primary risk drivers | Details | Potential Impacts
Physical | Acute | Increased frequency and severity of weather events causing disruption to business operations | •Decreased real estate values or stranded assets •Decreased household income and wealth •Increased costs of legal and compliance •Increased public scrutiny •Decreased profitability •Lower asset performance
Chronic | Longer-term shifts in climate patterns (e.g. sustained higher temperatures, sea level rise, shifting monsoons or chronic heat waves)
Transition | Policy and legal | Mandates on, and regulation of products and services and/or policy support for low carbon alternatives. Litigation from parties who have suffered loss and damage from climate impacts
Technology | Replacement of existing products with lower emissions options
End-demand (market) | Changing consumer demand from individuals and corporates
Reputational | Increased scrutiny following a change in stakeholder perceptions of climate-related action or inaction

HSBC Holdings plc Annual Report and Accounts 2022 | 221

The table below provides an overview of the drivers of greenwashing risk, which is considered to be a thematic risk driver within HSBC’s
framework.

Climate risk – thematic risk drivers | Details
Greenwashing | Firm | Failure to be accurate and transparent in communicating our progress against our net zero ambition
Product | Not taking steps to ensure our ‘green’ and ‘sustainable’ products are developed and marketed appropriately
Client | Failing to check our products are being used for ‘green’ and ‘sustainable’ business activity and assessing the credibility of our customers’ climate commitments and/or progress against key performance indicators

In February 2022, we refreshed a high-level assessment of how
climate risk may impact HSBC taxonomy risk types over a 12-month
horizon, and we conducted an assessment to understand which parts
of our risk taxonomy could be impacted by greenwashing risk. The
table below summarises the results of these exercises. Assessments
were completed prior to year-end 2022 and do not take into account
all of the factors that were considered in our assessment of climate
risk impacts on the financial statements for the year ended 31
December 2022. The assessments will be refreshed annually, and,
results may change as our understanding of climate risk and how it
impacts HSBC evolves (for further details, see ‘Impact on reporting
and financial statements’ on page 46). In addition to these
assessments, we also consider climate risk in our emerging risk
process, which considers potential impacts across longer time
horizons (for further details, see ‘Top and emerging risks’ on
page 135).

| Risk type | Relevant risk drivers
Primary risk drivers | Thematic risk drivers
Physical | Transition | Greenwashing
Financial risk | Wholesale credit risk | ● | ● |
Retail credit risk | ● | ● |
Treasury risk – insurance risk | ● | ● |
Treasury risk – pension risk |  | ● | ●
Traded risk | ● | ● |
Strategic business risk |  | ● |
Reputational risk |  | ● | ●
Non-financial risk | Regulatory compliance risk |  | ● | ●
Resilience risk | ● | ● | ●
Model risk | ● | ● | ●
Financial crime risk | ● | ● | ●
Financial reporting risk |  | ● | ●
Legal risk |  | ● | ●

l | Relevant risk driver

Climate risk management
Key developments in 2022
Our climate risk programme continues to support the development of
our climate risk management capabilities. The following outlines key
developments in 2022.
•We updated our climate risk management approach to cover all
risk types in our risk taxonomy.
•We expanded the scope of climate-related training for employees
to cover additional topics, such as greenwashing risk, and
increased the availability of training to the broader workforce.
•We developed new metrics to monitor physical climate risk
exposure in our mortgage portfolio in all our markets, based on
locally available data.
•We enhanced our transition and physical risk questionnaire and
scoring tool, which will help us improve our understanding of the
impact of transition and physical risk on corporate clients in high
climate transition risk sectors.
•We assessed transition plans for EU and OECD managed clients in
scope of our thermal coal phase-out policy.
•We developed our first internal climate scenario exercise, where
we used four scenarios that were designed to articulate our view
of the range of potential outcomes for global climate change. For
further details of our internal climate scenario analysis, see
page 226.
While we have made progress in developing our climate risk
framework, there remains significant work to fully integrate climate
risk, including the need to provide additional skills for our colleagues
and clients on climate risk topics, and develop further metrics to
understand how climate risk can impact our risk taxonomy. We also
need to continue to enhance our stress testing capabilities and
expand our greenwashing risk framework. We have a dependency on
data and systems in order to achieve these aims, which continue to
be enhanced.
Governance and structure
The Board takes overall responsibility for our ESG strategy,
overseeing executive management in developing the approach,
execution and associated reporting.
The Group ESG Committee supports the development and delivery of
our ESG strategy, key policies and material commitments by providing
oversight, coordination and management of ESG commitments and
initiatives. It is co-chaired by the Group Company Secretary and Chief
Governance Officer, and Group Chief Sustainability Officer.
The Group Chief Risk and Compliance Officer is responsible for the
management of climate-related financial risks under the UK Senior
Managers Regime, which involves holding overall accountability for
the Group’s climate risk programme. The Climate Risk Oversight
Forum oversees risk activities relating to climate risk management
and the escalation of climate risks. It is supported by equivalent
forums at regional level.
The Group Reputational Risk Committee considers matters arising
from customers, transactions and third parties that either present a
serious potential reputational risk to the Group or merit a Group-led
decision to ensure a consistent risk management approach across the
regions, global businesses and global functions.
The Group Risk Management Meeting and the Group Risk Committee
receive regular updates on our climate risk profile and progress of our
climate risk programme.
For further details on the Group’s ESG governance structure, see
page 86.
Risk review

222 | HSBC Holdings plc Annual Report and Accounts 2022

Risk appetite
Our climate risk appetite supports the oversight and management of
the financial and non-financial risks from climate change, and supports
the business to deliver our climate ambition in a safe and sustainable
way. Our initial risk appetite focused on the oversight and
management of climate risks in five priority areas, including exposure
to high transition risk sectors in our wholesale portfolio and physical
risk exposures in our retail portfolio. We have created metrics both at
global and regional levels, where appropriate, to help manage our risk
appetite. We continue to review our risk appetite regularly to capture
the most material climate risks and will enhance our metrics over
time, including to monitor risk exposures associated with our financed
emissions reduction targets.
Policies, processes and controls
We are integrating climate risk into the policies, processes and
controls across many areas of our organisation, and we will continue
to update these as our climate risk management capabilities mature
over time. In 2022, we incorporated climate considerations into our
UK mortgage origination process for our retail business, and new
money request process for our key wholesale businesses. We also
continued to enhance our climate risk scoring tool, which will enable
us to assess our customers’ exposures to climate risk. We also
published our updated 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, and we updated our thermal coal phase-out policy
after its initial publication in 2021. For further details of how we
manage climate risk across our global businesses, see page 64.
Wholesale credit risk
Identification and assessment
In 2019, we initially identified six key sectors where our wholesale
credit customers had the highest exposure to climate transition risk,
based on their carbon emissions, which were: automotive; chemicals;
construction and building materials; metals and mining; oil and gas;
and power and utilities. For a majority of customers in these sectors,
we use a transition and physical risk questionnaire to help assess and
improve our understanding of the impact of climate change on our
customers’ business models and any related transition strategies.
Relationship managers work with these customers to record
questionnaire responses and also help identify potential business
opportunities to support the transition. Since 2020, we have rolled out
the questionnaire so that it includes the majority of our largest
customers in the next highest climate transition risk sectors:
agriculture; industrials; real estate; and transportation. In 2022, we
continued to roll out the physical and transition risk questionnaire in
these sectors by adding new countries to the scope of the
questionnaire. Due to ongoing data and methodology challenges
across the industry, our risk appetite metrics remained limited in their
ability to monitor our risk profile.
In 2023, we intend to roll out the questionnaire to additional
customers and enhance our scoring model. We will also continue
engaging with peers and regulators to explore approaches for further
integration of climate in credit risk models. We continue to develop
processes and training to improve the quality and accuracy of the
questionnaire responses.
Management
In 2022, we updated our credit risk policy to require that relationship
managers comment on climate risk factors in credit applications for
new money requests. We continued using a climate risk scoring tool,
which provides a climate risk score for each customer based on
questionnaire responses. The climate risk score is used to inform
portfolio level management discussions, and are made available to
relationship management teams and credit risk management teams.
The scoring tool will be enhanced and refined over time as more data
becomes available.
In 2023, we aim to further embed climate risk considerations in our
credit risk management processes.
Aggregation and reporting
We report our exposure to the six high transition risk sectors in the
wholesale portfolio, as well as our related RWAs internally.
We also report the proportion of questionnaire responses that have a
board policy or management plan for transition risk. Our key
wholesale credit exposures are included as part of our broader ESG
management information dashboard, which is presented to the Group
Executive Committee each quarter. In addition, a representative from
the Wholesale Credit Risk Management function attends the Global
Climate Risk Oversight Forum to ensure there is consideration of this
risk type, and we report our exposure through the climate risk
management information dashboard at this meeting.
Since 2019, we have received responses from customers within the
six high transition risk sectors, which represent 59% of our exposure,
an increase in coverage of 7% since last year. The table below
presents a breakdown of our customer responses by sector.
The table below also captures our lending activity, including
environmentally responsible and sustainable finance activities, to
customers within the six high risk sectors. Green financing for large
companies that work in high transition sectors is also included. The
overall exposure has decreased to 17.7% (2021: 18.2%). We have
restated the 2021 comparatives to reflect the new 2022 sector
allocations and to remove certain off-balance sheet exposures that
were previously included following improvements in our data and
processes. For further details of how we designate counterparties as
high transition risk, see footnote 2.

HSBC Holdings plc Annual Report and Accounts 2022 | 223

Wholesale loan exposure to transition risk sectors and customer questionnaire responses at 31 December 2022 1

| Automotive | Chemicals | Construction and building materials | Metals and mining | Oil and gas | Power and utilities | Total
| % | % | % | % | % | % | %
Wholesale loan exposure as % of total wholesale loans and advances to customers and banks 2,3,4 | ≤ 3.0 | ≤ 3.3 | ≤ 3.2 | ≤ 2.1 | ≤ 2.6 | ≤ 3.5 | ≤ 17.7
Proportion of sector for which questionnaires were completed 5 | 63 | 49 | 55 | 56 | 67 | 66 | 59
Proportion of questionnaire responses that reported either having a board policy or a management plan 5 | 69 | 81 | 74 | 71 | 77 | 94 | 79
Sector weight as proportion of high transition risk sector 5 | 16 | 19 | 18 | 12 | 15 | 20 | 100

1 The 2022 numbers reflect the new 2022 sector allocations and remove certain off-balance sheet exposures that were previously included following
improvements in our data and processes. See the ESG Data Pack for comparative 2020 and 2021 data.
2 Amounts shown in the table also include green and other sustainable finance loans, which support the transition to the net zero economy. The
methodology for quantifying our exposure to high transition risk sectors and the transition risk metrics will evolve over time as more data becomes
available and is incorporated in our risk management systems and processes.
3 Counterparties are allocated to the high transition risk sectors via a two-step approach. Firstly, where the main business of a group of connected
counterparties is in a high transition risk sector, all lending to the group is included in one high transition risk sector irrespective of the sector of each
individual obligor within the group. Secondly, where the main business of a group of connected counterparties is not in a high transition risk sector,
only lending to individual obligors in the high transition risk sectors is included. From 2022, for Global Banking and Markets clients and Commercial
Banking clients, the main business of a group of connected counterparties is identified by the industry that generates the majority of revenue within a
group. Customer revenue data utilised during this allocation process is the most recent readily available and will not align to our own reporting period.
In prior periods for Global Banking and Markets clients, the main business of a group of connected counterparties was identified by the relationship
manager for the group. For Commercial Banking clients, the main business of a group of connected counterparties was identified based on the largest
industry of HSBC’s total lending limits to the group.
4 Total wholesale loans and advances to customers and banks amount to $658bn (2021: $662bn). Amounts include loans and advances that are held for
sale.
5 All percentages are weighted by exposure.
Retail credit risk
Identification and assessment
We continued to improve our identification and assessment of climate
risk within our retail mortgage portfolio. We increased our
investments in centrally available physical risk data and enhanced our
internal risk assessment capabilities and models, in order to
understand our physical risk exposure across a larger proportion of
our global portfolio. We have also started to identify and monitor
potential physical risk in the remainder of our global mortgage
markets, using locally available data.
In 2022, we undertook an internal climate scenario analysis exercise
to further our understanding and assessment of the potential impacts
that physical risk could have on our mortgage portfolios. We
completed detailed analysis for the UK, Hong Kong, Singapore and
Australia, which together represent 73.8% of balances of the global
mortgage portfolio. We also undertook a stress test for our portfolio in
Singapore at the behest of the Monetary Authority of Singapore, and
participated in the second round of the Bank of England’s climate
biennial exploratory scenario exercise, focusing on management
actions. For further details of our approach and results of our scenario
analysis, see the ‘Insights on climate scenario analysis’ section on
page 226.
Management
We continued to review and update our retail credit risk management
policies and processes to further embed climate risk, while
monitoring local regulatory developments to ensure compliance.
In the UK, which has our largest retail mortgage portfolio, we
integrated climate risk data into our decision-making framework as
part of the mortgage origination process. We are actively managing
our UK mortgage portfolio with a climate risk perspective, and in line
with our risk appetite, taking conduct considerations into account in
the lending decision-making process.
Our UK team is also proactively supporting customers by providing
information on our public website relating to how physical risk and
home energy efficiency ratings may impact their mortgage
applications. This gives customers more insight when considering
purchasing a property that may be susceptible to physical climate risk
or which may not be energy efficient.
Aggregation and reporting
We manage and monitor the integration of climate risk in Wealth and
Personal Banking through the WPB Risk Management Meeting and
other senior leadership forums.
We assess the progress of the implementation of our strategic
climate risk plans, and ensure that we update operational processes
and risk management frameworks as our data and understanding of
climate risk evolves. A senior representative from WPB Risk attends
the Group Climate Risk Oversight Forum to ensure we maintain
alignment with the Group strategy.
Monitoring climate risk
In 2022, each of our retail mortgage businesses defined metrics and
began reporting on their potential balance sheet exposure to physical
climate risk. Locally relevant data sources were used to identify
properties or areas with potentially heightened climate risk. These
climate risk exposure metrics are in the early stages of development
and the underlying data and methodologies may require refinement in
the future, although they provide an indicative view.
We continue to measure climate risk using third-party data in our
most material mortgage market, which is the UK, where the primary
physical risk facing properties is flooding. Using a risk methodology
that considers a combination of the likelihood and severity of flood
hazard affecting individual properties, we estimate that on a total
value basis, and at present day risk levels, 3.5% of the UK retail
mortgage portfolio is at high risk of flooding, and 0.2% is at a very
high risk. This is based on approximately 93% coverage by value of
our portfolio at the end of September 2022, and is reliant on flood
data provided by Ambiental Risk Analytics.
In line with the UK government ambition to improve the energy
performance certificate (‘EPC’) ratings of housing stock, we continue
to identify the current and potential EPC ratings for individual
properties within the UK mortgage portfolio.
At the end of September, we had approximately 62% of properties by
value in our UK residential mortgage portfolio with a valid EPC
certificate dated within the last 10 years. While 37.7% of these, with
balances of $31.5bn, had a ‘current’ rating of A to C, 96.8% of them,
with balances of $81.1bn, had the potential to improve to that level.
We are working on improving the EPC data coverage, we currently do
not have EPC data for properties in Northern Ireland.
Risk review

224 | HSBC Holdings plc Annual Report and Accounts 2022

For both flood risk and EPC data, we disclose the end of September
position. This is due to the time required for the data to be processed
by a third party and our reliance on the government’s public EPC data.
Beyond the UK, we have strengthened our focus on the development
of initiatives to support customers with their transition to more energy
efficient homes.
The table below shows the maturity level of the UK retail mortgage
portfolio at the end of December 2022, split by tenor.

Tenor | Loan by residual maturity ($bn)
<1 years | 0.45
1–5 years | 3.38
>5 years | 143.90

For further details of flood risk and the EPC breakdown of our UK
retail mortgage portfolio, see our ESG Data Pack at www.hsbc.com/
esg.
Resilience risk
Identification and assessment
Our Operational and Resilience Risk function is responsible for
overseeing the identification and assessment of physical and
transition climate risks that may impact on the organisation’s
operational and resilience capabilities.
We are developing a deeper understanding of the risks to which our
properties are subject, and assess the mitigants to ensure ongoing
operational resilience.
Management
Operational and Resilience Risk policies are reviewed and enhanced
periodically so they remain relevant to evolving risks, including those
linked to climate change. The capability of our colleagues is enhanced
through training, periodic communications and dedicated guidance.
Aggregation and reporting
With our ambition to achieve net zero in our own operations, we are
particularly focused on developing measures to facilitate proactive risk
management and assess progress against this strategic target.
Operational and Resilience Risk is represented at the Group’s Climate
Risk Oversight Forum.
Regulatory compliance risk
Identification and assessment
Compliance continues to prioritise the identification and assessment
of compliance risks that may arise from climate risk.
Throughout 2022, our focus remained on greenwashing risk,
particularly with regard to the development and ongoing governance
of new, changed or withdrawn climate and ESG products and
services, and ensuring sales practices and marketing materials were
clear, fair and not misleading.
To support the ongoing management and mitigation of greenwashing
risk, Regulatory Compliance worked across all business lines to
enhance our product controls. This improved our ability to identify,
assess and manage product-related greenwashing risks throughout
the product governance lifecycle. Examples of ongoing
enhancements include:
•integrating the consideration and mitigation of climate and ESG
risks within our existing product governance framework;
•enhancing our product templates and forms to ensure climate risk
is actively considered and documented by the business within
product review and creation; and
•clarifying and improving product governance policies, associated
guidance and key governance terms of reference to ensure new
climate and ESG products, as well as climate- and ESG-related
amendments to existing products, comply with both internal and
external standards, and are subject to robust governance.
Management
Our policies continue to set the Group-wide standards that are
required to manage the risk of breaches of our regulatory duty to
customers, including those related to climate risk, ensuring fair
customer outcomes are achieved. Our product and customer lifecycle
policies have been enhanced to ensure they take climate into
consideration. They are reviewed on a periodic basis to ensure they
remain relevant and up to date.
The Compliance function continues to focus on improving the
capability of colleagues through training, communications and
dedicated guidance, with a particular focus on ensuring colleagues
remain up to date with changes in the evolving regulatory landscape.
Aggregation and reporting
The Compliance function continues to operate an ESG and Climate
Risk Working Group to track and monitor the integration and
embedding of climate risk within the management of regulatory
compliance risks. The working group also continues to monitor
ongoing regulatory and legislative changes across the ESG and
climate risk agenda.
We have continued to develop our key climate risk-related metrics
and indicators, aligned to the broader focus on regulatory compliance
risks, to continually improve our risk monitoring capability. This has
included the development of a climate-specific risk profile, alongside
the introduction and improvement of existing metrics and indicators.
The Compliance function continues to be represented at the Group’s
Climate Risk Oversight Forums.
Reputational risk
Identification and assessment
We implement sustainability risk policies, including the Equator
Principles, as part of our broader reputational risk framework. We
focus on sensitive sectors that may have a high adverse impact on
people or the environment, and in which we have a significant
number of customers. A key area of focus is high-carbon sectors,
which include oil and gas, power generation, mining, agricultural
commodities and forestry. In 2022, we published our updated energy
policy, covering the broader energy system, including upstream oil
and gas, oil and gas power generation, hydrogen, renewables and
hydropower, nuclear, biomass and energy from waste. We also
updated our thermal coal phase-out policy after its initial publication in
2021.
Management
As the primary point of contact for our customers, our relationship
managers are responsible for checking that our customers meet
policies aimed at reducing carbon impacts. Our global network of
more than 75 sustainability risk managers provides local policy
support and expertise to relationship managers. Risk Strategy
includes a team of reputational and sustainability risk specialists
that provides a higher level of guidance and is responsible for the
oversight of policy compliance and implementation over wholesale
banking activities.
For further details on our sustainability risk policies, see our ESG
review on page 65.
Aggregation and reporting
Our Sustainability Risk Oversight Forum provides a Group-wide forum
for senior members of our Group Risk and Compliance team and
global businesses. It also oversees the development and
implementation of sustainability risk policies. Cases involving complex
sustainability risk issues related to customers, transactions or third
parties are managed through the reputational risk and client selection
governance process. We report annually on our implementation of the
Equator Principles and the corporate loans, project-related bridge
loans and advisory mandates completed under the principles. For the
latest report, see: www.hsbc.com/who-we-are/esg-and-responsible-
business/esg-reporting-centre. A representative from Reputational

HSBC Holdings plc Annual Report and Accounts 2022 | 225

Risk attends the Group Climate Risk Forum to ensure consideration of
this risk type.
Other risks
The following section outlines key developments that we made to
embed climate considerations within other risk types in our risk
taxonomy. All risk functions, including those not referenced below,
performed a materiality assessment to determine the impact of
climate risk on their risk framework.
Treasury risk
We established a treasury risk-specific climate risk governance forum
to provide oversight over climate-related topics that may impact
Global Treasury. We updated relevant treasury risk policies to
strengthen our climate risk guidance and requirements pertaining to
treasury risk. We undertook an initial assessment to understand the
exposure of high transition risk sectors within our pension plans.
Traded risk
We established a climate stress testing-focused working group to
coordinate the implementation of climate stress testing, and support
the delivery of internal climate scenario analysis. As part of the annual
limit review in 2022, we developed a set of climate metrics for
Markets and Securities Services, which we plan to implement in
2023.
Insights from climate scenario
analysis
Scenario analysis supports our strategy by assessing our position
under a range of climate scenarios. It helps to build our awareness of
climate change, plan for the future and meet our growing regulatory
requirements.
Having run our first Group-wide climate change scenario analysis
exercise in 2021, we produced several climate stress tests for global
regulators in 2022, including the Monetary Authority of Singapore and
the European Central Bank. We also conducted our first internal
climate scenario analysis.
We continue to develop how we produce our climate scenario
analysis exercises so that we can have a more comprehensive
understanding of climate headwinds, risks and opportunities that will
support our strategic planning and actions.
In climate scenario analysis, we consider, jointly:
•transition risk arising from the process of moving to a net zero
economy, including changes in policy, technology, consumer
behaviour and stakeholder perception, which could each impact
borrowers’ operating income, financing requirements and asset
values; and
•physical risk arising from the increased frequency and severity of
weather events, such as hurricanes and floods, or chronic shifts in
weather patterns, which could each impact property values, repair
costs and lead to business interruptions.
We also analyse how these climate risks impact how we manage
other risks within our organisation, including credit and market risks,
and on an exploratory basis, operational, liquidity, insurance and
pension risks.
Our climate scenarios
In our 2022 internal climate scenario analysis exercise, we used four
scenarios that were designed to articulate our view of the range of
potential outcomes for global climate change. The analysis considered
the key regions in which we operate, and assessed the impact on our
balance sheet between the 2022 and 2050 time period. In the
following sections, the time horizons are considered to cover three
distinct time periods: short term is up to 2025; medium term is 2026
to 2035; and long term is 2036 to 2050. The timeframes chosen are
aligned to the Climate Action 100+ disclosure framework.
These internal scenarios were formed with reference to external
publicly available climate scenarios, including those produced by the
Network for Greening the Financial System (‘NGFS’), the
Intergovernmental Panel on Climate Change and the International
Energy Agency. Using these external scenarios as a template, we
adapted them by incorporating our unique climate risks and
vulnerabilities to which our organisation and customers across
different business sectors and regions are exposed. This helped us
produce the scenarios, which varied by severity and probability, to
analyse how climate risks will impact our portfolios. Our scenarios
were:
•the Net Zero scenario, which aligns with our net zero strategy and
is consistent with the Paris Agreement, and which assumes that
there will be rapid and considerable climate action, limiting global
warming to no more than 1.5°C by 2100, when compared with
pre-industrial levels;
•the Current Commitments scenario, which assumes that climate
action is limited to the current governmental commitments and
pledges, leading to global temperature rises of 2.4°C by 2100;
•the Downside Transition Risk scenario, which assumes that
climate action is delayed until 2030, but will be rapid enough to
limit global temperature rises to 1.5°C by 2100; and
•the Downside Physical Risk scenario, which assumes climate
action is limited to current governmental policies, leading to
extreme global warming with global temperatures increasing by
3.1°C by 2100.
We have chosen these scenarios as they are designed to identify,
measure and assess our most material climate vulnerabilities through
considering our global presence, business activities and exposures.
Our scenarios reflect inputs from our businesses and experts, and
have been reviewed and approved through internal governance.
Our four scenarios reflect different levels of physical and transition
risks. The scenario assumptions include varying levels of
governmental climate policy changes, macroeconomic factors and
technological developments. However, these scenarios rely on the
development of technologies that are still unproven, such as global
hydrogen production to decarbonise aviation and shipping.
The nature of the scenarios, our developing capabilities, and
limitations of the analysis lead to outcomes that are indicative of
climate change headwinds, although they are not a direct forecast.
Developments in climate science, data, methodology and scenario
analysis techniques will help us shape our approach further. We
therefore expect this view to change over time.
For further details of our four internal climate scenarios, including a
table including their key underlying assumptions, see our ESG Data
Pack at www.hsbc.com/esg.
Our modelling approach
For our scenario analysis, we used models to assess how transition
and physical risks may impact our portfolios under different scenarios.
Our models incorporate a range of climate-specific metrics that will
have an impact on our customers, including expected production
volumes, revenue, unit costs and capital expenditure.
We also assess how these metrics interplay with economic factors
such as carbon prices, which represent the cost effect of climate-
related policies that aim to discourage carbon-emitting activities and
encourage low-carbon solutions. The expected result of higher carbon
prices is a reduction in emissions as high-emission activities become
uneconomical. We also assume carbon prices will vary from country
to country.
The models for our wholesale corporate lending portfolio consider
metrics across each climate scenario, and from 2022 also
incorporated our customers’ individual climate transition plans as part
of our climate scenario analysis. These results in turn feed into the
calculation of our risk-weighted assets and expected credit loss
projections. For our residential real estate portfolio models, we focus
on physical risk factors, including property locations, perils and
insurance coverage when assessing the overall credit risk impact to
the portfolio. The results were reviewed by our sector specialists
who, subject to our governance procedures, make bespoke
adjustments to our results based on their expert judgement when
relevant.
Risk review

226 | HSBC Holdings plc Annual Report and Accounts 2022

We continue to enhance our capabilities by incorporating lessons
learnt from previous exercises and feedback from key stakeholders,
including regulators.
For a broad overview of the models that we use for our climate
scenario analysis, as well as graphs that show how global carbon
prices and carbon emissions will differ under our climate scenarios,
see our ESG Data Pack at www.hsbc.com/esg.
Analysing the outputs of the climate
scenario analysis
Climate scenario analysis allows us to model how different potential
climate pathways may affect our customers and portfolios, particularly
in respect of credit losses. As the chart below shows, losses are
influenced by their exposure to a variety of climate risks under
different climate scenarios. Under the Current Commitments
scenario, we expect moderate levels of losses relating to transition
risks. However, the rise in global warming will lead to increasing
levels of physical risk losses in later years.
1 The counterfactual scenario is modelled on a scenario where there will
be no losses due to climate change.
2 The dotted lines in the chart show the impact of modelled expected
credit losses following our strategic responses to reduce the effect of
climate risks under the Net Zero and Downside Transition Risk
scenarios.
A gradual transition towards net zero, as shown in the Net Zero
scenario, still requires fundamental shifts in our customers’ business
models, and significant investments. This will have an impact on
profitability, leading to higher credit risk in the transition period. A
delayed transition will be even more disruptive due to lower levels of
innovation that limits the ability to decarbonise effectively, and rising
carbon prices that squeeze profit margins.
Overall, our scenario analysis shows that the level of potential credit
losses can be mitigated if we support our customers in enhancing
their climate transition plans.
In the following sections, we assess the impacts to our banking
portfolios under different climate scenarios.
How climate change is impacting our
wholesale lending portfolio
In our scenario analysis, we assessed the impact of climate-related
risks on our corporate counterparties under different climate
scenarios, which we measured by reviewing the modelled effect on
our expected credit losses (‘ECL’).
We focused our analysis on the 11 wholesale sectors that we expect
to be most impacted by climate risks. As at December 2021, these
portfolios represented 27% of our wholesale lending portfolio.
For each sector in each scenario, we calculated a peak ECL increase,
a metric showing the highest level of ECL modelled to be
experienced during the 2022 to 2050 period. The peak ECL increase
metric compares the multiplied levels of exposure in the scenario
against a counterfactual scenario that incorporates no climate change.
We use the sector’s exposure at default (‘EAD’), which represents
the relative size of our exposure to potential losses from customer
defaults. This helps to demonstrate which sectors are the most
material to us in terms of the impact of climate change.
Due to current limitations, we are unable to fully model the impact of
physical risks on our corporate customers’ supply chain. As a result,
we have not included the Downside Physical Risk scenario in the
following analysis, although we continue to develop our modelling
capabilities.
Impact of climate risk on wholesale lending portfolios under modelled
climate solutions
Relative size of exposures at default and increase in peak ECL under
each scenario compared with the counterfactual scenario (expressed
as a multiple).

Sector level | Exposure at default | Net Zero | Downside Transition Risk | Current Commitments
Conglomerates and industrials | ♦ | <5x | >5x | <1.5x
Power and utilities | ♦ | <3x | <3x | <1.5x
Construction and building materials | ♦ | <3x | <3x | <1.25x
Oil and gas | ♦ | <1.5x | <1.5x | <1.25x
Chemicals | ♦ | <4x | <4x | <1.5x
Automotive | ♦ | <3x | <3x | <1.25x
Land transport and logistics | ♦ | <5x | >5x | <1.5x
Aviation | ♦ | <2x | <3x | <1.25x
Agriculture and soft commodities | ♦ | <5x | <4x | <1.5x
Marine | ♦ | <2x | <3x | <1.25x
Metals and mining | ♦ | <5x | >5x | <1.5x

As the table above illustrates, we expect our ECL to rise most under
the Net Zero or Downside Transition Risk scenarios. This is reflective
of the high transition risks to which these sectors are exposed, and
the potential impact of not having clear transition plans to mitigate
these risks.
For many sectors, the impact of rising carbon prices will lead to
increased credit losses. However, this will depend on individual
companies to determine how much of the additional costs associated
with carbon pricing will be absorbed by their suppliers or customers
and demand for more economically viable substitute products that
emerge.
The conglomerates and industrials sector, which includes large
companies with business activities in multiple business segments, is
the most impacted by climate change in each scenario. It also
represents our largest climate-related exposure, and would potentially
experience the highest increases in credit losses, largely due to the
transition risks predominantly within the high-emitting and lower-
profitability manufacturing segments.
Of our other largest and most impacted sectors, the power and
utilities, construction and building materials, and chemicals sectors
are subject to increased levels of transition risks due to their ongoing
exposure to higher carbon emitting activities.

HSBC Holdings plc Annual Report and Accounts 2022 | 227

Within the analysis, there is a range of geographical outcomes,
dictated by the varied pace of change in the transition to net zero,
such as in Asia, where the quality of our customers’ climate transition
plans within our high-risk sectors lags behind other regions.
We use the results of our climate scenario analysis, including how
different scenarios will impact on different sectors, to assess the
impact of climate change risk mitigation on our clients, including our
customers’ creditworthiness. It informs us about climate risks in our
wholesale portfolio, allowing us to identify and prioritise the sectors
and sub-sectors that require the greatest support to transition. This
also allow us to test the impact of actions that can support our
customers’ transition and our net zero ambition.
Our net zero ambition represents one of our four strategic pillars. For
further details of our net zero ambition, see the ‘Transition to net zero’
section of the ESG review on page 47, including how we are
supporting our customers transition to net zero on page 57.
How climate change is impacting our retail
mortgage portfolio
As part of our internal climate scenario analysis, we carried out a
detailed physical risk assessment of four of our retail mortgage
markets – the UK, Hong Kong, Singapore and Australia – which
represent 73.8% of balances in our retail mortgage portfolio.
We modelled defaults and losses under three physical risk scenarios.
Under the Net Zero and Current Commitments scenarios, we project
minimal losses over the modelled time horizon. However, under the
Downside Physical Risk scenario, the mortgage book is expected to
experience a moderate increase in defaults and losses, as the severity
of perils is expected to worsen, although overall losses are still low.
The modelling, data and methodology in relation to climate scenario
analysis is still evolving, so the results are not expected to be stable
or consistent in the short to medium term, and are meant to give an
indicative, directional assessment for strategic awareness only.
In our analysis of our retail mortgage portfolio, we assessed several
physical perils that could impact the value of properties, including
flooding, wildfire and windstorms. We also assessed the ability and
willingness of borrowers to service their debts.
In 2022, we enhanced the methodology to factor in the negative
impact on property valuations, as well as the impact of affordability
due to repair costs, following physical risk events. We also considered
the retail mortgage portfolio with and without insurance. The scenario
assumptions reflected whether or not properties within the portfolio
had buildings insurance coverage to pay for damage incurred from
physical events. In addition, we addressed geolocation data
deficiencies, implemented new models and incorporated more data,
although the data and models used to estimate defaults and losses
are still evolving.
1 Our internal climate scenarios are supported by the Intergovernmental
Panel on Climate Change’s Representative Concentration Pathways
(‘RCP’) and are used as inputs into physical risk modelling. The Net
Zero scenario is mostly aligned to the RCP 2.6 scenario; the Current
Commitments scenario is mostly aligned to the RCP 4.5 scenario; and
the Downside Physical Risk scenario is mostly aligned to the RCP 8.5
scenario.
The modelled impact on our portfolio projects losses will remain
negligible under the Net Zero and Current Commitments scenarios by
2050. Under the Downside Physical Risk (with insurance) scenario,
although losses are five times larger than under the Net Zero and
Current Commitments scenario, they remain at low levels. This
moderate increase is largely driven by the expected demise of Flood
Re in the UK in 2039. Flood Re is a UK government-backed insurance
scheme that ensures that properties at the highest risk of flooding
can obtain buildings insurance. Under this scenario, properties ceded
to the scheme become uninsurable post-2039. The proportion of our
properties that were reinsured by Flood Re was less than 4% of the
UK portfolio at December 2021. While overall modelled losses were
low, a large proportion of these were driven by such properties.
One of the outcomes from the exercise was that the non-availability
of insurance for impacted properties was a key contributor to losses.
It was assumed that properties that are insurable, or where insurance
is affordable, will largely maintain their insurance. We also assessed
the impact of enhanced EPC legislation, although it was deemed to
be immaterial.
In addition, we assessed the risk of tropical cyclones and related
storm surges as they were deemed material in Hong Kong. However,
defaults are expected to remain low through to 2050 due to buildings
being designed to withstand high wind speeds and investment into
sea defences. We also looked at wildfire in Australia, although the risk
and severity is limited given our mortgage portfolio is predominantly
located in metropolitan areas. Similarly, losses in Singapore were low
in all the scenarios due to its geographical location and strong sea
defences.
Projected peril risk
Flooding is usually localised to specific areas that are close to water
sources such as rivers or the coast, areas that are located in particular
valleys where surface water can ‘pool’, or urban areas with poor
drainage following flash floods.
As the ‘Exposure to flooding’ table below shows, the majority of
properties located in the four markets are predicted to experience
zero to low risk of flooding, with flood depths of less than 0.5 metres,
under a 1-in-100-year event in each of the scenarios, demonstrating
the resilience of our portfolio.
Risk review

228 | HSBC Holdings plc Annual Report and Accounts 2022

Exposure to flooding
Proportion of properties with projected flood depths in a 1-in-100- year severity flood event (%)1
|  | Scenarios
Markets | Flood depth (metres) | Baseline flood risk | Net Zero | Downside Physical Risk
|  | 2022 | 2050 | 2050
UK | >1.5 | 0.2 | 0.2 | 0.4
0.5–1.5 | 0.7 | 2.5 | 3.7
0–0.5 | 99.1 | 97.3 | 95.9
Hong Kong | >1.5 | 0.7 | 0.8 | 1.2
0.5–1.5 | 1.2 | 1.3 | 30.4
0–0.5 | 98.1 | 97.9 | 68.4
Singapore | >1.5 | 0 | 0 | 0.1
0.5–1.5 | 2.8 | 2.9 | 7.4
0–0.5 | 97.2 | 97.1 | 92.5
Australia | >1.5 | 0.6 | 0.6 | 0.7
0.5–1.5 | 1.2 | 1.2 | 2.6
0–0.5 | 98.2 | 98.2 | 96.7

1 Severe flood events include river and surface flooding and coastal
inundation. The table compares 2050 snapshots under the Net Zero
and Downside Physical Risk scenarios with a baseline view in 2022.
The most impacted market is Hong Kong, where over 30% of the
locations would be susceptible to flood depths greater than
0.5 metres under the Downside Physical Risk scenario in 2050. This is
primarily driven by higher coastal and storm surges. However, this did
not take into account building type and property floor level, which we
expect would reduce the impact of flooding for a large number of
individual properties, given the majority of buildings in Hong Kong are
high-rise apartments.
For the remainder of the markets, more than 90% of mortgage
locations within each market are expected to experience flood depths
of less than 0.5 metres in all scenarios, which would not be material.
How climate change is impacting our
commercial real estate portfolios
We assessed the impact of various perils to which our commercial
real estate customers could be vulnerable, including flooding and
windstorms. Our commercial real estate portfolio is globally
diversified with larger concentrations in Hong Kong, the UK and the
US.
The impact of exposures to these perils can lead to increased ECL,
largely due to the cost of repairs following damages caused by
physical risk events or property valuation impacts caused by the
increasing frequency of physical risk events.
The ‘Exposure to peril’ table below shows exposure of our
commercial real estate portfolio within our largest markets to specific
physical risk events. The ‘peak multiplier increase in ECL’ table shows
for our largest markets the peak ECL increase modelled to be
experienced during the 2022 to 2050 period. This is a metric which
compares the multiplied levels of exposure in the scenario against a
counterfactual scenario that incorporates no climate change. We use
the sector’s exposure at default, which represents the relative size of
our exposure to potential losses from customer defaults within each
jurisdiction.
Exposure to peril
Proportion of our portfolio exposed to main perils in key markets.

| Coastal inundation | Cyclone wind | Surface water flooding | Riverine flooding
| % | % | % | %
Hong Kong | 2 | 94 | 18 | 11
UK | 15 | 0 | 12 | 8
US | 16 | 83 | 15 | 28

Peak multiplier increase in ECL
Relative size of exposures at default (‘EAD’) and increase in peak ECL
under each scenario compared with the counterfactual scenario
(expressed as a multiple)

| Exposure at default in 2021 | Net Zero | Current Commit- ments | Downside Transition Risk | Downside Physical Risk (with insurance) | Downside Physical Risk (without insurance )
Hong Kong | ♦ | <1.25x | <1.25x | <1.25x | <1.25x | <1.25x
UK | ♦ | <1.25x | <1.25x | <1.25x | <1.5x | <1.5x
US | ♦ | <1.25x | <1.25x | <1.25x | <1.25x | <1.5x

The tables show that despite a varying degree of exposure to perils
across our most significant markets, our portfolio continues to
maintain a strong level of resilience to physical climate risks out to the
long term. In addition, the impact of insurance coverage mitigates
some of the risks under the most severe Downside Physical Risk
climate scenario.
Our largest credit exposure is in Hong Kong, where our portfolio has
material exposure to tropical cyclone winds. However, the resulting
impact on prospective credit losses remains low in the medium to
long term due to high building standards.
In the UK, in line with our retail portfolio, the main perils that drive
potential credit losses relate to coastal, river and surface water
flooding, although the impacts from these perils are not expected to
cause significant damages. Around 20% of our financed properties
are in London, and most are protected by the Thames Barrier. Under
the Net Zero scenario, transition risks materialise from 2025 due to
the costs of retrofitting requirements, and these are expected to lead
to increased impairments.
In the US, the major perils are from coastal flooding, largely in the
north-east of the country and in Florida, and from hurricane impact,
including gust damage, heavy rainfall and storm surges. The intensity
of these events are expected to increase in the future with a greater
proportion of tropical cyclones falling within the highest categories.
These will not only affect the regions that are currently exposed, but
also new areas due to the projected poleward shift of future tropical
cyclones. Building resilience and the future availability and affordability
of insurance cover in these regions will be the key determinants of
climate risks.
Understanding the resilience of our critical
properties
Climate change poses a physical risk to the buildings that we occupy
as an organisation, including our offices, retail branches and data
centres, both in terms of loss and damage, and business interruption.
We measure the impacts of climate and weather events to our
buildings on an ongoing basis, using historical, current and scenario
modelled forecast data. In 2022, there were 38 major storms that had
no impact on the availability of our buildings.
We use stress testing to evaluate the potential for impact to our
owned or leased premises. Our scenario stress test, conducted in
2022, analysed how seven different climate change-related hazards –
comprising coastal inundation, extreme heat, extreme winds,
wildfires, riverine flooding, soil movement due to drought, and surface
water flooding – could impact 500 of our critical and important
buildings.
The 2022 stress test covered all 500 buildings and modelled climate
change with the NGFS’s Hot house scenario that projects that the rise
in the temperature of the world will likely exceed 4°C by 2100. It also
modelled a less severe scenario that projects that global warming will
likely be limited to 2°C, in line with the upper limit ambition of the
Paris Agreement.

HSBC Holdings plc Annual Report and Accounts 2022 | 229

Key findings from the 4°C or greater Hot house scenario included:
•By 2050, 62 of the 500 critical and important buildings will have a
high potential for impact due to climate change, with insurance-
related losses estimated to be in excess of 10% of the insured
value of our buildings.
•These included 40 locations that face the risk of coastal flooding
due to sea levels rising and storm surges associated with
typhoons and hurricanes. In addition, five locations face the risk of
fluvial flooding due to surface water run-off caused by heavy rain.
The remaining 17 locations are data centres where the
predominant risk emanate from a mixture of temperature
extremes and water stress, which could impact the mechanical
cooling equipment or drought for which the specific direct physical
impacts could be soil movement.
•A further 84 locations have the potential to be impacted by climate
change, albeit to a lesser extent, with insurance-related losses
estimated at between 5% and 10% of the insured value of our
buildings. The principal risks are coastal flooding, drought,
temperature extremes, and water stress.
A key finding from the 2°C, less severe scenario showed:
•The total number of buildings at risk reduces from 146 to 98, with
the same 62 key facilities still at risk by 2050 from the same perils.
This forward-looking data will inform real estate planning. We will
continue to improve our understanding of how extreme weather
events impact our building portfolio as climate risk assessment tools
improve and evolve. Additionally, we buy insurance for property
damage and business interruption, and consider insurance as a loss
mitigation strategy depending on its availability and price.
We regularly review and enhance our building selection process and
global engineering standards, and will continue to assess historical
claims data to help ensure our building selection and design standards
reflect the potential impacts of climate change.

Resilience risk

Overview
Resilience risk is the risk of sustained and significant business
disruption from execution, delivery, physical security or safety events,
causing the inability to provide critical services to our customers,
affiliates, and counterparties. Resilience risk arises from failures or
inadequacies in processes, people, systems or external events.
Resilience risk management
Key developments in 2022
The Operational and Resilience Risk sub-function provides robust risk
steward oversight of the management of resilience risk by the Group
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 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, and refreshing risk and control assessments.
•We implemented heightened monitoring and reporting of cyber,
third-party, business continuity and payment/sanctions risks
resulting from the Russia-Ukraine war, and enhanced controls and
key processes where needed.
•We 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.
•We further strengthened our non-financial risk governance and
senior leadership, and improved our coverage and risk steward
oversight for data privacy and change execution.
We prioritise our efforts on material risks and areas undergoing
strategic growth, aligning our location strategy to this need. We also
remotely provide oversight and stewardship, including support of
chief risk officers, in territories where we have no physical presence.
Governance and structure
The Operational and Resilience Risk 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
nine sub-risk types related to: failure to manage third parties;
technology and cybersecurity; transaction processing; failure to
protect people and places from physical malevolent acts; business
interruption and incident risk; data risk; change execution risk; building
unavailability; and workplace safety.
Risk appetite and key escalations for resilience risk are reported to the
Non-Financial Risk Management Board, chaired by the Group Chief
Risk and Compliance Officer, with an escalation path to the Group
Risk Management Meeting and Group Risk Committee.
Key risk management processes
Operational resilience is our ability to anticipate, prevent, adapt,
respond to, recover and learn from operational disruption while
minimising customer and market impact. Resilience is determined by
assessing whether we are able to continue to provide our most
important services, within an agreed level. This is achieved via day-to-
day oversight and periodic and ongoing assurance, such as deep dive
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 quarterly risk steward opinion papers to formal
governance. We accept we will not be able to prevent all disruption
but we prioritise investment to continually improve the response and
recovery strategies for our most important business services.
Business operations continuity
We continue to monitor the situation in Russia and Ukraine, and
remain ready to take measures to help ensure business continuity,
should the situation require. There has been no significant impact to
our services in nearby markets where the Group operates.
Publications from the UK government, EU Commission and energy
company National Grid, among others, advised on potential plans for
power cuts and energy restrictions across the UK and continental
Europe during the winter period. In light of potential disruption,
businesses and functions in these markets are reviewing existing
plans and responses to minimise the impact.
Risk review

230 | HSBC Holdings plc Annual Report and Accounts 2022

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.
Regulatory compliance risk management
Key developments in 2022
The dedicated programme to embed our updated purpose-led
conduct approach has concluded. Work to map applicable regulations
to our risks and controls continues in 2023 alongside the adoption of
new tooling to support enterprise-wide horizon scanning for new
regulatory obligations and manage our regulatory reporting
inventories. Climate risk has been integrated into regulatory
compliance policies and processes, with enhancements made to the
product governance framework and controls in order to ensure the
effective consideration of climate – and in particular greenwashing –
risks.
Governance and structure
The structure of the Compliance function is substantively unchanged
and the Group Regulatory Conduct capability and Group Financial
Crime capability both continue to work closely with the regional chief
compliance officers and their respective teams to help them identify
and manage regulatory and financial crime compliance risks across
the Group.
They also work together and with all relevant stakeholders to achieve
good conduct outcomes and provide enterprise-wide support on the
compliance risk agenda in collaboration with the Group’s Risk
function.
Key risk management processes
The Group Regulatory Conduct capability is responsible for setting
global policies, standards and risk appetite to guide the Group’s
management of regulatory compliance risk. It also devises the
required frameworks, support processes and tooling to protect
against regulatory compliance risks. The Group capability provides
oversight, review and challenge to the regional chief compliance
officers and their teams to help them identify, assess and mitigate
regulatory compliance risks, where required. The Group’s regulatory
compliance risk policies are regularly reviewed. Global policies and
procedures require the identification and escalation of any actual or
potential regulatory breaches, and relevant reportable events are
escalated to the Group’s Non-Financial Risk Management Board, the
Group Risk Management Meeting and Group Risk Committee, as
appropriate. The Group Head of Compliance reports to the Group
Chief Risk and Compliance Officer and attends the Risk and
Compliance Executive Committee, the Group Risk Management
Meeting and the Group Risk Committee.

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.
Financial crime risk management
Key developments in 2022
We regularly review the effectiveness of our financial crime risk
management framework, which includes consideration of the
complex and dynamic nature of sanctions compliance risk. In 2022,
we adapted our policies, procedures and controls to respond to the
unprecedented volume and diverse set of sanctions and trade
restrictions imposed against Russia following its invasion of Ukraine.
We also continued to make progress with several key financial crime
risk management initiatives, including:
•We enhanced our screening and non-screening controls to aid the
identification of potential sanctions risk related to Russia, as well
as risk arising from export control restrictions.
•We deployed a key component of our intelligence-led, dynamic
risk assessment capability for customer account monitoring in
additional UK entities, Mexico and Singapore, and have expanded
coverage to include monitoring of customer credit card activity in
the UK. Furthermore we have deployed a next generation
capability for the monitoring of correspondent banking activity in
Hong Kong and the UK.
•We reconfigured our transaction screening capability to be ready
for the global change to payment systems formatting under
ISO20022 requirements, and enhanced transaction screening
capabilities by implementing automated alert discounting.
•We strengthened the first-party lending fraud framework,
reviewed and published an updated fraud policy and associated
control library, and continued to develop fraud detection tools.
Governance and structure
The structure of the Financial Crime function remained substantively
unchanged in 2022, although we continued to review the
effectiveness of our governance framework to manage financial crime
risk. The Group Head of Financial Crime and Group Money Laundering
Reporting Officer continues to report to the Group Chief Risk and
Compliance Officer, while the Group Risk Committee retains
oversight of matters relating to fraud, bribery and corruption, tax
evasion, sanctions and export control breaches, money laundering,
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 laws and regulations of all
the markets in which we operate and applying a consistently high
financial crime standard globally.
We continue to assess the effectiveness of our end-to-end financial
crime risk management framework, and invest in enhancing our
operational control capabilities and technology solutions to deter and
detect criminal activity. We have simplified our framework by
streamlining and de-duplicating policy requirements. We also
strengthened our financial crime risk taxonomy and control libraries
and our investigative and monitoring capabilities through technology
deployments. We developed more targeted metrics, and have also
enhanced our governance and reporting.
We are committed to working in partnership with the wider industry
and the public sector in managing financial crime risk and we

HSBC Holdings plc Annual Report and Accounts 2022 | 231

participate in numerous public-private partnerships and information
sharing initiatives around the world. In 2022, our focus remained on
measures to improve the overall effectiveness of the global financial
crime framework, notably by providing input into legislative and
regulatory reform activities. We did this by contributing to the
development of responses to consultation papers focused on how
financial crime risk management frameworks can deliver more
effective outcomes in detecting and deterring criminal activity,
including tackling evolving criminal behaviours such as fraud. Through
our work with the Wolfsberg Group and the Institute of International
Finance, we supported the efforts of the global standard setter, the
Financial Action Task Force. In addition, we participated in a number
of public events related to tackling forestry crimes, wildlife trafficking
and human trafficking.
Independent Reviews
In August 2022, the Board of Governors of the Federal Reserve
System terminated its 2012 cease-and-desist order, with immediate
effect. This order was the final remaining regulatory enforcement
action that HSBC had entered into in 2012. In June 2021, the UK
Financial Conduct Authority had already determined that no further
skilled person work was required under section 166 of the Financial
Services and Markets Act. The Group Risk Committee retains
oversight of matters relating to financial crime, including any
remaining remedial activity not yet completed as part of previous
recommendations.

Model risk

Overview
Model risk is the risk of inappropriate or incorrect business decisions
arising from the use of models that have been inadequately designed,
implemented or used, or from models that do not perform in line with
expectations and predictions.
Model risk arises in both financial and non-financial contexts
whenever business decision making includes reliance on models.
Key developments in 2022
In 2022, we continued to make improvements in our model risk
management processes amid regulatory changes in model
requirements.
Initiatives during the year included:
•In response to regulatory capital changes, we redeveloped,
independently validated and submitted to the PRA and other local
regulators 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 redeveloped and validated models impacted by the changes to
the alternative rate setting mechanisms due to the Ibor transition.
•We embedded changes to address gaps in the control framework
that emerged as a result of increases in adjustments and overlays
that were applied to compensate for the impact of the Covid-19
pandemic, and the subsequent volatility due to the effects of the
rise in global interest rates on the ECL models.
•We have increased the involvement of first line colleagues in
businesses and functions in the development and management of
models. We also put an enhanced focus on key model risk drivers
such as data quality and model methodology.
•We have sought to enhance the reporting that supports the model
risk appetite measures, to support our businesses and functions in
managing model risk more effectively.
•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.
•We have completed independent validations of a suite of newly
developed models for the forthcoming IFRS17 accounting
standards for insurance.
•We have enhanced our model risk teams with specialist skills to
manage the increased model risk in areas such as climate risk and
models using advanced analytics and machine learning, as they
become critical areas of focus that will grow in importance in 2023
and beyond.
Governance and structure
Model risk governance committees at the Group, business and
functional levels provide oversight of model risk. The committees
include senior leaders from the three global businesses and the Group
Risk and Compliance function, and focus on model-related concerns
and are supported by key model risk metrics. We also have Model
Risk Committees in our geographical regions focused on local delivery
and requirements. The Group-level Model Risk Committee is chaired
by the Group Chief Risk and Compliance Officer, and the heads of key
businesses participate in these meetings.
Key risk management processes
We use a variety of modelling approaches, including regression,
simulation, sampling, machine learning and judgemental scorecards
for a range of business applications. These activities include customer
selection, product pricing, financial crime transaction monitoring,
creditworthiness evaluation and financial reporting. Global
responsibility for managing model risk is delegated from the Board to
the Group Chief Risk and Compliance Officer, who authorises the
Group Model Risk Committee. 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 and the Group Risk Committee on a
regular basis through the use of the risk map, 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.
Risk review

232 | HSBC Holdings plc Annual Report and Accounts 2022

Insurance manufacturing operations risk

Contents

233 | Overview
233 | Insurance manufacturing operations risk management
235 | Insurance manufacturing operations risk in 2022
235 | Measurement
237 | Key risk types
237 | – Market risk
238 | – Credit risk
238 | – Liquidity risk
238 | – Insurance underwriting risk

Overview
The key risks for our insurance manufacturing operations are market
risk, in particular interest rate and equity, credit risk and insurance
underwriting risk. These have a direct impact on the financial results
and capital positions of the insurance operations. Liquidity risk, while
significant in other parts of the Group, is relatively minor for our
insurance operations.
HSBC’s insurance business
We sell insurance products through a range of channels including our
branches, insurance salesforces, direct channels and third-party
distributors. The majority of sales are through an integrated
bancassurance model that provides insurance products principally for
customers with whom we have a banking relationship, although the
proportion of sales through other sources such as independent
financial advisers, tied agents and 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 Group.
We have life insurance manufacturing subsidiaries in eight markets,
which are Hong Kong, Singapore, mainland China, France, the UK,
Malta, Mexico and Argentina. We also have a life insurance
manufacturing associate in India.
Where we do not have the risk appetite or operational scale to be an
effective insurance manufacturer, we engage with a small number of
leading external insurance companies in order to provide insurance
products to our customers. These arrangements are generally
structured with our exclusive strategic partners and earn the Group a
combination of commissions, fees and a share of profits. We
distribute insurance products in all of our geographical regions.
This section focuses only on the risks relating to the insurance
products we manufacture.
Insurance manufacturing operations
risk management
Key developments in 2022
The insurance manufacturing subsidiaries follow the Group’s risk
management framework. In addition, there are specific policies and
practices relating to the risk management of insurance contracts,
which have not changed materially over 2022. During the year, there
was continued market volatility observed across interest rates, equity
markets and foreign exchange rates. This was predominantly driven
by geopolitical factors and wider inflationary concerns. One area of
key risk management focus was the implementation of the new
accounting standard, IFRS17 ‘Insurance Contracts’. Given the
fundamental nature of the impact of the accounting standard on
insurance accounting, this presents additional financial reporting and
model risks for the Group. Another area of focus was the acquisition
early in 2022 of an insurance business in Singapore and the
subsequent integration of that business into the Group’s risk
management framework.
Governance and structure
(Audited)
Insurance manufacturing risks are managed to a defined risk appetite,
which is aligned to the Group’s risk appetite and risk management
framework, including its three lines of defence model. For details of
the Group’s governance framework, see page 133. The Global
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 our insurance operations is carried
out by Insurance Risk teams. The Group’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 Group-wide
regulatory stress tests, as well as internally developed stress and
scenario tests, including Group internal stress test exercises.
The results of these stress tests and the adequacy of management
action plans to mitigate these risks are considered in the Group’s
ICAAP and the entities’ regulatory Own Risk and Solvency
Assessments (‘ORSAs’), which are produced by all material entities.
Key risk management processes
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 discretionary participating features
(‘DPF’). The effect is that a significant proportion of the market risk
is borne by the policyholder.
•We use asset and liability matching where asset portfolios are
structured to support projected liability cash flows. The Group
manages its assets using an approach that considers asset quality,
diversification, cash flow matching, liquidity, volatility and target
investment return. We use models to assess the effect of a range
of future scenarios on the values of financial assets and associated
liabilities, and ALCOs employ the outcomes in determining how
best to structure asset holdings to support liabilities.
•We use derivatives to protect against adverse market movements.
•We design new products to mitigate market risk, such as changing
the investment return sharing proportion between policyholders
and the shareholder.

HSBC Holdings plc Annual Report and Accounts 2022 | 233

Credit risk
(Audited)
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
(Audited)
Capital risk for our insurance manufacturing subsidiaries is assessed
in the Group’s ICAAP based on their financial capacity to support the
risks to which they are exposed. Capital adequacy is assessed on
both the Group’s economic capital basis, and the relevant local
insurance regulatory basis.
Risk appetite buffers are set to ensure that the operations are able to
remain solvent, allowing for business-as-usual volatility and extreme
but plausible stress events. In certain cases, entities use reinsurance
to manage capital risk.
Liquidity risk is relatively minor for the insurance business. It is
managed by cash flow matching and maintaining sufficient cash
resources, investing in high credit-quality investments with deep and
liquid markets, monitoring investment concentrations and restricting
them where appropriate, and establishing committed contingency
borrowing facilities.
Insurance manufacturing subsidiaries complete quarterly liquidity risk
reports and an annual review of the liquidity risks to which they are
exposed.
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.
Risk review

234 | HSBC Holdings plc Annual Report and Accounts 2022

Insurance manufacturing operations risk in 2022
Measurement
The following tables show the composition of assets and liabilities by contract type and by geographical region.

Balance sheet of insurance manufacturing subsidiaries by type of contract 1
(Audited) |  |  |  |  |
| With DPF | Unit-linked | Other contracts 2 | Shareholder assets and liabilities | Total
| $m | $m | $m | $m | $m
Financial assets | 89,907 | 8,144 | 21,467 | 9,086 | 128,604
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 30,950 | 7,992 | 3,899 | 1,543 | 44,384
– derivatives | 418 | — | 30 | 15 | 463
– financial investments at amortised cost | 46,142 | 43 | 16,114 | 4,805 | 67,104
– financial investments at fair value through other comprehensive income | 8,349 | — | 486 | 1,920 | 10,755
– other financial assets 3 | 4,048 | 109 | 938 | 803 | 5,898
Reinsurance assets | 2,945 | 50 | 1,724 | 2 | 4,721
PVIF 4 | — | — | — | 9,900 | 9,900
Other assets and investment properties | 2,521 | 2 | 225 | 957 | 3,705
Total assets | 95,373 | 8,196 | 23,416 | 19,945 | 146,930
Liabilities under investment contracts designated at fair value | — | 2,084 | 3,296 | — | 5,380
Liabilities under insurance contracts | 91,948 | 5,438 | 17,521 | — | 114,907
Deferred tax 5 | 227 | 6 | 22 | 1,495 | 1,750
Other liabilities | — | — | — | 7,212 | 7,212
Total liabilities | 92,175 | 7,528 | 20,839 | 8,707 | 129,249
Total equity | — | — | — | 17,681 | 17,681
Total liabilities and equity at 31 Dec 2022 | 92,175 | 7,528 | 20,839 | 26,388 | 146,930

Financial assets | 88,969 | 8,881 | 19,856 | 9,951 | 127,657
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 30,669 | 8,605 | 3,581 | 1,827 | 44,682
– derivatives | 129 | 1 | 15 | 2 | 147
– financial investments at amortised cost | 42,001 | 61 | 14,622 | 4,909 | 61,593
– financial investments at fair value through other comprehensive income | 10,858 | — | 459 | 1,951 | 13,268
– other financial assets 3 | 5,312 | 214 | 1,179 | 1,262 | 7,967
Reinsurance assets | 2,180 | 72 | 1,666 | 3 | 3,921
PVIF 4 | — | — | — | 9,453 | 9,453
Other assets and investment properties | 2,558 | 1 | 206 | 820 | 3,585
Total assets | 93,707 | 8,954 | 21,728 | 20,227 | 144,616
Liabilities under investment contracts designated at fair value | — | 2,297 | 3,641 | — | 5,938
Liabilities under insurance contracts | 89,492 | 6,558 | 16,757 | — | 112,807
Deferred tax 5 | 179 | 9 | 24 | 1,418 | 1,630
Other liabilities | — | — | — | 7,269 | 7,269
Total liabilities | 89,671 | 8,864 | 20,422 | 8,687 | 127,644
Total equity | — | — | — | 16,972 | 16,972
Total liabilities and equity at 31 Dec 2021 | 89,671 | 8,864 | 20,422 | 25,659 | 144,616

1 Balance sheet of insurance manufacturing operations is shown before elimination of inter-company transactions with HSBC non-insurance operations.
2‘Other contracts’ includes term insurance, credit life insurance, universal life insurance and investment contracts not included in the ‘Unit-linked’ or
‘With DPF’ columns.
3 Comprise mainly loans and advances to banks, cash and inter-company balances with other non-insurance legal entities.
4 Present value of in-force long-term insurance business.
5‘Deferred tax’ includes the deferred tax liabilities arising on recognition of PVIF.

HSBC Holdings plc Annual Report and Accounts 2022 | 235

Balance sheet of insurance manufacturing subsidiaries by geographical region 1,2
(Audited)
| Europe | Asia | Latin America | Total
| $m | $m | $m | $m
Financial assets | 27,407 | 100,224 | 973 | 128,604
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 15,858 | 28,030 | 496 | 44,384
– derivatives | 292 | 171 | — | 463
– financial investments – at amortised cost | 383 | 66,674 | 47 | 67,104
– financial investments – at fair value through other comprehensive income | 9,505 | 861 | 389 | 10,755
– other financial assets 3 | 1,369 | 4,488 | 41 | 5,898
Reinsurance assets | 183 | 4,533 | 5 | 4,721
PVIF 4 | 1,296 | 8,407 | 197 | 9,900
Other assets and investment properties | 958 | 2,687 | 60 | 3,705
Total assets | 29,844 | 115,851 | 1,235 | 146,930
Liabilities under investment contracts designated at fair value | 1,143 | 4,237 | — | 5,380
Liabilities under insurance contracts | 24,076 | 89,904 | 927 | 114,907
Deferred tax 5 | 288 | 1,440 | 22 | 1,750
Other liabilities | 2,166 | 4,992 | 54 | 7,212
Total liabilities | 27,673 | 100,573 | 1,003 | 129,249
Total equity | 2,171 | 15,278 | 232 | 17,681
Total liabilities and equity at 31 Dec 2022 | 29,844 | 115,851 | 1,235 | 146,930
Financial assets | 34,264 | 92,535 | 858 | 127,657
– financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 19,030 | 25,248 | 404 | 44,682
– derivatives | 65 | 82 | — | 147
– financial investments – at amortised cost | 1,161 | 60,389 | 43 | 61,593
– financial investments – at fair value through other comprehensive income | 12,073 | 817 | 378 | 13,268
– other financial assets 3 | 1,935 | 5,999 | 33 | 7,967
Reinsurance assets | 213 | 3,703 | 5 | 3,921
PVIF 4 | 1,098 | 8,177 | 178 | 9,453
Other assets and investment properties | 1,091 | 2,431 | 63 | 3,585
Total assets | 36,666 | 106,846 | 1,104 | 144,616
Liabilities under investment contracts designated at fair value | 1,396 | 4,542 | — | 5,938
Liabilities under insurance contracts | 30,131 | 81,840 | 836 | 112,807
Deferred tax 5 | 250 | 1,357 | 23 | 1,630
Other liabilities | 2,711 | 4,523 | 35 | 7,269
Total liabilities | 34,488 | 92,262 | 894 | 127,644
Total equity | 2,178 | 14,584 | 210 | 16,972
Total liabilities and equity at 31 Dec 2021 | 36,666 | 106,846 | 1,104 | 144,616

1 HSBC has no insurance manufacturing subsidiaries in the Middle East and North Africa or North America.
2 Balance sheet of insurance manufacturing operations is shown before elimination of inter-company transactions with HSBC non-insurance operations.
3 Comprise mainly loans and advances to banks, cash and inter-company balances with other non-insurance legal entities.
4 Present value of in-force long-term insurance business.
5‘Deferred tax’ includes the deferred tax liabilities arising on recognition of PVIF.
Risk review

236 | HSBC Holdings plc Annual Report and Accounts 2022

Key risk types
Market risk
(Audited)
Description and exposure
Market risk is the risk of changes in market factors affecting HSBC’s
capital or profit. Market factors include interest rates, equity and
growth assets and foreign exchange rates.
Our exposure varies depending on the type of contract issued.
Our most significant life insurance products are contracts with
discretionary participating features (‘DPF’). These products typically
include some form of capital guarantee or guaranteed return on the
sums invested by the policyholders, to which discretionary bonuses
are added if allowed by the overall performance of the funds. These
funds are primarily invested in fixed interest, with a proportion
allocated to other asset classes to provide customers with the
potential for enhanced returns.
DPF products expose HSBC 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 HSBC. Amounts are held against
the cost of such guarantees, calculated by stochastic modelling in the
larger entities.
The cost of such guarantees is accounted for as a deduction from the
present value of in-force (‘PVIF‘) asset, unless the cost of such
guarantees is already explicitly allowed for within the insurance
contract liabilities.
The following table shows the total reserve held for the cost of
guarantees, the range of investment returns on assets supporting
these products and the implied investment return that would enable
the business to meet the guarantees.
The cost of guarantees decreased to $745m (2021: $938m), primarily
due increases in interest rates during 2022.
For unit-linked contracts, market risk is substantially borne by the
policyholder, but some market risk exposure typically remains, as fees
earned are related to the market value of the linked assets.

Financial return guarantees
(Audited)
|  | 2022 | 2021
|  | Investment returns implied by guarantee | Long-term investment returns on relevant portfolios | Cost of guarantees | Investment returns implied by guarantee | Long-term investment returns on relevant portfolios | Cost of guarantees
|  | % | % | $m | % | % | $m
Capital |  | — | 1.6-5.1 | 47 | — | 0.7-2.3 | 220
Nominal annual return |  | 0.1-1.9 | 3.6-6.8 | 548 | 0.1-1.9 | 2.7-6.4 | 423
Nominal annual return |  | 2.0-3.9 | 2.0-5.5 | 109 | 2.0-3.9 | 2.2-4.1 | 183
Nominal annual return |  | 4.0-5.0 | 2.0-4.2 | 41 | 4.0-5.0 | 2.2-4.2 | 112
At 31 Dec |  |  |  | 745 |  |  | 938

Sensitivities
Changes in financial market factors, from the economic assumptions
in place at the start of the year, had a negative impact on reported
profit before tax of $988m (2021: $516m). The following table
illustrates the effects of selected interest rate, equity price and
foreign exchange rate scenarios on our profit for the year and the total
equity of our insurance manufacturing subsidiaries. These sensitivities
are prepared in accordance with current IFRSs, which will change
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 335.
Where appropriate, the effects of the sensitivity tests on profit after
tax and equity incorporate the impact of the stress on the PVIF.
Due in part to the impact of the cost of guarantees and hedging
strategies, which may be in place, the relationship between the profit
and total equity and the risk factors is non-linear, particularly in a low
interest-rate environment. Therefore, the results disclosed should not
be extrapolated to measure sensitivities to different levels of stress.
For the same reason, the impact of the stress is not necessarily
symmetrical on the upside and downside. The sensitivities are stated
before allowance for management actions, which may mitigate the
effect of changes in the market environment. The sensitivities
presented allow for adverse changes in policyholder behaviour that
may arise in response to changes in market rates. The differences
between the impacts on profit after tax and equity are driven by the
changes in value of the bonds measured at fair value through other
comprehensive income, which are only accounted for in equity. The
increased upward sensitivity and reduced downward sensitivity of
profit after tax to a parallel shift in yield curves is driven by rising
interest rates having reduced the sensitivity impact associated with
the cost of guarantees in France.

Sensitivity of HSBC’s insurance manufacturing subsidiaries to market risk factors
(Audited)
| 2022 | 2021
| Effect on profit after tax | Effect on total equity | Effect on profit after tax | Effect on total equity
| $m | $m | $m | $m
+100 basis point parallel shift in yield curves | (100) | (236) | (2) | (142)
-100 basis point parallel shift in yield curves | 35 | 177 | (154) | (9)
10% increase in equity prices | 391 | 391 | 369 | 369
10% decrease in equity prices | (419) | (419) | (377) | (377)
10% increase in US dollar exchange rate compared with all currencies | 98 | 98 | 80 | 80
10% decrease in US dollar exchange rate compared with all currencies | (98) | (98) | (80) | (80)

HSBC Holdings plc Annual Report and Accounts 2022 | 237

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 235.
The credit quality of the reinsurers’ share of liabilities under insurance
contracts is assessed as ‘satisfactory’ or higher (as defined on
page 146), with 100% of the exposure being neither past due nor
impaired (2021: 100%).
Credit risk on assets supporting unit-linked liabilities is predominantly
borne by the policyholders. Therefore, our exposure is primarily
related to liabilities under non-linked insurance and investment
contracts and shareholders’ funds. The credit quality of insurance
financial assets is included in the table on page 165.
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.
L iquidity 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 DPF.
The following table shows the expected undiscounted cash flows for
insurance liabilities at 31 December 2022.
The profile of the expected maturity of insurance contracts at
31 December 2022 remained comparable with 2021.
The remaining contractual maturity of investment contract liabilities is
included in Note 30 on page 396.

Expected maturity of insurance contract liabilities
(Audited)
| Expected cash flows (undiscounted)
| Within 1 year | 1–5 years | 5–15 years | Over 15 years | Total
| $m | $m | $m | $m | $m
Unit-linked | 801 | 1,732 | 2,522 | 2,355 | 7,410
With DPF and Other contracts | 8,637 | 31,290 | 55,157 | 135,002 | 230,086
At 31 Dec 2022 | 9,438 | 33,022 | 57,679 | 137,357 | 237,496
Unit-linked | 1,346 | 2,605 | 3,159 | 2,293 | 9,403
With DPF and Other contracts | 8,803 | 31,334 | 51,891 | 94,168 | 186,196
At 31 Dec 2021 | 10,149 | 33,939 | 55,050 | 96,461 | 195,599

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. Lapse risk
exposure on products with premium financing increased over the year
as rising interest rates led to an increase in the cost of financing for
customers.
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 tables on pages 235 and 236 analyse our life insurance risk
exposures by type of contract and by geographical region.
The insurance risk profile and related exposures remain largely
consistent with those observed at 31 December 2021.
Sensitivities
(Audited)
The following table shows the sensitivity of profit and total equity to
reasonably possible changes in non-economic assumptions across all
our insurance manufacturing subsidiaries. These sensitivities are
prepared in accordance with current IFRSs, which will change
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 335.
Mortality and morbidity risk is typically associated with life insurance
contracts. The effect on profit of an increase in mortality or morbidity
depends on the type of business being written.
Sensitivity to lapse rates depends on the type of contracts
being written. An increase in lapse rates typically has a negative
effect on profit due to the loss of future income on the lapsed
policies. However, some contract lapses have a positive effect on
profit due to the existence of policy surrender charges.
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 our smaller entities.

Sensitivity analysis
(Audited)
| 2022 | 2021
| $m | $m
Effect on profit after tax and total equity at 31 Dec |  |
Effect on profit after tax and total equity at 10% increase in mortality and/or morbidity rates | (105) | (112)
Effect on profit after tax and total equity at 10% decrease in mortality and/or morbidity rates | 109 | 115
Effect on profit after tax and total equity at 10% increase in lapse rates | (121) | (115)
Effect on profit after tax and total equity at 10% decrease in lapse rates | 124 | 129
Effect on profit after tax and total equity at 10% increase in expense rates | (89) | (108)
Effect on profit after tax and total equity at 10% decrease in expense rates | 89 | 107

Risk review

238 | HSBC Holdings plc Annual Report and Accounts 2022

Corporate governance report

HSBC continues to enhance its corporate governance practices and
procedures to support the Board's ambition of world-class governance.
The corporate governance report gives details of our Board of Directors, senior management, and Board committees. It outlines key aspects of
our approach to corporate governance, including internal control.
It also includes the Directors’ remuneration report, which explains our policies on remuneration and their application.
Contents

240 | The Board
244 | Senior management
248 | How we are governed
255 | Board activities during 2022
257 | Board and committee effectiveness, performance and accountability
259 | Board committees
276 | Directors' remuneration report
301 | Share capital and other related disclosures
306 | Internal control
308 | Employees
310 | Statement of compliance
311 | Directors' responsibility statement

We have a comprehensive range of policies and systems in place designed to help ensure
that the Group is well managed, with effective oversight and control.

HSBC Holdings plc Annual Report and Accounts 2022 | 239

The Board

The Board, which seeks to promote the
Group’s long-term success, deliver
sustainable value to shareholders and
promote a culture of openness and debate,
comprises diverse, high-calibre members
who have experience in our global markets.
Chairman and executive Directors
Mark E Tucker (65) 4C
Group Chairman
Appointed to the Board: September 2017
Group Chairman since: October 2017
Skills and experience: With over 35 years of experience in financial
services in Asia, Africa, the US, the EU and the UK, including 30 years
living and working in Hong Kong, Mark has a deep understanding of
the industry and markets in which we operate.
Career: Mark was previously Chairman, Group Chief Executive and
President of AIA Group Limited (‘AIA’), and prior to AIA he was Group
Chief Executive of Prudential plc.
Mark previously served as a non-executive Director of the Court of
the Bank of England and as an independent non-executive Director of
Goldman Sachs Group.
Other appointments:
•Non-executive Chairman of Discovery Limited
•Supporting Chair of Chapter Zero
•Member of the UK Investment Council
•Member of the Advisory Group on Trade Finance to the
International Chamber of Commerce
•Member of the Trade Advisory Group on Financial Services to the
UK Government’s Department for International Trade
•Member of the Asia Business Council
•Chairman of the Multinational Chairman’s Group
•Co-Chair of the Indian B20 Taskforce on Financial Inclusion for
Economic Empowerment
•Director, Peterson Institute for International Economics
•Director, Institute of International Finance
•Asia Society Board of Trustees
Noel Quinn (61)
Group Chief Executive
Appointed to the Board: August 2019
Group Chief Executive since: March 2020
Skills and experience: Having qualified as an accountant in 1987,
Noel has more than 30 years of banking and financial services
experience, both in the UK and Asia.
Career: Noel was appointed Group Chief Executive in March 2020,
having held the role on an interim basis since August 2019. Since
joining HSBC and its constituent companies in 1987, Noel has held a
variety of roles including Chief Executive Officer, Global Commercial
Banking; Regional Head of Commercial Banking for Asia-Pacific; Head
of Commercial Banking UK; and Head of Commercial Finance Europe.
Other appointments:
•Chair of the Financial Services Task Force of the Sustainable
Markets Initiative
•Member of the Advisory Council of the Sustainable Markets
Initiative
•Founding member of CNBC ESG Council
•Member of the Advisory Board of the China Children Development
Fund
•Principal member of the Glasgow Financial Alliance for Net Zero
•Member of the World Economic Forum's International Business
Council
Georges Elhedery (48)
Group Chief Financial Officer
Appointed to the Board: January 2023
Skills and experience: Georges has 25 years of experience in the
banking industry across Europe, the Middle East and Asia, and has
held a number of executive roles at both a regional and global
business level.
Career: Georges was appointed Group Chief Financial Officer and
executive Director with effect from 1 January 2023. He is also
responsible for the oversight of the Group’s transformation
programme and corporate development activities. Georges was
previously co-Chief Executive Officer, Global Banking and Markets
and also Head of the Markets and Securities Services division of the
business. Georges joined HSBC in 2005 with extensive trading
experience in London, Paris and Tokyo. He has since held a number
of senior leadership roles, including Head of Global Banking and
Markets, Middle East and North Africa; Chief Executive Officer for
HSBC, Middle East, North Africa and Türkiye; and Global Head of
Markets based in London.
Board committee membership key
C. Committee Chair
1.Group Audit Committee
2.Group Risk Committee
3.Group Remuneration Committee
4.Nomination & Corporate Governance Committee
For full biographical details of our Board members, see
www.hsbc.com/who-we-are/leadership-and-governance.
Report of the Directors | Corporate governance report

240 | HSBC Holdings plc Annual Report and Accounts 2022

Independent non-executive Directors
Geraldine Buckingham (45) 2,3,4
Independent non-executive Director
Appointed to the Board: May 2022
Skills and experience: Geraldine is an experienced executive
within the global financial services industry, with significant leadership
experience in Asia.
Career: Geraldine is the former Chair and Head of Asia-Pacific at
BlackRock, where she was responsible for all business activities
across Hong Kong, mainland China, Japan, Australia, Singapore, India
and Korea. After stepping down from this role, she acted as senior
adviser to the Chairman and Chief Executive Officer of BlackRock.
She earlier served as BlackRock's Global Head of Corporate Strategy,
and previously was a partner within McKinsey & Company’s financial
services practice.
Other appointments:
•Independent non-executive Director of Brunswick Group
Partnership Ltd
•Member of the Advisory Board of ClimateWorks Centre Australia
Rachel Duan (52) 1,3,4
Independent non-executive Director
Appointed to the Board: September 2021
Skills and experience: Rachel is an experienced business leader
with exceptional international experience in the US, Japan, mainland
China and Hong Kong.
Career: Rachel spent 24 years at General Electric (‘GE’), where she
held positions including Senior Vice President of GE, and President
and Chief Executive Officer of GE’s Global Markets where she was
responsible for driving GE’s growth in Asia-Pacific, the Middle East,
Africa, Latin America, Russia and the Commonwealth of Independent
States. She also previously served as President and Chief Executive
Officer of GE Advanced Materials China and then of the Asia-Pacific;
President and CEO of GE Healthcare China; and President and CEO of
GE China.
Other appointments:
•Independent non-executive Director of Sanofi S.A.
•Independent non-executive Director of AXA S.A.
•Independent non-executive Director of the Adecco Group AG
Dame Carolyn Fairbairn (62) 2,3C,4
Independent non-executive Director
Appointed to the Board: September 2021
Skills and experience: Carolyn has significant experience across
the media, government and finance sectors, and a deep
understanding of the macroeconomic, regulatory, and political
environment.
Career: An economist by training, Carolyn has served as a partner at
McKinsey & Company, Director-General of the Confederation of
British Industry, and held senior executive positions at BBC and ITV
plc. She has extensive board experience, having previously served as
non-executive Director of Lloyds Banking Group plc, The Vitec Group
plc, Capita plc and BAE Systems plc. She has also served as a non-
executive Director of the UK Competition and Markets Authority and
the Financial Services Authority.
Other appointments:
•Honorary Fellow of Gonville and Caius College, Cambridge
•Honorary Fellow of Nuffield College, Oxford
•Chair of Trustees at Royal Mencap Society

HSBC Holdings plc Annual Report and Accounts 2022 | 241

James Forese (59) 2,3,4
Independent non-executive Director
Appointed to the Board: May 2020
Skills and experience: James has over 30 years of international
business and management experience in the finance industry working
in areas including global markets, investment and private banking.
Career: James formerly served as President of Citigroup. He began
his career in securities trading with Salomon Brothers, one of
Citigroup’s predecessor companies, in 1985. In addition to his most
recent role as Citigroup's President, he was Chief Executive Officer of
Citigroup’s Institutional Clients Group. He has held the positions of
Chief Executive of its Securities and Banking division and Head of its
Global Markets business.
Other appointments:
•Non-executive Chair of HSBC North America Holdings Inc
•Non-executive Chairman of Global Bamboo Technologies
•Trustee of Colby College
Steven Guggenheimer (57) 2,4
Independent non-executive Director
Appointed to the Board: May 2020
Skills and experience: Steven brings extensive insight into
technologies ranging from artificial intelligence to Cloud computing,
through his experience advising businesses on digital transformation.
Career: Steven has more than 25 years of experience at Microsoft,
where he held a variety of senior leadership roles. These included:
Corporate Vice President, Artificial Intelligence and Independent
Software Vendor Engagement; and Corporate Vice President, Original
Equipment Manufacturer.
Other appointments:
•Independent non-executive Director of BT Group plc
•Independent non-executive Director of Leupold & Stevens, Inc
•Independent non-executive Director of Forrit Holdings Limited
•Independent non-executive Director of Software Acquisition Group
Dr José Antonio Meade Kuribreña (53) 3,4
Independent non-executive Director
Appointed to the Board: March 2019
Workforce engagement non-executive Director since: June 2022
Skills and experience: José has extensive experience in public
administration, banking and financial policy.
Career: José has held Cabinet-level positions in the federal
government of Mexico, including as Secretary of Finance and Public
Credit, Secretary of Social Development, Secretary of Foreign Affairs
and Secretary of Energy. Prior to his appointment to the Cabinet, he
served as Undersecretary and as Chief of Staff in the Ministry of
Finance and Public Credit. José is also a former Director General of
Banking and Savings at the Ministry of Finance and Public Credit, and
served as Chief Executive Officer of the National Bank for Rural
Credit.
Other appointments:
•Independent non-executive Director of Alfa S.A.B. de C.V.
•Independent non-executive Director of Grupo Comercial Chedraui,
S.A.B. de C.V.
•Board member of The Global Center on Adaptation
•Member of the Advisory Board of the University of California,
Centre for US Mexican Studies
•Member of the UNICEF Mexico Advisory Board
Report of the Directors | Corporate governance report

242 | HSBC Holdings plc Annual Report and Accounts 2022

Eileen Murray (64) 1,4
Independent non-executive Director
Appointed to the Board: July 2020
Skills and experience: Eileen has extensive knowledge in financial
services, technology and corporate strategy from a career spanning
more than 40 years.
Career: Eileen previously served as co-Chief Executive Officer of
Bridgewater Associates, LP. Before this, she was Chief Executive
Officer for Investment Risk Management LLC, and President and co-
Chief Executive Officer of Duff Capital Advisors. Eileen started her
professional career at Morgan Stanley, where she held positions
including Controller, Treasurer, and Global Head of Technology and
Operations, as well as Chief Operating Officer for its Institutional
Securities Group. She was also Head of Global Technology,
Operations and Product Control at Credit Suisse.
Other appointments:
•Independent non-executive Director of Guardian Life Insurance
Company of America
•Independent non-executive Director of Broadridge Financial
Solutions, Inc
•Independent non-executive Director and Chair of Carbon Arc
•Strategic Adviser of Invisible Urban Charging
•Adviser of ConsenSys
David Nish (62) 1C,2,4
Independent non-executive Director
Appointed to the Board: May 2016
Senior Independent non-executive Director since: February 2020
Skills and experience: David has international experience in
financial services, corporate governance, strategy, financial reporting,
and operational transformation.
Career: David served as Group Chief Executive Officer of Standard
Life plc between 2010 and 2015, having joined the company in 2006
as Group Finance Director. He is also a former Group Finance Director
of Scottish Power plc and was a partner at Price Waterhouse. David
has also previously served as a non-executive Director of HDFC Life
(India), Northern Foods plc, Thus plc, London Stock Exchange Group
plc, the UK Green Investment Bank plc and Zurich Insurance Group.
Other appointments:
•Independent non-executive Director of Vodafone Group plc
•Honorary Professor of University of Dundee Business School
Jackson Tai (72) 1,2C,4
Independent non-executive Director
Appointed to the Board: September 2016
Skills and experience: Jackson has held senior operating and
governance roles across Asia, North America and Europe.
Career: Jackson was Vice Chairman and Chief Executive Officer of
DBS Group and DBS Bank Ltd, having previously served as Chief
Financial Officer and President and Chief Operating Officer. He
worked for 25 years in the investment banking division of J.P. Morgan
& Co. Incorporated, holding roles as Chairman of the Asia-Pacific
Management Committee and Head of Japan Capital Markets. Former
non-executive Director appointments included Canada Pension Plan
Investment Board, Royal Philips N.V., Bank of China Limited,
Singapore Airlines, NYSE Euronext, ING Groep N.V., CapitaLand Ltd,
SingTel Ltd. and Jones Lang LaSalle Inc. He also served as Vice
Chairman of Islamic Bank of Asia.
Other appointments:
•Independent non-executive Director of Eli Lilly and Company
•Independent non-executive Director of MasterCard Incorporated
•Member of the Advisory Panel of the Russell Reynolds Associates
Board and CEO Advisory Group
•Member of the Board of Trustees of the Rensselaer
Polytechnic Institute
•Member of the Association of the Metropolitan Opera
Board
Aileen Taylor (50)
Group Company Secretary and Chief Governance Officer
Appointed: November 2019
Skills and experience: Aileen is a solicitor with significant
governance and regulatory experience across various roles in the
banking industry. She is a member of the European Corporate
Governance Council, the GC100 and the Financial Conduct Authority's
Listing Authority Advisory Panel.
Career: Prior to joining HSBC, Aileen spent 19 years at the Royal
Bank of Scotland Group, holding various legal, risk and compliance
roles. She was appointed Group Secretary in 2010 and subsequently
Chief Governance Officer and Board Counsel.
Former Directors who served during the year
Irene Lee
Irene Lee retired from the Board on 29 April 2022
Pauline van der Meer Mohr
Pauline van der Meer Mohr retired from the Board on 29 April 2022
Ewen Stevenson
Ewen Stevenson resigned from the Board on 31 December 2022
Board committee membership key
C. Committee Chair
1.Group Audit Committee
2.Group Risk Committee
3.Group Remuneration Committee
4.Nomination & Corporate Governance Committee
For full biographical details of our Board members, see
www.hsbc.com/who-we-are/leadership-and-governance.

HSBC Holdings plc Annual Report and Accounts 2022 | 243

Senior management

Senior management, which includes the
Group Executive Committee, supports the
Group Chief Executive in the day-to-day
management of the business and the
implementation of strategy.

Elaine Arden, 54 Group Chief Human Resources Officer

Elaine joined HSBC as Group Chief Human Resources Officer in June
2017. Prior to joining HSBC, she was Group Human Resources
Director at Royal Bank of Scotland Group for six years. She has held a
number of human resources and employee relations roles throughout
her career in financial services, including with Clydesdale Bank and
Direct Line Group. Elaine is a member of the Chartered Institute of
Personnel and Development, and a Fellow of the Chartered Institute
of Banking in Scotland.

Colin Bell, 55 Chief Executive Officer, HSBC Bank plc and HSBC Europe

Colin joined HSBC in July 2016 and was appointed Chief Executive
Officer, HSBC Bank plc and HSBC Europe in February 2021. He
previously held the role of Group Chief Compliance Officer. Before
HSBC, Colin worked at UBS as Global Head of Compliance and
Operational Risk Control. He served for 16 years in the British Army,
where he held a variety of command and staff positions, including
within operational tours of Iraq and Northern Ireland, and roles in the
Ministry of Defence and NATO.

Jonathan Calvert-Davies, 54 Group Head of Internal Audit

Jonathan is a standing attendee of the Group Executive Committee,
having joined HSBC as Group Head of Internal Audit in October 2019.
He has 30 years of experience providing assurance, audit and advisory
services to the banking and securities industries in the UK, the US
and Europe. Jonathan’s previous roles included leading KPMG UK’s
financial services internal audit services practice and PwC’s UK
internal audit services practice. He also previously served as interim
Group Head of Internal Audit at the Royal Bank of Scotland Group.

Greg Guyett, 59 Chief Executive Officer, Global Banking and Markets

Greg joined HSBC in October 2018 as Head of Global Banking and
became co-Chief Executive Officer of Global Banking and Markets in
March 2020, before assuming sole responsibility in October 2022.
Before joining HSBC, he was President and Chief Operating Officer of
East West Bank. Greg began his career as an investment banker at
J.P. Morgan, where positions included: Chief Executive Officer for
Greater China; Chief Executive Officer, Global Corporate Bank; Head
of Investment Banking for Asia-Pacific; and Co-Head of Banking for
Asia-Pacific.
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244 | HSBC Holdings plc Annual Report and Accounts 2022

Dr Celine Herweijer, 45 Group Chief Sustainability Officer

Celine joined HSBC as Group Chief Sustainability Officer in July 2021,
and is responsible for the Group’s execution of its sustainability
strategy. She is also co-chair of the Group's ESG Committee. She
was previously a partner at PwC for over a decade, where she held
global leadership roles including acting as its global innovation and
sustainability leader. Before joining PwC in 2009, Celine worked as
Director of Climate Change and Consulting for Risk Management
Solutions. She is a World Economic Forum Young Global Leader, a co-
chair of the We Mean Business Coalition, a PhD climate scientist and
NASA Fellow.

John Hinshaw, 52 Group Chief Operating Officer

John became Group Chief Operating Officer in February 2020, having
joined HSBC in December 2019. He has extensive background in
transforming and digitising organisations across a range of industries.
John was previously Executive Vice President of Technology and
Operations and Chief Customer Officer at Hewlett Packard and
Hewlett Packard Enterprise, and has held senior executive positions
at Verizon and Boeing. John serves on the boards of Sysco
Corporation and Illumio, Inc., and has previously served on the boards
of BNY Mellon, DocuSign and the National Academy Foundation.

Bob Hoyt, 58 Group Chief Legal Officer

Bob joined HSBC as Group Chief Legal Officer in January 2021. He
was previously Group General Counsel at Barclays from 2013 to 2020.
Prior to that, he was General Counsel and Chief Regulatory Affairs
Officer for PNC Financial Services Group. Bob has served as General
Counsel and Senior Policy Adviser to the US Department of the
Treasury under Secretary Henry M. Paulson Jr, and as Special
Assistant and Associate Counsel to the White House under President
George W. Bush.

Steve John, 49 Group Chief Communications and Brand Officer

Steve joined HSBC in December 2019 and was appointed to the
Group Executive Committee in April 2021. He has a wealth of senior
communications, public policy and leadership experience acquired
across a number of multinational and charitable organisations. Steve
was previously a partner and Global Director of Communications at
McKinsey & Company from 2014 to 2019. He has also held roles with
Bupa as Global Director of Corporate Affairs and PepsiCo as Director
of Corporate Affairs for their UK and Ireland franchises.

Pam Kaur, 59 Group Chief Risk and Compliance Officer

Pam was appointed Group Chief Risk and Compliance Officer in 2021,
having held the position of Group Chief Risk Officer since 2020. Since
joining HSBC in 2013, her roles included Group Head of Internal Audit
and Head of Wholesale Market and Credit Risk. Pam has also held a
variety of audit, compliance, finance and operations roles in the
banking industry, including with Deutsche Bank, Royal Bank of
Scotland Group, Lloyds TSB and Citigroup. She serves as a non-
executive Director of abrdn plc, and was previously a non-executive
Director of Centrica plc.

David Liao, 50 Co-Chief Executive Officer, Asia-Pacific – The Hongkong and Shanghai Banking Corporation Limited

David was appointed co-Chief Executive Officer of the Asia-Pacific
region in 2021. He is a Director of the Hongkong and Shanghai
Banking Corporation Limited, Bank of Communications Co., Limited,
and Hang Seng Bank Limited. David joined HSBC in 1997, with
previous roles including: Head of Global Banking Coverage for Asia-
Pacific; President and Chief Executive of HSBC China; Head of Global
Banking and Markets, HSBC China; and Treasurer and Head of Global
Markets, HSBC China.

HSBC Holdings plc Annual Report and Accounts 2022 | 245

Nuno Matos, 55 Chief Executive Officer, Wealth and Personal Banking

Nuno was appointed Chief Executive Officer of Wealth and Personal
Banking in 2021. Since joining HSBC in 2015 from Santander Group,
he has held various roles, most recently as Chief Executive Officer of
HSBC Bank plc and HSBC Europe. He has also held the positions of
Chief Executive Officer of HSBC Mexico and Regional Head of Retail
Banking and Wealth Management for Latin America. He is currently a
Director of HSBC Global Asset Management Limited.

Stephen Moss, 56 Regional Chief Executive Officer – Middle East, North Africa and Türkiye

Stephen was appointed Regional Chief Executive Officer for the
Middle East, North Africa and Türkiye in 2021. He has held a series of
roles in Asia, the UK and the Middle East since joining HSBC in 1992,
including as Chief of Staff to the Group Chief Executive and
overseeing the Group’s mergers and acquisitions, and strategy and
planning activities. Stephen is a Director of HSBC Bank Middle East
Limited, HSBC Middle East Holdings B.V, HSBC Bank Egypt S.A.E.,
HSBC Saudi Arabia and The Saudi British Bank.

Barry O'Byrne, 47 Chief Executive Officer, Global Commercial Banking

Barry was appointed Chief Executive of Global Commercial Banking in
2020, having served in the role on an interim basis since August 2019.
He joined HSBC in 2017 as Chief Operating Officer for Commercial
Banking. Before joining HSBC, Barry worked at GE Capital for 19
years where he held a number of senior leadership roles, including
Chief Executive Officer and Chief Operating Officer for GE Capital
International.

Michael Roberts, 62 Chief Executive Officer, HSBC USA and Americas

Michael was appointed Chief Executive Officer of HSBC USA when
he joined HSBC in 2019. He became Chief Executive Officer of the
Americas with oversight responsibility for Canada and Latin America
in 2021. He is a Director of HSBC Bank Canada; Director, President
and Chief Executive Officer of HSBC North America Holdings Inc.;
and Chairman of HSBC Bank USA, N.A., HSBC USA Inc and HSBC
Latin America Holdings (UK) Limited. Previously, Michael spent over
30 years at Citigroup in a number of senior leadership roles, most
recently as Global Head of Corporate Banking and Capital
Management and Chief Lending Officer.

Surendra Rosha, 54 Co-Chief Executive Officer, Asia-Pacific – The Hongkong and Shanghai Banking Corporation Limited

Surendra was appointed co-Chief Executive Officer of the Asia-Pacific
region in 2021. He is a Director of The Hongkong and Shanghai
Banking Corporation Limited, HSBC Global Asset Management
Limited and HSBC Bank Malaysia Berhad. Surendra joined HSBC in
1991 and has held several senior positions within Global Banking and
Markets, including Head of Global Markets in Indonesia and Head of
Institutional Sales, Asia-Pacific. He previously held the position of
Chief Executive for HSBC India and Head of HSBC’s financial
institutions group for Asia-Pacific.

John David Stuart (known as Ian Stuart), 59 Chief Executive Officer, HSBC UK Bank plc

Ian has been Chief Executive Officer of HSBC UK Bank plc since 2017
and has worked in financial services for over four decades. He joined
HSBC as Head of Commercial Banking in the UK and Europe in 2014,
having previously led the corporate and business banking businesses
at Barclays. He has also held various roles at the Royal Bank of
Scotland Group, and started his career at Bank of Scotland. Ian is a
business ambassador for Meningitis Now, and a member of the
Economic Crime Strategic Board and UK Finance Board.
Additional members of the Group Executive Committee
Noel Quinn
Georges Elhedery
Aileen Taylor
Biographies are provided on pages 240 and 243.
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246 | HSBC Holdings plc Annual Report and Accounts 2022

Board and senior management diversity
We value difference
Diversity and inclusion are embedded within the culture of HSBC. The Board remains committed to having an inclusive culture that recognises
the importance of gender, social and ethnic diversity, and the benefits gained from different perspectives.
This section outlines the key diversity and inclusion metrics for Board members and executive management as at 31 December 2022. This
includes tenure, age, skills and experience, gender and ethnic representation.
Gender and ethnic diversity
The Financial Conduct Authority, in its capacity as the UK Listing
Authority, introduced new rules during 2022 that require listed
companies to publish information on female and ethnic heritage
representation on the Board and in senior management within the
Annual Report and Accounts 2023. The tables below outline the
current gender and ethnic diversity of the HSBC Holdings Board and
executive management in advance of these requirements becoming
applicable.
Gender
Board Executive management

| Board members |  | Executive management 2
| Number | % | Number of senior positions 1 | Number | %
Male | 8 | 67 | 4 | 17 | 81
Female | 4 | 33 | 0 | 4 | 19
Other | — | — | — | — | —
Not specified/prefer not to say | — | — | — | — | —

Board Executive management
Ethnic diversity

| Board members |  | Executive management 2
| Number | % | Number of senior positions 1 | Number | %
White British or other White (including minority-White groups) | 9 | 75 | 4 | 14 | 66
Mixed/multiple ethnic groups | — | — | — | 1 | 5
Asian/Asian British | 2 | 17 | — | 4 | 19
Black/African/Caribbean/Black British | — |  | — | — | —
Other ethnic groups, including Arab | 1 | 8 | — | 1 | 5
Not specified/prefer not to say | — |  | — | 1 | 5

1 Senior positions on the Board comprise the Group Chairman, Group
Chief Executive, Group Chief Financial Officer and Senior Independent
non-executive Director.
2 Executive management comprises the Group Chief Executive, his
direct reports, and the Group Company Secretary and Chief
Governance Officer.
Board composition, tenure and age
2 Executive Directors 10 Non-executive Directors
Tenure on the Board
Age
Skills and experience
The Board, through its Nomination & Corporate Governance
Committee, regularly reviews the skills and experience it requires to
effectively discharge its responsibilities. A skills matrix, which is a key
tool used by the Board to inform its succession planning discussions,
is reviewed at least annually by the Board. An extract of the skills
matrix, showing a selection of the current skills and experience of the
non-executive Directors, is shown below.

HSBC Holdings plc Annual Report and Accounts 2022 | 247

How we are governed

We are committed to high standards of corporate governance. The
Group has a comprehensive range of policies and procedures in place
designed to help ensure that it is well managed, with effective
oversight and controls. We comply with the UK Corporate
Governance Code and the applicable requirements of the Hong Kong
Corporate Governance Code.
Board’s role, Directors’
responsibilities and meeting
attendance
The Board, led by the Group Chairman, is responsible among other
matters for:
•promoting the Group’s long-term success and delivering
sustainable value to shareholders;
•establishing and approving the Group’s strategy and objectives,
and monitoring the alignment of the Group’s purpose, strategy and
values with the desired culture;
•setting the Group’s risk appetite and monitoring the Group’s risk
profile;
•approving and monitoring capital and financial resource plans for
achieving strategic objectives, including material transactions;
•considering and approving the Group’s technology and
environmental, social and governance strategies;
•approving the appointment and remuneration of Directors,
including Board roles; and
•reviewing the Group’s overall corporate governance arrangements.
The Board’s responsibilities are set out in a schedule of matters
reserved within its terms of reference, which are available on our
website at www.hsbc.com/who-we-are/leadership-and-governance/
board-responsibilities. The Board’s powers are subject to relevant
laws, regulations and HSBC’s articles of association.
The role of the independent non-executive Directors is to support the
development of strategy, oversee risk, hold management to account
and ensure the executive Directors are discharging their
responsibilities properly, while creating the right culture to encourage
constructive challenge. Further details on the independence of the
Board can be found in the Nomination & Corporate Governance
Committee report on page 259. Non-executive Directors also review
the performance of management in meeting agreed goals and
objectives. The Group Chairman meets with the non-executive
Directors without the executive Directors in attendance after Board
meetings and otherwise, as necessary.
The roles of Group Chairman and Group Chief Executive are separate.
There is a clear division of responsibilities between the leadership of
the Board by the Group Chairman, and the executive responsibility for
day-to-day management of HSBC’s business, which is undertaken by
the Group Chief Executive.
The majority of Board members are independent non-executive
Directors. At 31 December 2022, the Board comprised the Group
Chairman, nine non-executive Directors, and two executive Directors
who are the Group Chief Executive and the Group Chief Financial
Officer. One non-executive Director will not stand for re-election at
the AGM in May 2023.
For further details of Board members' career backgrounds, skills,
experience and external appointments, see their biographies on
page 240, and for a breakdown of the diversity and skills of the Board
and senior management, see page 247.
Operation of the Board
The Board is ordinarily scheduled to meet at least seven times a year.
In 2022, the Board held 15 meetings. For further details on
attendance at those meetings, see page 250. The Board agenda is
agreed by the Group Chairman, working with both the Group Chief
Executive and the Group Company Secretary and Chief Governance
Officer. For further information, see ’Board activities during 2022’ on
page 255.
The Group Company Secretary and Chief Governance Officer, the
Group Chief Risk and Compliance Officer, the Group Chief Legal
Officer and the non-executive Chairman of The Hongkong and
Shanghai Banking Corporation Limited are all regular attendees at
Board meetings. Other senior executives attend Board meetings for
specific items as required.
In addition to formal Board meetings, the Board Oversight Sub-Group
met in advance of each Board meeting during 2022. Such meetings
were established following the appointment of Noel Quinn as Group
Chief Executive and changes to the senior management team as an
informal mechanism for a smaller group of Board members and
management to discuss emerging issues and upcoming Board
matters. Standing attendees comprise the Group Chairman, the Chair
of the Group Audit Committee (who is also the Senior Independent
Director), the Chair of the Group Risk Committee, the Chair of the
Group Remuneration Committee, the Group Chief Executive, the
Group Chief Financial Officer, the Group Chief Risk and Compliance
Officer, and the Group Company Secretary and Chief Governance
Officer. Other non-executive Directors and senior management are
invited on an ad hoc basis, depending on the subject matter to be
discussed. The forum is not decision making but provides regular
opportunities for Board members to communicate with senior
management to deepen their understanding of, and provide input into,
key issues facing the Group. Following a review by the Group
Chairman and Group Chief Executive of the role of the Board
Oversight Sub-Group, it was agreed that it would only be used on an
ad hoc basis where necessary going forward.
Relationship between the Board and senior
management
The Board delegates day-to-day management of the business and
implementation of strategy to the Group Chief Executive. The Group
Chief Executive is supported in his management of the Group by
recommendations and advice from the Group Executive Committee
(’GEC’), an executive forum comprising members of senior
management that include chief executive officers of the global
businesses, regional chief executive officers and functional heads. For
further details of the senior management team, see page 244.
The Directors are encouraged to have contact with management at all
levels, and have full access to all relevant information. Non-executive
Directors are encouraged to visit local business operations and meet
local management when they attend Board meetings in different
locations, and when travelling for other reasons. Board and senior
management travel resumed in 2022, which allowed for more
opportunities for Board members to meet together in person and with
key stakeholders. As Covid-19 restrictions remained in place for some
markets, and with the safety of colleagues and customers a priority,
several virtual meetings with senior executives continued to take
place, which included business meetings, induction meetings and
subject matter ’deep dives’.
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Executive governance
The Group’s executive governance is underpinned by the Group
operating rhythm, which helps facilitate end-to-end governance
between senior leadership and the Board, and sets out the Board and
executive engagement schedule.
The Group operating rhythm has the following three pillars:
•The GEC normally meets every week to discuss current and
emerging issues.
•On a monthly basis, the GEC reviews the performance of each of
the global businesses in principal geographical areas and legal
entities. These performance reviews are supplemented by
operating unit performance review meetings between the Group
Chief Financial Officer and each of the chief executive officers of
the respective global businesses, regions and principal
subsidiaries. The Group Chief Risk and Compliance Officer usually
attends these meetings.
•The GEC holds a strategy and governance meeting two weeks in
advance of each Board meeting.
In addition, during the year, the Group Chief Executive independently
conducts several business reviews on focus areas such as costs and
the financial reporting plan.
Separate committees have been established to provide specialist
oversight for matters delegated to the Group Chief Executive and
senior management. For further details of these committees, see
page 251.
To further support our senior management, we have dedicated
corporate governance officers supporting our global businesses and
global functions to assist in effective end-to-end governance,
consistency and connectivity.
Subsidiary governance
We are committed to maintaining high standards of corporate
governance throughout the Group. All subsidiary boards and their
respective businesses are required to have in place effective
governance arrangements with regard to the businesses’ nature, size,
locations and the sectors in which they operate.
Certain subsidiaries are designated formally as principal subsidiaries
by approval of the Board. In addition to their obligations under their
respective local laws and regulation, principal subsidiaries, supported
by regional company secretaries, perform an important role in
supporting effective and high standards of governance across the
Group.
The designated principal subsidiaries are:

Principal subsidiary | Oversight responsibility
The Hongkong and Shanghai Banking Corporation Limited | Asia-Pacific
HSBC Bank plc | Europe, Bermuda (excluding Switzerland and UK ring-fenced activities)
HSBC UK Bank plc | UK ring-fenced bank and its subsidiaries
HSBC Middle East Holdings BV | Middle East, North Africa and Türkiye
HSBC North America Holdings Inc. | US
HSBC Latin America Holdings (UK) Limited | Mexico and Latin America
HSBC Bank Canada 1 | Canada

1 On 29 November 2022 HSBC announced it had entered into an
agreement to sell HSBC Bank Canada, subject to regulatory and
governmental approvals. The sale is expected to complete in late 2023.
Principal subsidiaries play a critical role in overseeing the
implementation of the subsidiary accountability framework in the
regions for which they are responsible. The subsidiary accountability
framework, refreshed by the Board in 2021, aims to provide
subsidiaries with a shared understanding and a consistent approach
towards the Group’s strategic objectives, culture and values, and
ensure that corporate governance best practice is applied throughout.
The framework sets clear overarching principles for subsidiaries to
follow to improve communications and connectivity within the Group.
It also focuses on ensuring that each subsidiary is led by an effective
board with an appropriate balance of skills, diversity, experience and
knowledge, having regard to the nature of the subsidiary's business
and any local legal and regulatory requirements. Board composition of
the Group's subsidiaries is kept under review as part of succession
planning.
The framework is subject to periodic review by the Board and/or its
Nomination & Corporate Governance Committee and is updated to
ensure that there is clarity for the directors and officers of their
respective roles and responsibilities.
Since the revised framework was implemented in 2021, there has
been a notable improvement in the diversity of subsidiary board
composition.
To continue this progress, HSBC in 2022 launched a Bank Director
Programme to develop and equip internal talent to undertake non-
executive employee director roles on subsidiary boards. This
programme is delivered in partnership with an external business
school, and provides certified qualifications to its participants in
becoming highly skilled and knowledgeable subsidiary director
candidates.
The Group Chairman interacts regularly with the chairs of the principal
subsidiaries, including through the Chairman’s Forum, which brings
together the chairs of the principal subsidiaries and the chairs of the
Group’s audit, risk and remuneration committees, and depending on
the topic for discussion, also the Group Chief Executive, non-
executive Directors and relevant executive management, advisers
and/or external experts. In 2022, the Chairman’s Forum covered
strategic business considerations, geopolitics, global public health,
liability pricing, shareholder engagements, ESG insights, delegations
of authority, employee engagement and financial performance. The
Non-Executive Director Summits, hosted by the Group Chairman, are
also effective subsidiary directors’ engagement events.
During 2022, the Group Chairman hosted two virtual Non-Executive
Director Summits in March and September, where approximately 180
independent non-executive directors from the Group’s subsidiaries
attended along with HSBC Holdings Board Directors. The summits
provide a platform for sharing key messages across subsidiaries, as
well as facilitating greater connectivity and helping to build a sense of
community among our subsidiaries’ non-executive directors. In 2022,
the non-executive directors received updates on Group-wide matters
including strategy, ESG issues, technology and governance.
The annual Remuneration Committee Chairs’ Forum took place in
November, and provided the principal subsidiary chairs with an
opportunity to discuss the Group’s performance and the Group
Remuneration Committee’s priorities. A follow-up forum was held in
late November to provide transparency around pay outcomes and
allocation, with feedback from the discussion used to shape the final
pay proposals, which were considered and approved by the Group
Remuneration Committee.
Board members attend principal subsidiary meetings as guests from
time to time. Similarly, principal subsidiary directors are invited to
attend committee meetings at Group level, where relevant. The chairs
of the principal subsidiary risk committees are regular attendees at
the Group Risk Committee. Similarly, the Group Audit Committee
Chair meets regularly with the principal subsidiary audit committee
chairs to promote the sharing of information and best practices.
These Group Board committees received escalated reports and
certifications from the principal subsidiary risk and audit committees
through the year.

HSBC Holdings plc Annual Report and Accounts 2022 | 249

Board roles, responsibilities and meeting attendance

The table below sets out the Board members’ respective roles, responsibilities and attendance at Board meetings and the AGM in 2022. For a full description of key Board members’ responsibilities, see www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.
Roles | Board attendance in 2022 | Responsibilities
Group Chairman Mark E Tucker 1,2 | 15/15 | •Provides effective leadership of the Board and promotes the highest standards of corporate governance practices. •Leads the Board in providing strong strategic oversight and setting the Board’s agenda, culture and values. •Leads the Board in challenging management’s thinking and proposals, and fosters open and constructive debate among Directors. •Maintains internal and external relationships with key stakeholders, and communicates investors’ views to the Board. •Organises periodic monitoring and evaluation, including externally facilitated evaluation, of the performance of the Board, its committees and individual Directors. •Leads on succession planning for the Board and its committees, ensuring appointments reflect diverse cultures, skills and experiences.
Executive Director Group Chief Executive Noel Quinn 2 | 15/15 | •Leads and directs the implementation of the Group’s business strategy, embedding the organisation’s culture and values. •Leads the Group Executive Committee with responsibility for the day-to-day operations of the Group, under authority delegated to him from the Board. •Maintains relationships with key internal and external stakeholders including the Group Chairman, the Board, customers, regulators, governments and investors. •Maintains responsibility and accountability for the Group’s and its employees’ compliance with applicable laws, codes, rules and regulations, good market practice and HSBC’s own standards.
Executive Director Group Chief Financial Officer Ewen Stevenson 2,4,6 | 14/15 | •Supports the Group Chief Executive in developing and implementing the Group strategy and recommends the annual budget and long-term strategic and financial resource plan. •Leads the Finance function and is responsible for effective financial reporting, including the effectiveness of the processes and controls, to ensure the financial control framework is robust and fit for purpose. •Maintains relationships with key stakeholders including shareholders.
Non-executive Director Senior Independent Director David Nish 2,3 | 15/15 | •Supports the Group Chairman, acting as intermediary for non-executive Directors when necessary. •Leads the non-executive Directors in the oversight of the Group Chairman, supporting the clear division of responsibility between the Group Chairman and the Group Chief Executive. •Listens to shareholders’ views if they have concerns that cannot be resolved through the normal channels.
Non-executive Directors |  | •Develop and approve the Group strategy. •Challenge and oversee the performance of management. •Approve the Group’s risk appetite and review risk profile and performance. •Contribute to the assessment and monitoring of culture. •Maintain internal and external relationships with the Group’s key stakeholders.
Geraldine Buckingham 3,5 | 9/9
Rachel Duan 2,3 | 15/15
Dame Carolyn Fairbairn 2,3 | 15/15
James Forese 2,3,6 | 14/15
Steven Guggenheimer 2,3 | 14/15
Irene Lee 2,4 | 6/6
Dr José Antonio Meade Kuribreña 2,3 | 15/15
Eileen Murray 2,3,6 | 14/15
Jackson Tai 2,3 | 15/15
Pauline van der Meer Mohr 2,3,4,6 | 4/6
Group Company Secretary and Chief Governance Officer Aileen Taylor |  | •Maintains strong and consistent governance practices at Board level and throughout the Group. •Supports the Group Chairman in ensuring effective functioning of the Board and its committees, and transparent engagement between senior management and non-executive Directors. •Facilitates induction and professional development of non-executive Directors. •Advises and supports the Board and management in ensuring effective end-to-end governance and decision making across the Group.

1 The non-executive Group Chairman was considered to be independent on appointment.
2 Attended the AGM on 29 April 2022.
3 Independent non-executive Director. All of the non-executive Directors are considered to be independent of HSBC. There are no relationships or
circumstances that are likely to affect any individual non-executive Director’s judgement. All non-executive Directors have confirmed their
independence during the year.
4 Irene Lee and Pauline van der Meer Mohr retired from the Board on 29 April 2022. Ewen Stevenson retired from the Board on 31 December 2022.
5 Geraldine Buckingham joined the Board effective 1 May 2022.
6 Due to prior commitments Eileen Murray and Pauline van der Meer Mohr were not able to attend on 28 March 2022 and Steven Guggenheimer on
2 November 2022. Meetings held on 10 February 2022 and 25 November 2022 were ad hoc meetings called at short notice, and due to prior
commitments, James Forese and Pauline van der Meer Mohr were unable to attend on 10 February 2022 and Ewen Stevenson was unable to attend
on 25 November 2022.
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Board committees and working groups
The Board delegates oversight of certain audit, risk, remuneration,
nomination and governance matters to its committees. Each standing
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. Only the Group Chairman and the
independent non-executive Directors are members of Board
committees. Details of the work carried out by each of the Board
committees can be found in the respective committee reports from
page 259.
The Chairman’s Committee provides the Board with the opportunity
to consider ad hoc and routine matters between scheduled Board
meetings. All Board members are invited to attend Chairman’s
Committee meetings.
In addition to Board committees, working groups have been
established to enhance Board governance, when appropriate,
including the Board Oversight Sub-Group and the Technology
Governance Working Group, which were first convened in 2019 and
2021, respectively. For further details of these committees, see
page 248 and the box below.
The Group Executive Committee has established a number of
committees to provide specialist oversight for matters delegated to
the Group Chief Executive and senior management, which help fulfil
their responsibilities under the Senior Managers and Certification
Regime.
These committees support the Group Chief Executive and senior
management in areas such as capital and liquidity, risk management,
disclosure and financial reporting, restructuring and investment
considerations, transformation oversight, ESG matters and talent and
development.

Board
Chair: Mark Tucker
Chairman’s Committee | Nomination & Corporate Governance Committee | Group Audit Committee | Group Risk Committee | Group Remuneration Committee | Informal governance Board Oversight Sub- Group
Chair: Mark Tucker | Chair: Mark Tucker | Chair: David Nish | Chair: Jackson Tai | Chair: Dame Carolyn Fairbairn | Chair: Mark Tucker
| See page 259 | See page 262 | See page 271 | See page 276 | Technology Governance Working Group
|  |  |  |  |  |  |  |  |  |  | Co-Chairs: Eileen Murray and Steven Guggenheimer

Group Executive Committee
Chair: Noel Quinn
Acquisitions and Disposals Committee | Disclosure and Controls Committee | Environmental, Social and Governance Committee | Group People Committee | Group Risk Management Meeting | Holdings Asset and Liability Committee | Transformation Oversight Executive Committee
Chair: Noel Quinn | Chair: Ewen Stevenson 1 | Co-Chairs: Celine Herweijer and Aileen Taylor | Chair: Elaine Arden | Chair: Pam Kaur | Chair: Ewen Stevenson 1 | Chair: Ewen Stevenson 1
1 Georges Elhedery took over as chair from 1 January 2023.

ESG governance
With ESG issues rising up the global agenda, including with the transition to a sustainable economy, we understood the need to embed ESG considerations more deeply into our governance processes. In February 2021, the Board approved the establishment of an executive level ESG committee to support senior management in the delivery of the Group’s ESG strategy and development of key policies. The ESG Committee also aims to track the Group's progress against material commitments by providing holistic oversight, coordination and management of ESG activities. The ESG Committee is jointly chaired by the Group Chief Sustainability Officer and the Group Company Secretary and Chief Governance Officer. The committee oversees all areas of environmental, social and governance issues, with support from accountable senior management in relation to their particular areas of responsibilities. Key representatives from the functions and global businesses attend to provide insights on the implementation of the ESG strategy across the Group, allowing the ESG Committee to make recommendations to the Board in respect of ESG matters.

Technology governance
The Technology Governance Working Group was established by the Board in early 2021 to enhance its oversight of technology strategy, governance and emerging risks, as well as to strengthen connectivity with the principal subsidiaries. The role of the working group is regularly reviewed by the Board. It was agreed in January 2022 that it should continue as an informal committee of the Board for the duration of 2022, and it was extended for a further 12 months in January 2023. The working group continues to be jointly chaired by two of the Board’s non-executive Directors, Eileen Murray and Steven Guggenheimer, and members include the Group Risk Committee chair and other non-executive Directors representing our US, UK, European and Asian principal subsidiaries. The working group met formally six times in 2022. These meetings included deep dives on key strategic business initiatives, as well as updates on technology strategy implementation and cybersecurity matters, with attendance from key technology and business stakeholders. There were a number of joint sessions between the working group, the Group Audit Committee and the Group Risk Committee. For further details of these sessions, see pages 262 and 271.

HSBC Holdings plc Annual Report and Accounts 2022 | 251

Board induction and training
The Group Company Secretary and Chief Governance Officer works
with the Group Chairman to ensure that all Board members receive
appropriate training, both individually and collectively, throughout their
time on the Board. On appointment, new Directors are provided with
tailored and comprehensive induction programmes to fit with their
individual experiences and needs, including the process for managing
conflicts.
During 2022, we welcomed one new non-executive Director,
Geraldine Buckingham, to our Board. In October, we also announced
that Ewen Stevenson would be stepping down as Group Chief
Financial Officer on 31 December 2022 and be replaced by Georges
Elhedery. Georges Elhedery’s induction programme commenced
upon announcement of his proposed appointment, which included a
detailed handover prepared by the Group Chief Financial Officer prior
to Georges commencing the role from 1 January 2023.
The induction programme is delivered through formal briefings and
introductory sessions with other Board members, senior
management, legal counsel, auditors, tax advisers and regulators, as
appropriate. Topics covered in the induction programme include, but
are not limited to: purpose and values; culture and leadership;
governance and stakeholder management; Directors’ legal and
regulatory duties; recovery and resolution planning; anti-money
laundering and anti-bribery; technical and business briefings; and
strategy.
Where possible, the induction process is initiated before appointment
to allow each new Board member to contribute meaningfully from
appointment. The structure of the induction supports good
information flows within the Board and its committees, as well as
between senior management and non-executive Directors, providing
a clear understanding of our culture and way of operating.
For illustrations of typical induction modules, see the ’Directors’
induction and ongoing development in 2022’ table below.
Directors undertook routine training during 2022 in subject matters
that included: the risk management framework; financial crime; and
health, safety and well-being. They were provided training by external
counsel on their obligations when handling confidential and sensitive
information. The Directors also participated in ’deep dive’ sessions
into specific areas of the Group’s strategic priorities, risk appetite,
approach to managing certain risks, climate-aligned finance and
market abuse regulations. These training sessions included external
consultants who provided insights into geopolitical matters,
macroeconomics and investor sentiments. Other topics of focus
included: operations and technology strategy; the resolvability
assessment framework; and climate change and sustainability.
Non-executive Directors also discussed individual development areas
with the Group Chairman during performance reviews and in
conversations with the Group Company Secretary and Chief
Governance Officer. The Group Company Secretary and Chief
Governance Officer makes appropriate arrangements for any
additional training needs identified using internal resources, or
otherwise, at HSBC’s expense.
Members of Board committees receive relevant training as
appropriate. Directors may take independent professional advice at
HSBC’s expense.
Board Directors who serve on principal subsidiary boards receive
training that is pertinent to circumstances and context relevant to
those boards. Opportunities exist for the principal subsidiary
committee chairs to share their understanding in specific areas with
the Board Directors as part of the Chairman’s Forum.

Directors’ induction and ongoing development in 2022
Director | Induction 1 | Strategy and business briefings 2 | Risk and control 3 | Corporate governance, ESG and other reporting matters 4 | Board global mandatory training 5 | Chair and subsidiary non- executive Director forums 6
Geraldine Buckingham | l | l | l | l | l | l
Rachel Duan | ô | l | l | l | l | l
Dame Carolyn Fairbairn | ô | l | l | l | l | l
James Forese | ô | l | l | l | l | l
Steven Guggenheimer | ô | l | l | l | l | l
José Antonio Meade Kuribreña | ô | l | l | l | l | l
Eileen Murray | ô | l | l | l | l | l
David Nish | ô | l | l | l | l | l
Noel Quinn | ô | l | l | l | l | l
Ewen Stevenson | ô | l | l | l | l | l
Jackson Tai | ô | l | l | l | l | l
Mark Tucker | ô | l | l | l | l | l

l | Matter considered | ô | Matter not considered

1 The induction programme was delivered through formal briefings and introductory sessions with Board members, senior management, legal counsel,
auditors, tax advisers and regulators, as appropriate. Topics covered included, but were not limited to: purpose and values; culture and leadership;
governance and stakeholder management; Directors’ legal and regulatory duties; recovery and resolution risk; anti-money laundering and anti-bribery;
technical and business briefings; and strategy.
2 Directors participated in business strategy, market development and business briefings, which are global, regional and/or market-specific. Examples of
specific sessions held in 2022 included: ’Sustainability operating model’, ’Implications from the Russia-Ukraine conflict’ and ’Strategy execution of Asia
wealth’.
3 Directors received risk and control training and briefings. Examples of specific sessions held in 2022 included: ’Interest rate risk of the banking book
strategy’ and ’ICAAP/ILAAP’.
4 All Directors received training on topics such as: ’Resolvability assessment framework’, ’Climate-aligned finance’, ’Data literacy’ and ’Cyber
ransomware’.
5 Global mandatory training, issued to all Directors, mirrored training undertaken by all employees, including senior management. This included:
management of risk under the risk management framework; cybersecurity risk; health, safety and well-being; sustainability; financial crime, including
understanding money laundering, terrorist financing, tax, sanctions, fraud and bribery and corruption risks; our values, including workplace harassment;
and data privacy and the protection of data of our customers and colleagues.
6 These included the Chairman’s Forum, Remuneration Committee Chairs’ Forum and the Non-Executive Director Summits.
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252 | HSBC Holdings plc Annual Report and Accounts 2022

Board stakeholder engagement
during 2022
The Board is committed to engaging with key stakeholders, including
colleagues, and welcomed the increased focus on bringing the
employee voice into the boardroom, as envisaged by the revisions
made to the UK Corporate Governance Code in 2018.
The Board had previously decided that, given HSBC’s size, scale and
geographical spread, the ’alternative arrangements’ approach for
workforce engagement under the UK Corporate Governance Code
was the suitable option. The Board reviews this annually, and in light
of the challenges facing the organisation and colleagues from factors
outside of HSBC’s control, including the Covid-19 pandemic, decided
to strengthen its practices through the introduction of a non-executive
Director with designated responsibility for workforce engagement. It
was agreed by the Board’s Nomination & Corporate Governance
Committee in May 2022 to appoint José Meade to the new role of
dedicated workforce engagement non-executive Director. This
approach assists with the employee voice being heard in Board
discussions and helps inform decision making.
The appointment of a designated workforce engagement non-
executive Director does not restrict other Board members from
engaging with the workforce, particularly as it is not possible for one
person to represent the diversity of views across the entirety of the
Group. It remains the responsibility of all Directors to consider
stakeholder views, including employees.
The programme of workforce engagement for 2022 continued to be
delivered through a variety of interaction styles, both in person and
virtually, to accommodate the breadth of experience, geographical
spread and range of seniority of our employees. Such activities
included bespoke sessions with smaller groups, formal presentations
and Q&A opportunities. These engagements were designed to
promote and deliver open dialogue and two-way discussions between
Directors and colleagues, allowing the Board to gain valuable insight
on employee perspectives. This in turn informed Directors’
deliberations and decision making in Board and committee meetings.
To help inform the Board of employee initiatives and sentiment and
allow the Board to plan for future engagement activities, Directors
received regular workforce engagement papers at Board meetings.
The Board’s agenda also regularly included non-executive Director
workforce and other stakeholder engagement updates. These
updates were addressed in the Group Chief Executive’s Board report
and the Group Chief Human Resources Officer's report on employee
views and sentiment, particularly around employee Snapshot surveys.
The Chairman’s Forum meetings also discussed employee feedback
from the Group's subsidiaries and received workforce engagement
updates from each of the principal subsidiary chairs.
Engagement activity between the Board and the wider workforce
included meetings and events between representatives of the eight
employee resource groups and the non-executive Directors who have
been designated to support them. These included:
•a virtual Nurture event with working parents and carers, which
reflected on the HSBC colleague survey and how more relevant
data could be captured and actioned;
•two Pride events with our LGBTQ+ colleagues, during which
participants shared their thoughts, explored what Pride had
achieved, discussed future opportunities and considered how
Directors could advocate and support the work of Pride; and
•an in-person event with employee resource group leaders based in
Hong Kong to discuss what motivates them to be employee
resource group leaders, share achievements and discuss
opportunities to align outcomes across the Group.
For more examples of how the Board has engaged with the
workforce and other stakeholders see ‘Board decision making and
engagement with stakeholders’ on page 20.
Workforce engagement non-executive
Director
“I was pleased when the Board took the decision to create
this role and asked me to assume the position of workforce
engagement non-executive Director. Our colleagues, and the
culture we promote, are key to our success in achieving our
purpose of opening up a world of opportunity.
My role and responsibilities, summarised in the chart below,
are clear, but I appreciate that given the scale of our
organisation, and the newness of this responsibility, it is
critical that I execute this role with focus and intent to
understand the employee voice, and communicate this to the
Board. Notwithstanding the challenges, I am dedicated to do
what I can to meet and speak with a broad spectrum of our
people, across global businesses, regions and functions.
With the easing of Covid-19 restrictions in 2022, and as the
Board resumed travel for meetings, I used these opportunities
to connect with employees on a number of topics. Each
experience has been enlightening and I am encouraged to see
how common themes and reflections are being addressed.
While I cannot represent and hear every employee voice, I will
endeavour to listen to what our colleagues are saying around
the world. With a dedicated plan of action for 2023, I see this
role evolving such that I will be able to add value to – and help
drive more in-depth Board discussions on – topics that affect
our people.
I look forward to reporting in the future on the progress
made.”
Dr José Antonio Meade Kuribreña
Workforce engagement non-executive Director
Lunch with graduates
Mexico City, HSBC Tower
July 2022

HSBC Holdings plc Annual Report and Accounts 2022 | 253

Role of the workforce engagement non-executive Director at a glance
Headline responsibilities:
•Engages, understands, represents colleagues globally.
•Receives employee perspectives through formal and informal engagement.
•Represents the employee voice at Board meetings for consideration during decision making.

|  |  |  | Holdings Board |  |  |
Feedback given and considered |  |  |  | ↑ |  |  |
|  |  | Workforce engagement non-executive Director |  |  |
|  |  |  | ↑ |  |  |
| Data | Direct engagement
Means of engagement | Surveys/ Snapshot |  | Employee jams | Audits | Chairs of principal subsidiaries | Virtual 'field' trips | Geographical visits
Reach | Global |  | Global | Sample | Regional | Specific interest groups | Direct engagement
| ↑ | ↑ | ↑ | ↑ | ↑ | ↑ | ↑ | ↑
Likely issues/ topics | Purpose, culture values | Strategy and growth | Pay | Performance management | Working conditions/ future of work | Diversity and inclusion | Change and transformation | Climate/ESG

Activities during 2022
José Meade’s appointment was announced to the workforce jointly
by the Group Chairman and Group Chief Executive on 1 June 2022.
This was positively received by colleagues, several of whom reached
out directly to José with engagement ideas.
Since his appointment, José has undertaken a variety of
engagements in his role including:

Employee views – Mexico, US, India, UK, Hong Kong, Argentina, Brazil, Chile and Uruguay
In the weeks immediately following his appointment, José had 25 meetings with colleagues in nine countries, in person and virtually, across most areas of the Group. Topics discussed included: the need for continued focus on areas such as well-being, and diversity and inclusion; and enhancement of technology. Following such discussions, several suggestions were made, including strengthening employee retention strategies, increasing career ownership within teams and improving information gathering analysis and dissemination following exit interviews to relevant colleagues in the Group.

Graduates – Mexico, US
During the year, José met with Mexican graduates in person and US graduates virtually to share experiences of HSBC’s graduate programme.

GBM – UK
José participated in an in-person meeting with a diverse group of Global Banking colleagues in London to share experiences and views on people matters, women in finance, diversity and inclusion, and career development.

Global Service Centre – Mexico
José joined colleagues for a meeting with Global Service Centre employees to understand their perspective on working life.

Employee resource groups – Global
José participated in the virtual annual employee resource group summit and heard about the groups' leaders' successes and challenges. He connected with representatives in the UK, Mexico, India, Dubai, Hong Kong, Singapore and the US.

Employee resource groups – Dubai
José joined an in-person meeting with the chapter leads of the five employee resource groups active in MENA (Ability, Balance, Embrace, Generations and Nurture).

Visit to Global Service Centre, Mexico City, Tecnoparque
October 2022
Engagement highlights

65 | 1,500+
Sessions attended by executive and/or non-executive Directors | Number of employees engaged
38 | 600+
Sessions attended by workforce engagement non-executive Director | Number of employees engaged by workforce engagement non- executive Director
12+ | 73%
Countries of engagement | Highest employee engagement survey response

Priorities for 2023
•Review opportunities with Human Resources to ensure the right
insight is being gained from employees to support and better
inform the Board when taking decisions.
•Attend six larger-scale employee engagement events aligned to
Board meeting agenda items to foster debate and discussion.
•Plan further international employee engagement opportunities in
addition to the Board travel plans.
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254 | HSBC Holdings plc Annual Report and Accounts 2022

Board activities during 2022

During 2022, the Board remained focused on HSBC’s strategic
direction, overseeing performance, and risk. It considered
performance against financial and other strategic objectives, key
business challenges, emerging risks, business development, investor
relations and the Group’s relationships with its stakeholders. The end-
to-end governance framework facilitated discussion on strategy and
performance by each of the global businesses and across the principal
geographical areas, which enabled the Board to support executive
management with its delivery of the Group’s strategy.
The Board’s key areas of focus in 2022 are set out by theme below.
Strategy and business performance
The Group’s strategy remains focused on increasing returns for
investors, creating capacity for future investment and building a
sustainable platform for growth. In 2022, each Board meeting
featured the Group's strategic performance on its agenda, facilitating
opportunities to track its delivery throughout the year, and providing
opportunity to shape how it was developed. The Board reviewed
progress within the Group’s global businesses and regions, as well as
against its four strategic pillars of: focus on our strengths, digitise at
scale, energise for growth and transition to net zero.
The Group’s strategic transformation programme came to a formal
conclusion in December 2022, having delivered against its objectives
to reshape underperforming businesses, simplify the organisation,
reduce costs and reallocate risk-weighted assets. Transformation
remains a key business focus as it is embedded throughout the
organisation and its operations.
Environmental, social and governance
In 2020, the Group announced a climate ambition to align its financed
emissions to net zero by 2050, and to become net zero in its own
operations and supply chain by 2030. The Group aims to achieve this
by supporting clients’ transition to a net zero carbon economy and
focusing on sustainable finance opportunities, as well as by reducing
the carbon emissions in its own operations.
The Board takes overall responsibility for ESG strategy, overseeing
executive management in developing the approach, execution and
associated reporting. The Board considered whether to establish a
Board committee dedicated to ESG issues, but instead decided that
the best way to support the oversight and delivery of the Group’s
climate ambition and ESG strategy was to retain governance at Board
level. The Group Executive Committee enhanced its governance
model of ESG matters with the introduction of a dedicated ESG
Committee and supporting forums. These support senior
management in the delivery of the Group’s ESG strategy, key policies
and material commitments by providing oversight over – and
management and coordination of – ESG commitments and initiatives.
In 2022, the Board oversaw the implementation of ESG strategy
through regular dashboard reports and detailed updates including:
reviews of net zero policies, financed emissions target setting and
climate-aligned financing initiatives.
Financial decisions
The Board and its dedicated committees approved key financial
decisions throughout the year, including the Annual Report and
Accounts 2021, the Interim Report 2022 and the first quarter and the
third quarter Earnings Releases.
At the end of 2021, the Board approved the 2022 financial resourcing
plan. The Board monitored the Group’s performance against the
approved plan, as well as the plans of each of the global businesses.
The Board also approved the renewal of the debt issuance
programme. In December 2022, the Board approved the financial
resourcing plan for 2023.
The Board adopted a dividend policy designed to provide sustainable
cash dividends, while retaining the flexibility to invest and grow the
business in the future, supplemented by additional shareholder
distributions, if appropriate. For the financial year 2022, we achieved a
dividend payout ratio within our 2022 target range of between 40%
and 55% of reported earnings per ordinary share (’EPS’). As
previously communicated, given our current returns trajectory, we are
establishing a dividend payout ratio of 50% of reported earnings per
share for 2023 and 2024, excluding material significant items
(including the planned sale of our retail banking operations in France
and the planned sale of our banking business in Canada).
On 22 February 2022, we announced an interim dividend of $0.18 per
share for the 2021 full-year, and on 1 August 2022 we announced an
interim dividend of $0.09 per share for the 2022 half-year. For further
details of dividend payments, see page 418.
Risk, regulatory and legal
considerations
The Board, advised by the Group Risk Committee, promotes a strong
risk governance culture that shapes the Group’s risk appetite and
supports the maintenance of a strong risk management framework,
giving consideration to the measurement, evaluation, acceptance and
management of risks, including emerging risks.
The Board considered the Group’s approach to risk including its
regulatory obligations. A number of key frameworks, control
documents, core processes and legal responsibilities were also
reviewed and approved as required by the Board and/or its relevant
committees. These included:
•the Group’s risk appetite framework and risk appetite statement;
•the individual liquidity adequacy assessment process;
•the individual capital adequacy assessment process;
•the Group’s obligations under the Modern Slavery Act and
approval of the Modern Slavery and Human Trafficking Statement;
•stress testing and capabilities required to meet the PRA’s
resolvability assessment framework;
•the revised terms of reference for the Board and Board
committees; and
•the Group's revised delegation of authority policy.
The Board also reviewed and monitored the implications of
geopolitical and macroeconomic developments during the year.
Technology
Throughout the year, the Board received regular updates on
technology from the Group Chief Operating Officer, including on the
implementation of the technology strategy and key strategic business
initiatives. As technology is crucial to help deliver the Group’s
strategic objectives, including the strategic pillar ’Digitise at scale’,
strategy papers covered technology issues throughout the year. In
December, the Board discussed a digital technology map, a new tool
that could help simplify, prioritise and drive change in the Group’s
technology estate. For further details, see ’Principal decisions’ on
page 22.
The Technology Governance Working Group continued to oversee
and enhance the Group's governance of technology. For further
details of this working group, see page 251.
People and culture
The Board continued to dedicate time in its meetings to discuss
people-related and culture-related topics, to help raise its awareness
of employee and other stakeholder perspectives. The Board is
committed to setting the right cultural tone, with each Board meeting
beginning with a ’culture moment’, which includes observations of
behaviours within the Group aligned to its purpose and values.
Group subsidiary directors’ approaches to workforce engagement
were presented by each of the chairs from the principal subsidiaries
to the Chairman's Forum, where they discussed their respective
board engagement activities with the workforce, as well as what they
learned as part of such engagements and other cultural insights. The

HSBC Holdings plc Annual Report and Accounts 2022 | 255

Board also receives insights from the all-employee Snapshot survey,
which measures employee sentiment. A culture insights report,
developed in 2021, provides the Board with key data indicators, such
as behaviours, sentiment, business outcomes and people to allow it
to monitor culture across the Group.
Board engagement with management and the wider workforce
continued to remain a strong area of attention, particularly with the
appointment of a dedicated workforce engagement non-executive
Director. For further details of the work of the workforce engagement
non-executive Director, see page 253.
Governance
The Board continued to oversee the governance, smooth operation
and oversight of the Group and its principal and material subsidiaries.
The Board and senior management supported improvements to
governance initiatives to encourage simplification and promote
effective decision making in the business. Such improvements
included making refinements to Board and committee paper
templates, and reducing unnecessary committee meetings to free
management time and encourage individual accountability and
decision taking.
During the year, Pauline van der Meer Mohr and Irene Lee retired as
independent non-executive Directors, and Ewen Stevenson resigned
as Group Chief Financial Officer. The Board appointed Geraldine
Buckingham as an independent non-executive Director in May 2022,
and Georges Elhedery as Group Chief Financial Officer from 1 January
2023. The Board, supported by the Nomination & Corporate
Governance Committee, reviews the skills and experience of the
Board on an ongoing basis. This ensures that the Board and its
committees comprise the necessary skills, diversity, experience and
competencies to discharge their responsibilities effectively. For
further details of the review and changes to the Board, see the
Nomination & Corporate Governance report on page 259. For further
details of diversity of the Board, see page 247.
The Board monitored its compliance with the UK Corporate
Governance Code, the Hong Kong Corporate Governance Code and
the Companies Act 2006 throughout the year.
Board engagements with
shareholders
In 2022, Board members remained responsive to shareholder
requests to engage, and certain of the Board met with key investors
including Ping An Asset Management Co. Ltd. The Group Chairman
and the Senior Independent Director, often with the Group Company
Secretary and Chief Governance Officer, engaged with a number of
our large institutional investors in 19 meetings. The Group Chief
Executive and the Group Chief Financial Officer, together and
separately, attended over 100 meetings with investors. Key topics
included our financial performance, updates on strategy and market
presence, geopolitical risks and the macroeconomic outlook in key
geographies.
The Group Remuneration Committee Chair also met with key
investors and proxy advisory firms during the fourth quarter of 2022.
These sessions provided useful insight into investor views on key
areas of decision making for the Group Remuneration Committee,
including our approach to the 2022 pay review for executive Directors
and the wider workforce. For further details of the Group
Remuneration Committee report, see page 276.

Board activities in 2022
Main topic | Sub-topic | Meetings at which topics were discussed 1
|  | Jan | Feb | Mar | Apr | May | Jun | Jul | Sep | Nov | Dec
Strategy | Group strategy | ô | ô | l | ô | l | l | l | l | ô | l
Regional strategy/global business strategy | l | l | l | l | l | ô | l | l | l | l
Environmental, social, governance | l | l | ô | l | l | ô | l | l | ô | l
Business and financial performance | Region/global business | l | l | ô | l | l | ô | l | l | ô | l
Financial performance | l | l | ô | l | l | ô | l | l | ô | l
Financial | Results and accounts | l | l | ô | ô | ô | ô | l | ô | ô | ô
Dividends | l | l | ô | ô | ô | ô | l | ô | ô | ô
Group financial resource planning | l | l | ô | l | l | ô | l | l | ô | l
Risk | Risk function | l | l | ô | l | l | ô | l | l | ô | l
Risk appetite | ô | ô | l | ô | ô | ô | l | ô | ô | l
Capital and liquidity adequacy | ô | ô | l | l | ô | ô | ô | l | ô | ô
Regulatory | Regulatory and legal matters 2 | l | l | l | l | l | l | l | l | ô | l
Regulatory matters with regulators in attendance 3 | ô | ô | ô | ô | ô | l | ô | ô | ô | ô
External | External insights | ô | ô | ô | l | ô | ô | ô | l | ô | ô
Technology | Strategic and operational | l | l | ô | l | l | l | l | l | ô | l
People and culture | Purpose, values and engagement | ô | l | ô | ô | ô | ô | ô | l | ô | ô
Governance | Subsidiary governance framework | ô | l | ô | ô | ô | ô | ô | ô | ô | ô
Policies and terms of reference | l | ô | ô | l | l | ô | l | l | ô | l
Board/committee effectiveness | l | l | ô | ô | ô | ô | l | ô | ô | ô
Appointment and succession | ô | l | ô | ô | ô | ô | l | l | ô | l
| AGM and resolutions | l | l | ô | l | ô | ô | ô | ô | ô | ô

l | Matter considered | ô | Matter not considered

1 No Board meetings were held during August and October 2022.
2 Includes resolvability assessment framework, modern slavery and human trafficking, statement of business principles and code of conduct, regional
updates and listing renewals.
3 Meeting attended by members of the Prudential Regulation Authority.
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256 | HSBC Holdings plc Annual Report and Accounts 2022

Board and committee effectiveness, performance and accountability

The Board and its committees are committed to regular, independent
evaluation of their effectiveness at least once every three years. The
Board intends to conduct an independent evaluation in 2023.
For 2022, the Nomination & Corporate Governance Committee
agreed that the evaluation of the Board and its committees would
again be conducted internally. The process included the completion of
a questionnaire, issued by Lintstock, an independent service provider
with no other connection to the Group or any individual Director. The
questions were designed by the Group Company Secretary and Chief
Governance Officer, some based on themes from the 2021 evaluation
findings. A summary of the effectiveness reviews of the Board and
the Board committees can be found on page 258 and in the
respective committee reports from page 259.
To gather qualitative feedback, the Group Company Secretary and
Chief Governance Officer, together with the Deputy Group Secretary,
conducted interviews with each questionnaire respondent, including
all the Board Directors, regular attendees of the relevant meetings
and key advisers. The Group Chairman and committee chairs also
participated in additional discussions following the consolidation of
feedback in respect of the individual committees.
Overall, the work of the Board was rated highly and it was viewed as
operating effectively. In general, there were consistent findings
across the Board and committee reviews. These included:
•a positive view of the effectiveness of the Chairs of the Board and
committees and the participation of its members;
•a greater desire to be even more forward looking;
•a need for continued focus on the quality of meeting materials to
ensure that content remains focused, clear and precise; and
•continued collaboration between the Board committees.
At its January 2023 meeting, the Group Chairman led a discussion
with the Board and considered the findings. The following areas of
focus were discussed and actions agreed: a revised approach to
tracking strategy execution; continued development of the timeline of
sustainability and technology deliverables; simplification and
prioritisation of deliverables and interdependencies; and enhanced
focus on customer stakeholder engagement.
Actions will be monitored and addressed on an ongoing basis. Similar
discussions were led by each of the committee chairs in their
respective January meetings. Progress against these actions will be
included in the Annual Report and Accounts 2023.
During 2022, a review of the Group Chairman’s performance was led
by the Senior Independent Director in consultation with the other
independent non-executive Directors, management and key
stakeholders. Non-executive Directors also undergo regular individual
reviews with the Group Chairman. These reviews confirmed that the
performance of the Group Chairman and each Director was effective
and that each had met their time commitments during the year.
The review of executive Directors’ performance, which helps
determine their pay outcomes each year, is contained in the
Directors’ remuneration report on page 276.
Board and Committee evaluation process
The Board made good progress against all of the action points
identified during the 2021 evaluation. In particular, the Board:
•enhanced its composition with the appointment of Geraldine
Buckingham, which brought significant Asia leadership experience;
•maintained a focus on succession planning, with a view to
strengthening its expertise in banking and improving its
representation from Asia;
•strengthened workforce engagement, with the appointment of
José Antonio Meade Kuribreña as designated non-executive
Director for workforce engagement;
•devoted time to the consideration of key areas of focus, including
digital opportunities and threats, ESG and strategic risk;
•continued to monitor compliance with the subsidiary accountability
framework; and
•enhanced coordination and collaboration between its committees,
with combined meetings of the Group Audit Committee, Group
Risk Committee and Technology Governance Working Group held
during the year.

HSBC Holdings plc Annual Report and Accounts 2022 | 257

Summary of 2022 Board effectiveness findings and recommendations for action:
| Findings from the evaluation | Recommendations for action
Strategy, execution and deliverables | •The Board’s strategic oversight was rated positively overall, although the consistency of management’s articulation, tracking and execution of progress against the Group’s strategy could be strengthened. It was recommended to increase the use of metrics to show comparable progress against key deliverables. •The Board’s approach to the oversight of the Group’s sustainability strategy was rated positively, although the monitoring of sustainability-related key targets required greater clarity. •The Board’s oversight of technology strategy was considered strong and it was suggested that the Board required a more detailed plan of digital deliverables to enable continuous monitoring and performance tracking. | •The Group Chief Executive should develop a revised set of metrics related to performance, execution and risk management, as well as other key value drivers, as appropriate. •The Group Chief Executive and relevant accountable executives should develop a timeline of ESG and technology deliverables and milestones.
Simplification and prioritisation | •The importance of devoting sufficient time to challenging management’s progress on simplification and prioritisation was highlighted. It was suggested that the Board provide greater oversight of management prioritisation of key projects and strategic deliverables. | •A Board session should be held annually on organisational simplification and prioritisation of deliverables and interdependencies.
Stakeholder engagement | •Engagement with stakeholders was strong, including the focus on the employees, in the year. The Board asked that further enhancements be considered, in particular customers given the current macroeconomic headwinds. | •The Board’s stakeholder engagement plan should be reviewed to ensure that all members of the Board have sufficient opportunity to engage with, and understand the views, of the Group’s key stakeholders.
Meeting materials | •It was recognised that meeting materials had improved considerably over recent years, but it was emphasised there was opportunity for further improvement around consistency, comparability and ownership. Stakeholder considerations could be better incorporated in Board papers to support decision making. | •Training and/or guidance should be provided to all paper authors in 2023.

Report of the Directors | Corporate governance report | Board committees

258 | HSBC Holdings plc Annual Report and Accounts 2022

Nomination & Corporate Governance Committee

"Developing our skills and experience, and diversity and inclusion ambitions remains a priority and the Committee will continue to oversee and enhance the succession pipeline at Board and senior leadership level.” |

D ear Shareholder
I am pleased to present the Nomination & Corporate Governance
Committee report, which provides an overview of the work of the
Committee and its activities during the year.
During 2022, the Committee continued to review the Board’s
composition, succession planning, skills, experience and diversity, to
ensure that the Group operated in line with its ambition of world class
governance.
On behalf of the Board, the Committee oversaw a number of changes
to Board composition, including the retirements of Pauline van der
Meer Mohr and Irene Lee, and the appointment of Geraldine
Buckingham. The Committee also closely monitored executive
succession planning, in particular the transition of the Group Chief
Financial Officer, with Georges Elhedery succeeding Ewen Stevenson
from 1 January 2023. Ewen leaves with our sincere thanks for the
significant contribution that he has made to the Board and to the
broader Group over the past four years.
Jackson Tai will retire from the Board at the conclusion of our 2023
AGM in May and will be succeeded as Chair of the Group Risk
Committee by James Forese. On behalf of the Board, I wish to thank
Jackson for his outstanding dedication and the significant contribution
he has made to the success of the Group, in particular the
improvement in our oversight and governance of risk and conduct.
James' significant banking and risk experience will be invaluable in
the leadership of the Group Risk Committee as the Group continues
to deliver on its transformation and growth strategy, in a safe and
sustainable manner.
On 1 March 2023, Kalpana Morparia will join the Board, strengthening
both its collective Asia business and banking knowledge and
experience, and diversity.
Developing our skills and experience, and diversity and inclusion
ambitions of the Board and senior management, remains a priority
and the Committee will continue to oversee and enhance the
succession pipeline at Board and senior leadership level through
2023. This will build on the revised gender and ethnic representation
targets introduced within the diversity and inclusion policy, and the
work led by management on developing successors for senior
leadership roles and under the Asia Talent programme. Our Board
diversity and inclusion policy, which contains our revised targets, can
be found on hsbc.com.
During 2022, we also took the decision to establish a new Board role
designated with responsibility for ensuring that the employee voice is
strengthened within the Board’s deliberations. The creation of the role
was a natural evolution of the work already undertaken to enhance
stakeholder engagement within Board decision making. In this role,
José Meade will lead our workforce engagement on behalf of the
Board, supported by the Corporate Governance and Secretariat and
Human Resource functions. Further details on the role and initial
areas of focus can be found on page 253.

Membership
| Member since | Meeting attendance in 2022
Mark Tucker (Chair) | Oct 2017 | 7/7
Geraldine Buckingham 1 | May 2022 | 4/4
Rachel Duan 2 | Sep 2021 | 6/7
Dame Carolyn Fairbairn | Sep 2021 | 7/7
James Forese | May 2020 | 7/7
Steven Guggenheimer | May 2020 | 7/7
Irene Lee 3 | Apr 2018 | 3/3
José Antonio Meade Kuribreña | Apr 2019 | 7/7
Eileen Murray 2 | Jul 2020 | 5/7
David Nish | Apr 2018 | 7/7
Jackson Tai | Apr 2018 | 7/7
Pauline van der Meer Mohr 3 | Apr 2016 | 3/3

1 Geraldine Buckingham was appointed to the Board and joined the
Committee on 1 May 2022.
2 Rachel Duan was unable to attend the July committee meeting due to
a pre-existing engagement. Eileen Murray was unable to attend the
April and September meetings for personal health reasons.
3 Irene Lee and Pauline van der Meer Mohr stepped down from the
Board and the Committee following the conclusion of the AGM on
29 April 2022.
The Committee’s role in overseeing these changes is outlined on the
following pages.
As we look ahead to 2023, the Committee will consider the changes
to the UK audit, governance and regulatory regimes, including
updates to the UK Corporate Governance Code, and the steps needed
to ensure the Group continues to operate in line with best practice.
Mark E Tucker
Chair
Nomination & Corporate Governance Committee
21 February 2023
Key responsibilities
The Committee’s key responsibilities include:
•leading the process for identifying and nominating candidates for
appointment to the Board and its committees;
•overseeing succession planning and development for the Group
Executive Committee and other senior executives; and
•overseeing and monitoring the corporate governance framework
of the Group and ensuring that this is consistent with best
practice.
Committee governance
The Group Chief Executive, the Group Chief Human Resources
Officer, and the Group Head of Talent routinely and selectively
attended Committee meetings. The Group Company Secretary and
Chief Governance Officer attends all Committee meetings and
supports the Group Chairman in ensuring that the Committee has
fulfilled its governance responsibilities.
Russell Reynolds Associates, which supported the Committee and
the management team in relation to Board and senior management
succession planning, regularly and selectively attended meetings
during the year. It has no other connection with the Group or
members of the Board.

HSBC Holdings plc Annual Report and Accounts 2022 | 259

Board composition and succession
The Committee continued its focus on ensuring that the Board and its
members, both collectively and individually, possess the skills,
knowledge and experience necessary to oversee, challenge and
support management in the achievement of the Group’s strategic and
business objectives.
In addition to the retirements of Irene Lee and Pauline van der Meer
Mohr, the Board welcomed Geraldine Buckingham, who most
recently held the position of Head of Asia-Pacific at BlackRock. She
was appointed to the Board with effect from 1 May 2022.
In October, the Group announced the appointment of Georges
Elhedery as an executive Director and Group Chief Financial Officer
with effect from 1 January 2023. This decision followed a review by
the Committee of the composition of the Group Executive Committee
with a particular focus on long-term succession planning. It was
concluded, based on the recommendation of the Group Chief
Executive, that Georges, who was previously co-Chief Executive
Officer of Global Banking and Markets, should replace Ewen, who
stepped down from the Board at the end of 2022. Georges, who has
a track record of driving growth and managing change and who brings
a strong focus on execution, will help the Group to accelerate delivery
of improved financial performance and shareholder returns.
In advance of taking up the role, Georges spent significant time with
Ewen to ensure an orderly handover of responsibilities. The Board has
put in place a tailored development and support plan for Georges as
he transitions to his new role, which will be overseen by the
Committee.
The Committee expects that non-executive Directors serve two three-
year terms, with any appointments beyond this to be determined on
an annual basis with reference to the needs of the Board and the
performance and contribution of the individual. In view of the
importance of continuity for key roles on the Board, particularly given
the current economic and geopolitical environment, the Committee
agreed that David Nish’s appointment should be extended for a
further year to the 2024 AGM, subject to his re-election by
shareholders. In taking this decision, the Committee considered the
need for an effective transition in relation to the Senior Independent
Director and Chair of the Group Audit Committee roles, both of which
David currently holds. It is the Board’s strong belief that this
extension of David’s appointment, given his performance and
contribution to the Board during 2022, is in the best interests of the
Group and all of its stakeholders.
As referenced in our 2021 report, the Committee agreed to prioritise
in future appointments significant previous executive experience in
banking, as well as with deep business and cultural expertise across
Hong Kong and mainland China, and south-east Asia. A number of
potential candidates meeting the desired skills and experiences were
identified, a shortlist of which were considered and discussed by the
Committee. Following meetings between various members of the
Committee and priority candidates to understand their respective
interests and capacities, the Board accepted the Committee’s
recommendations and approved the appointments of Geraldine
Buckingham with effect from 1 May 2022 and Kalpana Morparia with
effect from 1 March 2023.
Strengthening the Board’s collective experience in these areas
remains a priority, and the Committee will continue to discuss broader
succession planning for key roles on the Board and committees
through 2023, and beyond. In addition, succession planning will have
regard to diversity and inclusion targets and expectations. The
Committee is focused on identifying candidates with the following
skills and experience for future appointments to the Board:
•significant executive experience in banking;
•deep business and cultural expertise across Asia, in particular
Hong Kong and mainland China, and the Middle East, given the
geographical mix of the Group’s business and the importance of
these regions to the strategy and future growth; and
•previous public company leadership experience.
The Committee will continue to monitor the market for potential
candidates for appointment to the Board in both the short and
medium term, to ensure that the Board has a pipeline of credible
successors and continues to be equipped to effectively discharge its
responsibilities.
Board diversity
The Board recognises the importance of gender, social and ethnic
diversity, and the strengths diversity brings to Board effectiveness.
Diversity is taken into account in its broadest sense when considering
succession plans and appointments at both Board and senior
management level, as well as more broadly across the Group.
Over the past 12 months, there has been significant focus on
diversity at Board level, including as a result of the updated guidance
and targets issued by the FTSE Women Leaders Review (formerly the
Hampton-Alexander review) and the UK Listing Authority. The Board
is supportive of the proposals and, in line with the Board diversity and
inclusion policy, remains committed to increasing diversity at Board
and senior levels to ensure we reflect the markets and societies we
serve. This policy, which was updated in 2022 to incorporate new
targets on female representation, details our approach to achieving
our diversity ambitions, and ensures that diversity and inclusion
factors are considered in succession planning. The revised Board
diversity and inclusion policy is available at www.hsbc.com/who-we-
are/leadership-and-governance/board-responsibilities.
At the end of 2022, the Board had 33% female representation, with
four female Board members out of 12. Following our recent
announcement in relation to Kalpana Morparia and Jackson Tai, this
leaves us on track to meet our aspirational target of at least 40%
female representation on the Board by the end of 2023, ahead of the
end of 2025 expectations set by the FTSE Women Leaders Review
for gender representation on Boards.
The FTSE Women Leaders Review also published revised gender
representation targets, specifically the expectation that a woman
holds at least one of the senior Board positions of Chair, Chief
Executive Officer, Senior Independent Director or Chief Financial
Officer by the end of 2025. The Committee considers succession for
these key Board roles on an ongoing basis and will take into account
the need for greater diversity when considering candidates for
appointment to these roles in future. At the end of 2022, all those
holding these senior Board positions at the Group were male. The
Board is committed to achieving this target by the review’s end of
2025 deadline.
The Board continued to exceed the Parker Review target of having at
least one Director of diverse ethnic heritage, with three members of
our Board self-identifying in line with the ethnicity/ethnic definition set
by the Parker Review. Given the global and international nature of our
business, including our strong presence and heritage in Asia, the
Committee considers that the Board should comprise a greater
proportion of diverse ethnic heritage Directors than anticipated by the
Parker Review. The Board’s targets were revised to reflect this
commitment and therefore to maintain or improve the current
representation of directors from a diverse ethnic heritage.
Further details on activities to improve diversity across senior
management and the wider workforce, together with representation
statistics, can be found on page 308.
Diversity of our principal subsidiary boards has also improved as a
result of the Committee’s focus on succession planning and regular
refreshment of subsidiary boards, with gender representation
improving across all seven of our principal subsidiaries. The HSBC
Bank Director Programme, delivered in partnership with IMD
Business School during the first half of 2022, has also helped to
prepare senior talent for roles on our subsidiary boards. A number of
the graduates who participated in the programme have been provided
with opportunities on subsidiary boards, enhancing the skills,
experience and diversity of our subsidiary boards. This programme
will operate regularly with the next cohort scheduled to take place in
2024.
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260 | HSBC Holdings plc Annual Report and Accounts 2022

Independence
Independence is a critical component of good corporate governance,
and is a principle that is applied consistently at both Holdings and
subsidiary level. The Committee has delegated authority from the
Board in relation to the assessment of the independence of non-
executive Directors. In accordance with the UK and Hong Kong
Corporate Governance Codes, the Committee has reviewed and
confirmed that all non-executive Directors who have submitted
themselves for election and re-election at the AGM are considered to
be independent. This conclusion was reached after consideration of
all relevant circumstances that are likely to impair, or could appear to
impair, independence.
In line with the requirements of the Hong Kong Corporate
Governance Code, the Committee also reviewed and considered the
mechanisms in place to ensure independent views and input are
available to the Board. These mechanisms include:
•having the appropriate Board and Committee structure in place,
including rules on the appointment and tenure of non-executive
Directors;
•facilitating the option of having brokers and external industry
experts in attendance at Board meetings during 2022, as well as
having representatives from the Group’s key regulators attend
Board meetings in relation to specific regulatory items;
•ensuring non-executive Directors are entitled to obtain
independent professional advice relating to their personal
responsibilities as a Director at the Group’s expense;
•having terms of reference for each Committee and the Board
provide authority to engage independent professional advisers;
and
•holding annual Board and Committee effectiveness reviews, with
feedback sought from members on the quality of, and access to,
independent external advice.
Senior executive succession and
development
The outputs from the annual capability review, including updated
succession plans for the Group Executive Committee members, were
considered and approved by the Committee in December 2022.
These reflected continued efforts to support the development and
progression of diverse talent and promote the long-term success of
the Group, with the gender diversity and proportion of Asian heritage
successors improving year on year. This included future internal and
external succession options for the Group Chief Executive, to ensure
that the Committee has a robust and actionable succession plan
when required.
The Committee also continued to receive updates on the
development of our talent programme within the Asia-Pacific region.
Since its launch in 2020, significant progress has been made towards
ensuring that we have a deeper and more diverse leadership bench-
strength. Succession plans are more robust, with greater diversity and
good succession fulfilment outcomes.
Committee evaluation
The annual review of the effectiveness of the Committee was
internally facilitated in 2022. The review concluded that, overall, the
Committee continued to operate effectively and in line with regulatory
requirements. However, a number of areas for enhancement were
identified, including the need for a continued focus on succession
planning for the Group Chief Executive, the Committee Chair, the
Senior Independent Director and future non-executive Directors,
ensuring plans supporting the Board’s objectives in relation to
diversity and stakeholder needs. Other areas of focus included the
continued identification of both internal and external talent, training
requirements and the retention strategy for high performing
individuals. Certain priority areas of focus for the Committee across
2023 were suggested, including the continued monitoring of progress
of governance within material and principal subsidiaries (as defined in
the subsidiary accountability framework), and the need to review the
external advisers supporting the Committee. The outcomes of the
evaluation have been reported to the Board, and the Committee will
track the progress in implementing recommendations during 2023. In
line with the UK Corporate Governance Code, the 2023 Board and
Committee performance review will be externally facilitated.
The Committee has initiated the process for the selection of the
independent board evaluator, with a decision on the evaluator to be
taken within the first half of the year to allow the review to
commence in the second half of 2023. A report on the process,
findings and recommendations will be disclosed in the Annual Report
and Accounts 2023.
The Committee was kept updated on progress on actions agreed
following its 2021 evaluation, which were all completed.
Subsidiary governance
In line with the subsidiary accountability framework introduced in
2021, the Committee continued to oversee the corporate governance
and succession arrangements across the principal and material
subsidiary portfolio. Where appropriate and subject to strong
rationale, the Committee approved exceptions from strict compliance
with the framework, including to reflect local law and regulation, as
well as market practice. The Committee has reinforced its
expectations that subsidiaries take steps to achieve full compliance
with the framework, with any exception requests subject to thorough
review and consideration by the Group Company Secretary and Chief
Governance Officer in advance of consideration by the Committee.

Matters considered during 2022
| Jan | Feb | Apr | May | Jul | Sep | Dec
Board composition and succession |  |  |  |  |  |  |
Board composition, including succession planning and skills matrices | l | l | l | l | ô | l | ô
Approval of diversity and inclusion policy | ô | ô | ô | ô | l | ô | ô
Executive talent and development |  |  |  |  |  |  |
Senior executive succession | ô | l | l | l | l | l | l
Approval of executive succession plans | ô | ô | ô | ô | ô | ô | l
Talent programmes | ô | l | ô | ô | ô | ô | l
Governance |  |  |  |  |  |  |
Board and committee evaluation | l | ô | ô | ô | l | ô | ô
Subsidiary governance | l | ô | ô | ô | l | l | l
Subsidiary and executive appointments | l | ô | l | ô | l | l | l

l | Matter considered | ô | Matter not considered

HSBC Holdings plc Annual Report and Accounts 2022 | 261

Group Audit Committee

"The Committee reviewed management's arrangements for compliance and assurance over regulatory reporting processes, and progress of HSBC-specific reviews of regulatory reporting." |

Dear Shareholder
I am pleased to introduce the Group Audit Committee (‘GAC’) report
setting out the key matters and issues considered in 2022.
We welcomed Eileen Murray, who rejoined the GAC in 2022, and
Rachel Duan, who was appointed to the Committee in April 2022.
Pauline van der Meer Mohr stepped down from the Board and James
Forese stepped down from the GAC to assume new Board
responsibilities. I would like to thank them both for their support and
insightful contributions to the work of the GAC.
The GAC continued to provide oversight of change and transformation
programmes to enhance the Group’s internal controls over financial
reporting. We challenged management on its forecasts and
confidence in the delivery of externally communicated targets in an
uncertain external environment. The Committee also reviewed
management's arrangements for compliance and assurance over
regulatory reporting processes, and progress of HSBC-specific
reviews of regulatory reporting.
We continued to strengthen our relationships and understanding of
issues at the local level through regular information sharing with the
principal subsidiary audit committee chairs. This was supplemented
with regular meetings with the principal subsidiary audit committee
chairs to discuss key issues, and through their attendance at GAC
meetings. I also joined a number of principal subsidiary audit
committee meetings throughout the Group.
The Group’s whistleblowing arrangements continue to satisfy
regulatory obligations and I regularly met the whistleblowing team to
discuss material whistleblowing cases. Efforts were made in 2022 to
drive continuous operational improvements and to provide deeper
insights to support our purpose, values and conduct approach.
Actions were also taken to make use of best practices across
investigative functions and to enhance the experiences of colleagues
when they report concerns at HSBC.
The Committee oversaw the retendering for statutory audit services
for the 2025 year-end. This process included detailed qualification
activities, thorough evaluation of firms, consideration of evolving UK
legislation and guidelines, and engagement with regulators. The GAC
recommended to the Board that PwC be reappointed for a further
term of 10 years commencing 1 January 2025.
The Committee implemented all the actions from the 2022 evaluation
and the 2023 review determined that the GAC continued to operate
effectively.
David Nish
Chair
Group Audit Committee
21 February 2023

Membership
| Member since | Meeting attendance in 2022 1
David Nish (Chair) | May 2016 | 13/13
Rachel Duan 2 | Apr 2022 | 6/8
James Forese 3 | May 2020 | 5/5
Eileen Murray 4 | Jun 2022 | 6/8
Jackson Tai | Dec 2018 | 13/13
Pauline van der Meer Mohr 5 | Apr 2020 | 5/5

1 These included four joint meetings with the Group Risk Committee
(‘GRC’) and the Technology Governance Working Group.
2 Rachel Duan was unable to join two meetings due to prior
commitments made before becoming a GAC member.
3 James Forese stepped down from the GAC on 1 June 2022.
4 Eileen Murray rejoined the GAC on 1 June 2022, and was unable to
attend two meetings due to personal circumstances.
5 Pauline van der Meer Mohr retired from the Board on 29 April 2022.
Key responsibilities
The Committee’s key responsibilities include:
•monitoring and assessing the integrity of the financial statements,
formal announcements and regulatory information in relation to the
Group’s financial performance, as well as significant accounting
judgements;
•reviewing the effectiveness of, and ensuring that management
has appropriate internal controls over, financial reporting;
•reviewing management’s arrangements for compliance with
prudential regulatory financial reporting;
•reviewing and monitoring the relationship with the external auditor
and overseeing its appointment, tenure, rotation, remuneration,
independence and engagement for non-audit services;
•overseeing the Group’s policies, procedures and arrangements for
capturing and responding to whistleblower concerns and ensuring
they are operating effectively; and
•overseeing the work of Global Internal Audit and monitoring and
assessing the effectiveness, performance, resourcing,
independence and standing of the function.
Committee governance
The Committee keeps the Board informed and advises on matters
concerning the Group’s financial reporting requirements to ensure
that the Board has exercised oversight of the work carried out by
management, Global Internal Audit and the external auditor.
Committee meetings usually take place a couple of days before Board
meetings to allow the Committee to report its findings and
recommendations in a timely and orderly manner. The Board also
receives copies of the Committee agendas and minutes of meetings.
The Group Chief Executive, Group Chief Financial Officer, Group Head
of Finance, Global Financial Controller, Group Head of Internal Audit,
Group Chief Risk and Compliance Officer, Group Company Secretary
and Chief Governance Officer and other members of senior
management routinely attended meetings of the GAC. The external
auditor attended all meetings.
The Chair held regular meetings with management, Global Internal
Audit and the external auditor to discuss agenda planning and specific
issues as they arose during the year outside the formal Committee
process. The Committee also regularly met separately with the
internal and external auditors and other senior management to
discuss matters in private.
The Committee Secretary regularly met with the Chair to ensure the
Committee fulfilled its governance responsibilities, and to consider
input from stakeholders when finalising meeting agendas, tracking
progress on actions and Committee priorities.
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262 | HSBC Holdings plc Annual Report and Accounts 2022

Matters considered during 2022
| Jan | Feb | Apr | Jun | Jul | Sep | Oct | Dec
Reporting |  |  |  |  |  |  |  |
Financial reporting matters including: – review of financial statements, ensuring that disclosures are fair, balanced and understandable – significant accounting judgements – going concern assumptions and viability statement – supplementary regulatory information |  |  |  |  |  |  |  |
ESG and climate reporting |  |  | ô | ô |  | ô |  |
Regulatory reporting-related matters |  |  |  |  |  |  |  |
Certificates from principal subsidiary audit committees | ô |  | ô | ô |  | ô | ô | ô
Control environment |  |  |  |  |  |  |  |
Control enhancement programmes |  |  |  |  |  |  |  |
Group transformation | ô | ô | ô | ô |  | ô | ô |
Review of deficiencies and effectiveness of internal financial controls |  |  |  |  |  |  |  |
Internal audit |  |  |  |  |  |  |  |
Reports from Global Internal Audit |  |  |  | ô |  | ô |  |
Audit plan updates, independence and effectiveness |  | ô |  | ô |  | ô | ô |
External audit |  |  |  |  |  |  |  |
Reports from external audit, including external audit plan |  |  |  |  |  |  |  |
Appointment, remuneration, non-audit services and effectiveness |  |  |  |  |  |  | ô |
Audit tender |  | ô |  |  |  |  | ô |
Compliance |  |  |  |  |  |  |  |
Accounting standards and critical accounting policies | ô |  | ô |  |  | ô |  |
Corporate governance codes and listing rules | ô |  | ô |  |  | ô | ô | ô
Whistleblowing |  |  |  |  |  |  |  |
Whistleblowing arrangements and effectiveness | ô |  | ô | ô | ô |  | ô |

l | Matter considered | ô | Matter not considered

Compliance with regulatory requirements
The Board has confirmed that each member of the Committee is
independent according to the criteria from the US Securities and
Exchange Commission, and the Committee continues to have
competence relevant to the sector in which the Group operates. The
Board has determined that David Nish, Jackson Tai and Eileen Murray
are ‘financial experts’ for the purposes of section 407 of the
Sarbanes-Oxley Act and have recent and relevant financial experience
for the purposes of the UK and Hong Kong Corporate Governance
Codes.
The GAC Chair continued to engage with regulators, including the
UK’s PRA and the Financial Reporting Council. These included
trilateral meetings involving the Group’s external auditor, PwC.
The Committee assessed the adequacy of resources of the
accounting, internal audit, financial reporting and ESG performance
and reporting functions. It also monitored the legal and regulatory
environment relevant to its responsibilities.
How the Committee discharged its
responsibilities
Connectivity with principal subsidiary audit committees
The GAC strengthened its working relationship with the principal
subsidiary audit committees through formal and informal channels.
The GAC Chair regularly met the chairs of the principal subsidiary
audit committees to enable close links and deeper understanding on
judgements around key issues. The GAC Chair attended a number of
the principal subsidiary audit committee meetings and certain chairs
of the principal subsidiary audit committees also joined meetings of
the GAC during the year.
This continuous engagement supported effective information sharing
and targeted collaboration between audit committee chairs and
management to ensure there was appropriate focus on the local
implementation of programmes. Subsidiary audit committee chairs
were also able to directly share local challenges, including regulatory
expectations with Group management and the GAC Chair.
On a half-year basis, principal subsidiary audit committees provided
certifications to the GAC that regarded the preparation of their
financial statements, adherence to Group policies and escalation of
any issues that required the attention of the GAC. These certifications
also included information regarding the governance, review and
assurance activities undertaken by principal subsidiary audit
committees in relation to prudential regulatory reporting.
Internal controls
The Committee devoted significant time in understanding the effect
on financial reporting risk from high-impact programmes aimed at
enhancing and enabling the transformation of the control environment
to support financial, prudential regulatory and other regulatory
reporting. The GAC provided detailed feedback and challenge to
management on a number of aspects, including requesting external
assurance, replanning and mobilisation of programme workstreams,
resourcing and engagement throughout the Group and with
regulators. Common themes from these discussions included the
need to improve understanding and accountability for data capture,
improve data quality from the implementation and embedding of data
policies while ensuring there was a stronger appreciation throughout
the Group of the downstream impact on financial and regulatory
reporting. The oversight and implementation of these programmes
and their component parts will remain a key focus for the Committee
in 2023.
The GAC received regular updates and confirmations that
management had taken, or was taking, the necessary actions to
remediate any failings or weaknesses identified through the operation
of the Group’s framework of internal financial controls. These updates
included the Group’s work on compliance with section 404 of the
Sarbanes-Oxley Act. Based on this work, the GAC recommended that
the Board support its assessment of the internal controls over
financial reporting.
For further details on how the Board reviewed the effectiveness of
key aspects of internal control, see page 306.
Financial reporting
The Committee is responsible for reviewing the Group’s financial
reporting during the year, including the Annual Report and Accounts,
Interim Report, quarterly earnings releases, analyst presentations and,
where material, Pillar 3 disclosures and other items arising from the
review of the Group Disclosure and Controls Committee. As part of
its review, the GAC:
•evaluated management’s application of critical accounting policies
and material areas in which significant accounting judgements
were applied;

HSBC Holdings plc Annual Report and Accounts 2022 | 263

•gave particular regard to the analysis and measurement of IFRS 9
expected credit losses (‘ECL’), including the key judgements and
management adjustments made in relation to the forward
economic guidance, underlying economic scenarios and
reasonableness of the weightings;
•focused on compliance with disclosure requirements to ensure
these were consistent, appropriate and acceptable under the
relevant financial and governance reporting requirements;
•provided advice to the Board on the form and basis underlying the
long-term viability statement; and
•gave careful consideration to the key performance metrics related
to strategic priorities and ensured that the performance and
outlook statements were fair, balanced and reflected the risks and
uncertainties appropriately.
In conjunction with the Group Risk Committee (‘GRC’), the GAC
considered the current position of the Group, along with the emerging
and principal risks, and carried out a robust assessment of the
Group’s prospects, before making a recommendation to the Board on
the Group’s long-term viability. The GAC also undertook a detailed
review before recommending to the Board that the Group continues
to adopt the going concern basis in preparing the annual and interim
financial statements. Further details can be found on page 42.
Fair, balanced and understandable
Following review and challenge of the disclosures, the Committee
recommended to the Board that the financial statements, taken as a
whole, were fair, balanced and understandable. The financial
statements provided the shareholders with the necessary information
to assess the Group’s position and performance, business model,
strategy and risks facing the business, including in relation to the
increasingly important ESG considerations.
The Committee reviewed the draft Annual Report and Accounts 2022
and results announcements to enable input and comment. It was
supported by the work of the Group Disclosure and Controls
Committee, which also reviewed and assessed the Annual Report
and Accounts 2022 and investor communications.
This work enabled the GAC to provide positive assurance to the Board
to assist them in making the statement required in compliance with
the UK and Hong Kong Corporate Governance Codes.
Key financial metrics and strategic priorities
The Committee assessed management’s assurance and preparation
over external financial reporting disclosures, in particular the
monitoring and tracking of key financial metrics and strategic
priorities. In the second quarter of 2022, the Committee was involved
at all stages in overseeing and challenging management on the
revised financial targets.
The GAC challenged management on the forecasting, analysis and
additional assurance work undertaken to support the revised financial
targets in light of geopolitical risks, deteriorating outlook, ongoing
impact of the Covid-19 pandemic in certain jurisdictions and a rising
interest rate environment.
Further details can be found in the ‘Principal activities and significant
issues considered during 2022‘ table on page 266.
ESG and climate reporting
The GAC, supported by the executive-level ESG Committee and
Group Disclosure and Controls Committee, provided close oversight
of the disclosure risks in relation to ESG and climate reporting, amid
rising stakeholder expectations.
The GAC tracked and monitored developments from a number of
prominent consultations and considered them when reviewing the
strategy and scope of ESG and climate disclosures in 2022. In
particular, the Committee asked management to provide further
details on the pipeline of mandatory regulatory and externally
committed ESG and climate-related disclosures over the next 12 to 24
months, including the delivery status. This allowed the Committee to
consider management’s development of methodologies, tools and
data solutions holistically to fulfil external disclosure requirements and
commitments.
ESG reporting is fast evolving with few globally consistent reporting
standards and a high reliance on external data. The Committee
focused on internal and external assurance in this area in line with
wider market developments. Management updated the Committee
on the verification and assurance framework to ensure that ESG and
climate disclosures were materially accurate, consistent, fair and
balanced. The GAC discussed the roles and work of the three lines of
defence as part of this framework, discussed the nature and root
cause of issues identified through the increased assurance work, as
well as proposals for further limited third-party assurance to be
performed over specific ESG-related metrics.
Regulatory reporting
The Committee continued to focus heavily on the quality and reliability
of regulatory reporting and oversight of key programmes to
strengthen the end-to-end processes to meet regulatory expectations.
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. They also discussed root cause themes, remediation of
known issues and new issues identified through the increased
assurance work and focus on regulatory reporting. The GAC was
instrumental in the initiation of a global programme designed to
deliver consistent control frameworks for our regulatory reporting
globally over the next few years. 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. The Committee Chair invited
certain principal subsidiary audit committee chairs to GAC meetings
to participate in discussions to ensure alignment and understanding of
key issues and ongoing regulatory engagement.
UK audit reform
In May 2022, the UK government published its response to the
consultation paper, ‘Restoring Trust in Audit and Corporate
Governance’, on strengthening the UK’s audit, corporate reporting
and corporate governance systems. This summarised the responses
received to the consultation and set out the next steps towards
implementation.
One of the key changes proposed is for large public interest entities,
such as HSBC, to develop and publish an audit and assurance policy
every three years, setting out the approach to assurance of
information beyond the financial statements. The government will
also introduce a new statutory resilience statement.
The Committee received updates on the outcome of the consultation
and reviewed management’s proposed actions to support the future
requirement for disclosure of an audit and assurance policy. This
includes the work towards designing an integrated internal assurance
approach across the three lines of defence, with the development
during the year of an integrated assurance framework in support of
the Group’s risk management framework.
While the legislation and expected guidance around the form and
content of an audit and assurance policy is still being drafted, it is
expected that the areas below will be covered by any future
disclosures. Current disclosures exist in respect of certain of these
areas, although these will need to be enhanced and expanded as
guidance develops. The areas highlighted below are in addition to
disclosures on the statutory audit and assurance work required by
regulators.
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Area | Relevant current disclosure
Overview of risk and internal control framework | Risk review, pages 131 to 238
Assurance over internal controls | Risk review, pages 131 to 238, ’Global Internal Audit’, page 266, and ‘Internal controls’ page 306.
Specific information subject to assurance | Environmental, social and governance review, page 14
Resilience statement (currently viability statement) | Long-term viability and going concern statement, page 42
External auditor engagement | ’External auditor’, page 265
Stakeholder engagement on audit and assurance policy | No existing disclosure.

The Committee continues to focus on ESG and regulatory reporting
as areas for expanded assurance, in line with the risk assessment
framework established in 2021. The specific external assurance over
ESG disclosures is set out in the ESG review section of the Annual
Report and Accounts. The Committee continued to respond to various
regulatory engagement requests and surveys, including the Financial
Reporting Council’s Draft Minimum Standards for Audit Committees.
The Committee will continue to monitor developments as legislation
is drafted to enact the requirements and the associated guidance is
developed.
External auditor
The GAC has the primary responsibility for overseeing the relationship
with the Group’s external auditor, PwC.
PwC completed its eighth audit, providing robust challenge to
management and sound independent advice to the Committee on
specific financial reporting judgements and the control environment.
The senior audit partner is Scott Berryman who has been in the role
since 2019. The Committee reviewed the external auditor’s approach
and strategy for the annual audit and also received regular updates on
the audit, including observations on the control environment. Critical
audit matters discussed with PwC are set out in its report on
page 313.
External audit plan
The GAC reviewed the PwC external audit approach, including the
materiality, risk assessment and scope of the audit. PwC highlighted
the changes being made to their approach to enhance the quality and
effectiveness of the audit. Changes for the 2023 audit included more
auditing being performed centrally across legal entities. The
Committee also focused on PwC's increased use of technology
solutions, and received detailed briefings on its approach to data and
analytics.
Effectiveness of external audit process
The GAC assessed the effectiveness of PwC as the Group’s external
auditor, using a questionnaire that focused on the overall audit
process, its effectiveness and the quality of output.
In addition, the GAC Chair, certain principal subsidiary audit chairs and
members of the Group Executive Committee met with the Head of
Audit, PwC UK to discuss findings from the questionnaire and provide
in-depth feedback on the interaction with the PwC audit team.
PwC highlighted the actions being taken in response to the HSBC
effectiveness review, including the development of audit quality
indicators, which would provide a balanced scorecard and transparent
reporting to the GAC. These audit quality indicators focused on the
following areas:
•findings from inspections across the Group and regulators on PwC
as a firm;
•the hours of audit work delivered by senior PwC audit team
members, the extent of specialist and expert involvement, delivery
against agreed timetable and milestones and the use of
technology;
•any new control deficiencies in Sarbanes-Oxley locations,
proportion of management identified deficiencies and delivery of
audit deliverables to agreed timelines; and
•outcomes and scores from annual audit surveys, independent
senior partner reviews and prior period errors.
The GAC will continue to receive regular updates from PwC and
management on the progress of the external audit plan and PwC
performance across the audit quality indicators.
There were no breaches of the policy on hiring employees or former
employees of the external auditor during the year. The external
auditor attended all Committee meetings and the GAC Chair
maintains regular contact with the senior audit partner and his team
throughout the year.
Independence and objectivity
The Committee assessed any potential threats to independence that
were self-identified or reported by PwC. The GAC considered PwC to
be independent and PwC, in accordance with professional ethical
standards and applicable rules and regulations, provided the GAC with
written confirmation of its independence for the duration of 2022.
The Committee confirms it has complied with the provisions of The
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 for the financial statements.
The Committee acknowledges the provisions contained in the 2018
UK Corporate Governance Code in respect of audit tendering. In
conformance with these requirements, the GAC oversaw the
retendering of statutory audit services for the 2025 year-end,
including considering the tendering and shared audit proposals from
the UK government’s consultation. More details on the audit tender
can be found on page 267.
The Committee has recommended to the Board that PwC should be
reappointed as auditor. Resolutions concerning the reappointment of
PwC and its audit fee for 2023 will be proposed to shareholders at the
2023 AGM.
Non-audit services
The Committee is responsible for setting, reviewing and monitoring
the appropriateness of the provision of non-audit services by the
external auditor. It also applies the Group’s policy on the award of
non-audit services to the external auditor. The non-audit services are
carried out in accordance with the external auditor independence
policy to ensure that services do not create a conflict of interest. All
non-audit services are either approved by the GAC, or by Group
Finance when acting within delegated limits and criteria set by the
GAC.
The non-audit services carried out by PwC included 73 engagements
approved during the year where the fees were over $100,000 but less
than $1m. Global Finance, as a delegate of the GAC, considered that
it was in the best interests of the Group to use PwC for these
services because they were:
•audit-related engagements that were largely carried out by
members of the audit engagement team, with the work closely
related to the work performed in the audit;
•engagements covered under other assurance services that require
obtaining appropriate audit evidence to express a conclusion
designed to enhance the degree of confidence of the intended
users other than the responsible party about the subject matter
information; or
•other permitted services to advisory attestation reports on internal
controls of a service organisation primarily prepared for and used
by third-party end users.
Eleven engagements during the year were approved where the fees
exceeded $1m. These were mainly engagements required by the
regulator and incremental fees related to previously approved
engagements, including the provision of services by PwC relating to
the Section 166 Financial Services and Markets Act 2000 Skilled
Person report.

| 2022 | 2021
Auditors‘ remuneration | $m | $m
Total fees payable | 148.1 | 129.4
Of which fees for non-audit services | 50.5 | 41.3

HSBC Holdings plc Annual Report and Accounts 2022 | 265

Global Internal Audit
The primary role of the Global Internal Audit function is to help the
Board and management protect the assets, reputation and
sustainability of the Group. Global Internal Audit does this by providing
independent and objective assurance on the design and operating
effectiveness of the Group’s governance, risk management and
control framework and processes, prioritising the greatest areas of
risk. The independence of Global Internal Audit from day-to-day line
management responsibility is critical to its ability to deliver objective
audit coverage by maintaining an independent and objective stance.
Global Internal Audit is free from interference by any element in the
organisation, including on matters of audit selection, scope,
procedures, frequency, timing, or internal audit report content. The
Group Head of Internal Audit reports to, and meets frequently with,
the Chair of the GAC. In addition, in 2022, there was more interaction
between Global Internal Audit senior management and the members
of the GAC, aimed at increasing knowledge and awareness of the
audit universe and existing and emerging risks identified by Global
Internal Audit. Global Internal Audit adheres to The Institute of Internal
Auditors’ mandatory guidance.
Consistent with previous years, the 2023 audit planning process
includes assessing the inherent risks and strength of the control
environment across the audit entities representing the Group. Results
of this assessment are combined with a top-down analysis of risk
themes by risk category to ensure that themes identified are
addressed in the annual plan. Audit coverage is achieved using a
combination of business and functional audits of processes and
controls, risk management frameworks and major change initiatives,
as well as regulatory audits, investigations and special reviews. In
addition to the ongoing importance of regulatory-focused work, key
risk theme categories for 2023 audit coverage remain as: strategy,
governance and culture; financial crime, conduct and compliance;
financial resilience; and operational resilience. A quarterly assessment
of key risk themes will form the basis of thematic reporting and plan
updates and will ultimately drive the 2024 planning process.
In 2023, Global Internal Audit will maintain significant focus on the
Group transformation portfolio, increase coverage of treasury risks,
financial forecasting processes and regulatory reporting, and include
coverage of ESG risk, with focus on climate commitments,
operationalisation and reporting. In addition, Global Internal Audit will
continue its programme of culture audits to assess the extent that
behaviours reflect HSBC’s purpose, ambition, values and strategy,
and expand its coverage of franchise audits for locally significant
countries, following the development of the approach in 2022. The
annual audit plan and material plan updates made in response to
changes in the Group’s structure and risk profile are approved by the
GAC.
The results of audit work, together with an assessment of the
Group’s overall governance, risk management and control framework
and processes are reported regularly to the GAC, GRC and local audit
and risk committees, as appropriate. This reporting highlights key
themes identified through audit activity, and the output from
continuous monitoring. This includes business and regulatory
developments and an independent view of emerging and horizon risk,
together with details of audit coverage and any required changes to
the annual audit plan. Based on regular internal audit reporting to the
GAC, private sessions with the Group Head of Internal Audit, the
Global Professional Practices annual assessment and quarterly quality
assurance updates, the GAC is satisfied with the effectiveness of the
Global Internal Audit function and the appropriateness of its
resources.
Executive management is responsible for ensuring that issues raised
by Global Internal Audit are addressed within an appropriate and
agreed timetable. Confirmation to this effect must be provided to
Global Internal Audit, which validates closure on a risk basis.
Global Internal Audit maintains a close working relationship with
HSBC’s external auditor, PwC. The external auditor is kept informed
of Global Internal Audit’s activities and results, and is afforded free
access to all internal audit reports and supporting records.
Principal activities and significant
issues considered during 2022
Collaborative oversight by GAC, GRC and
Technology Governance Working Group
The GAC and GRC worked closely to ensure there were procedures
to manage risk and oversee the internal control framework. The
Chairs are members of both committees and engage on the agendas
of each other’s committees to further enhance connectivity,
coordination and flow of information.
A further development, based on 2022 evaluation findings, was to
have joint meetings of the GAC, GRC and Technology Governance
Working Group. These meetings would ensure there was coordinated
oversight and consistent joint feedback to management on areas of
significant overlap.
Areas of joint focus for the GAC, GRC and the Technology
Governance Working Group during 2022 were:
Finance on the Cloud
Finance on the Cloud is a key multi-year data and reporting
transformation programme using Cloud technology to enable the
transformation of the Global Finance operating model and re-
engineering of core reporting processes.
The committees conducted a deep dive review of Finance on the
Cloud and held multiple meetings throughout 2022 to challenge
management on the programme’s overall objectives, scope and target
end-state. As part of these discussions, the committees considered
organisational realignment and programme leadership, and asked
management to seek external assurance and validation of the Finance
on the Cloud investment case and technology architecture. The
committees also ensured that there was a greater understanding of
the complexities and dependencies between Finance on the Cloud
and other key programmes to ensure that deadlines for financial and
regulatory reporting deliverables were met.
Digital Business Services
The committees held a joint meeting to develop a deeper
understanding of the risk and internal controls issues across key
components of Digital Business Services. The joint meeting
discussed:
•the regulatory purpose of the service company structure, and
management providing an update on initiatives to streamline,
simplify and automate the services;
•actions taken by the Identity and Access Management sub-
function to tackle access risks through automation and a new
toolset;
•monitoring and governance activities carried out by the Global
Operations and Payments teams, and its shift towards an
automated control environment; and
•actions carried out within Global Procurement to enhance the risk
management and control culture, in particular with regard to the
oversight of critical third parties and its upgrade to a Cloud-based
procurement platform.
Embedding data into our culture
The committees reviewed and challenged the Group’s data strategy
and the work required for the Group to embed its data policies, define
the data technology landscape, and build a data-led culture. The
committees also reviewed the Group's approach to harnessing and
using data to better unlock value for our customers.
Whistleblowing and speak-up culture
An important part of HSBC’s values is speaking up when something
does not feel right. HSBC remains committed to ensuring colleagues
have confidence to speak up and acting when they do. A wide variety
of channels are provided for colleagues to raise concerns, including
the Group’s whistleblowing channel, HSBC Confidential (see page 92
for further information). The GAC is responsible for the oversight of
the effectiveness of the Group’s whistleblowing arrangements. The
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Group Head of Compliance provides periodic reporting to the GAC on
the efficacy of the whistleblowing arrangements, providing an
assessment of controls and detailing the results of internal audit
assessments. The Committee is also briefed on culture and conduct
risks arising from whistleblowing cases and the associated
management actions. The Chair of the GAC acts as the Group’s
whistleblowers’ champion, with responsibility for ensuring and
overseeing the integrity, independence and effectiveness of HSBC’s
policies and procedures on whistleblowing and the protection of
whistleblowers.
The Chair continued to meet regularly throughout 2022 with the
Group Head of Conduct, Policy and Whistleblowing, receiving
briefings on material whistleblowing cases and the ongoing
effectiveness of the whistleblowing arrangements. The Committee
also received reports on actions being taken to further align our
whistleblowing arrangements to actively support our purpose and
values, and conduct approach. During 2023, the Committee will
continue to be briefed on these actions, as well as the ongoing
effectiveness of the HSBC Confidential channel.
Audit tender
Following the conclusion of a formal competitive audit tender
process, the Board has approved the re-appointment of PwC as
external auditor of the statutory audits of HSBC Holdings for 2025 to
2034, at which point we are required to rotate auditors in accordance
with UK requirements. The audit tender process considered both
large and challenger audit firms and was led by the GAC.
Scope
As a UK public interest entity, we are required to tender our audit
every 10 years and rotate our auditor every 20 years. We disclosed in
our Annual Report and Accounts 2021 the intention to commence an
audit tender, given PwC were initially appointed for the audit of the
Annual Report and Accounts 2015.
Pursuant to the tender, interested and qualified parties were invited to
submit proposals for the right to provide statutory audit services to
HSBC Holdings and its subsidiaries for a period of 10 years
commencing from the financial year ending 31 December 2025.
HSBC’s primary objective was to ensure a fair and transparent tender
process and appoint the audit firm that will provide the highest quality
in the most effective and efficient manner. Firms were assessed
against detailed criteria which considered audit quality, capacity and
capability, understanding of HSBC and future audit vision. Input was
sought from principal subsidiaries’ audit committee chairs as part of
the GAC evaluation. Management views were advisory only to the
GAC.
In accordance with best practice corporate governance requirements,
the audit tender process described below was designed and led by
the GAC, with direct involvement of the GAC Chair at every stage.
Pre-qualification
HSBC undertook a series of pre-qualification activities to identify
vendors that satisfy our minimum requirements relating to credibility,
capacity and independence. These activities were overseen by the
GAC. The pre-qualification phase considered both large and challenger
audit firms and explored the possibility of adopting a managed, shared
audit using challenger firms.
During the pre-qualification phase, we were informed by two of the
large audit firms that they were not able to participate in the tender as
they believed they had insufficient capacity to perform a quality audit.
Three shortlisted audit firms were invited to respond to the formal
tender, including PwC and one challenger audit firm.
Process and assessment
The shortlisted firms were invited to submit capability proposals
(including written and data modelling exercises) to demonstrate their
understanding of HSBC, audit quality, capabilities and their future
vision of audit. Group and principal subsidiaries’ audit committee chair
and management meetings took place during October 2022, enabling
both the audit firms and HSBC management to articulate and discuss
critical success factors for the audit. Lead audit partner referrals and
audit quality reports from regulators supplemented these
assessments and contributed to the final evaluation of the audit firms.
The capability proposals were submitted on a fee blind basis, with the
fee proposal submitted directly to the GAC Chair.
The Committee considered the following during the evaluation of
audit firms:
•a tender proposal, a formal document in response to the tender
requirements;
•management meetings between the firms and HSBC (major legal
entity audit committee chairs and senior management);
•data exercises covering audit planning and risk assessment, ECL
modelling, firms’ broader assurance offering and a shared audit
exercise;
•public regulator audit reports for independent assessment on audit
quality;
•external referees to provide a third-party opinion on the audit lead
partner to support the evaluation process; and
•final presentations to the GAC.
As part of the tender process, the GAC Chair also met with Chief
Executive and Head of Standards of the Financial Reporting Council to
explain our audit tender process, understand views on shared audits
and seek input into our evaluation of individual firm’s audit quality
track record.
Evaluation
The key evaluation criteria and their respective weightings used to
assess the successful audit firm were proposed by management and
reviewed by the Group Audit Committee. The criteria were assessed
through formal capability proposals, presentations and certain
supplementary evidence:
•Audit quality (30%) – regulatory evaluation, methodology, risk
assessment, technology.
•Capacity and capability (30%) – footprint, partner quality and
rotation, diversity, independence.
•Future audit vision (20%) – future audit developments, audit
reform and innovation.
•Understanding of HSBC (20%) – knowledge of HSBC, shareholder
concerns and the financial services landscape.
Final decision
The GAC considered various data points from the assessments
outlined above, adopting a scorecard approach to supplement the final
presentations made by the audit firms at the end of the tender
process. The Committee considered the merits of appointing a
challenger audit firm in a managed shared audit capacity, in line with
recent UK government proposals. However, it did not have sufficient
confidence that the desired audit quality outcomes could be assured
in a such a large, complex, integrated and global organisation to
pursue such an arrangement.
The GAC presented two audit firms to the Board for consideration of
awarding the tender, recommending the re-appointment of PwC
given their strong performance against our evaluation criteria and the
benefits of continuity in this period of strategic change and
uncertainty in the external environment.
The Board made a final decision to award the audit tender to PwC on
19 January 2023. PwC will continue to be subject to annual
performance reviews (including annual effectiveness surveys and
analysis of relevant audit regulator findings) in the period up to 2025
to support the annual AGM auditor re-appointment requirement.

HSBC Holdings plc Annual Report and Accounts 2022 | 267

Principal activities and significant issues considered during 2022
Areas of focus | Key issues | Conclusions and actions
Financial and regulatory reporting | Key financial metrics and strategic priorities The GAC considered the key judgements in relation to external reporting to track the key financial metrics and strategic priorities and to review the forecast performance and outlook. | In exercising its oversight, the Committee assessed management’s assurance and preparation of external financial reporting disclosures. The Committee reviewed the draft external reporting disclosures and provided feedback and challenge on the top sensitive disclosures, including key financial metrics and strategic priorities to ensure HSBC was consistent and transparent in its messaging.
Environmental, social and governance (‘ESG’) reporting The Committee considered management’s efforts to enhance ESG disclosures and associated verification and assurance activities. The GAC reviewed the 2022 ESG disclosure approach in line with our external commitments. | In relation to our climate change resolution, particular attention was given to the disclosure of the financed and facilitated emissions, and thermal coal exposures. The Committee considered the key limitations and challenges relating to governance, processes, controls and data underpinning climate reporting. The Committee also discussed the nature and root cause of issues identified through the increased assurance work and ongoing enhancements to the governance, processes, controls and data underpinning climate reporting, which resulted in the deferral of disclosures on facilitated emissions and thermal coal. The Committee reviewed the ESG reporting strategy, including the broadening of ESG coverage in the Annual Report and Accounts and management’s approach on integrated reporting, which will be further informed by feedback from external stakeholders.
Regulatory reporting assurance programme The GAC monitored the progress of the regulatory reporting assurance programme to enhance the Group’s regulatory reporting, impact on the control environment and oversee regulatory reviews and engagement. | The Committee reflected on the continued focus on the quality and reliability of regulatory reporting by the PRA and other regulators globally. The GAC reviewed management’s efforts to strengthen and simplify the end-to-end operating model, including commissioning further independent external reviews of various aspects of regulatory reporting. The Committee discussed and provided feedback on management’s engagement plans with the Group’s regulators, including any potential impacts on some of our regulatory ratios. We continue to keep the PRA and other relevant regulators informed of our progress.
Significant accounting judgements | Expected credit losses The measurement of expected credit losses involves significant judgements, particularly under current economic conditions. Despite a general recovery in economic conditions in 2022, there remains an elevated degree of uncertainty over ECL estimation under current conditions, due to macroeconomic and political uncertainties. | The measurement of expected credit losses involves significant judgements, particularly under current economic conditions. There remains an elevated degree of uncertainty over ECL estimation under current conditions, due to macroeconomic, and political uncertainties. The GAC reviewed the economic scenarios for the key countries in which the Group operates, and challenged management’s judgements as to the weightings assigned to these scenarios. The GAC also challenged management’s approach to making management adjustments to account for the uncertainty in outcomes arising from the Russia-Ukraine war, inflation, supply chain disruption risks, China commercial real estate and Covid-19, including the rationale for such adjustments, the controls underpinning the adjustment processes, and under what conditions such adjustments could be reduced or removed. The GAC also challenged management on the overall levels of ECL across portfolios, including looking at historical performances of portfolios and peer group comparisons.
Goodwill, other non-financial assets and investment in subsidiaries impairment During the year, management tested for impairment goodwill, other non-financial assets and investments in subsidiaries. Key judgements in this area relate to long-term growth rates, discount factors and what cash flows to include for each cash-generating unit tested, both in terms of compliance with the accounting standards and reasonableness of the forecast. | The GAC received reports on management’s approach to goodwill, other non-financial assets and investments in subsidiaries impairment testing and challenged the approach and methodologies used, with a key focus on the cash flows included within the forecasts and the discount rates used. The GAC also challenged management’s key judgements and considered the reasonableness of the outcomes as a sense check against the business forecasts and strategic objectives of HSBC.
Associates (Bank of Communications Co., Limited) During the year, management performed the impairment review of HSBC’s investment in Bank of Communications Co., Ltd (‘BoCom’). The impairment reviews are complex and require significant judgements, such as projected future cash flows, discount rate, and regulatory capital assumptions. | The GAC reviewed the judgements in relation to the impairment review of HSBC’s investment in BoCom, including the sensitivity of the results to estimates and key assumptions such as projected future cash flows and regulatory capital assumptions. Additionally, the GAC reviewed the model’s sensitivity to long-term assumptions including the continued appropriateness of the discount rates. The GAC also challenged management to review all aspects of its approach to accounting for BoCom to ensure the approach remains the most appropriate in terms of accounting judgements including compliance with the relevant accounting requirements.
Investments in subsidiaries Management has reviewed investments in subsidiaries for indicators of impairment and conducted impairment reviews where relevant. These involve exercising significant judgement to assess the recoverable amounts of subsidiaries, by reference to projected future cash flows, discount rates and regulatory capital assumptions. | The GAC reviewed the judgements in relation to the impairment review of HSBC Overseas Holdings (UK) Limited, and the key inputs underpinning the recoverable amounts of its subsidiaries.

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Principal activities and significant issues considered during 2022 (continued)
Areas of focus | Key issues | Conclusions and actions
Significant accounting judgements | Legal proceedings and regulatory matters Management has used judgement in relation to the recognition and measurement of provisions, as well as the existence of contingent liabilities for legal and regulatory matters. | The GAC received reports from management on the legal proceedings and regulatory matters that highlight the accounting judgements for matters where these are required. The matters requiring significant judgements were highlighted. The GAC has reviewed these reports and agrees with the conclusions reached by management.
Valuation of defined benefit pension obligations The valuation of defined benefit pension obligations involves highly judgemental inputs and assumptions, of which the most sensitive are the discount rate, pension payments and deferred pensions, inflation rate and changes in mortality. | The GAC has considered the effect of changes in key assumptions on the HSBC UK Bank plc section of the HSBC Bank (UK) Pensions Scheme, which is the principal plan of HSBC Group. The GAC also considered the impact of changes in key assumptions on other schemes.
Valuation of financial instruments Due to the ongoing volatile market conditions in 2022, management continuously refined its approach to valuing the Group’s investment portfolio. In addition, as losses were incurred on the novation of certain derivative portfolios, management considered whether fair value adjustments were required under the fair value framework. Management’s analysis provided insufficient evidence to support the introduction of these adjustments in line with IFRSs. | The GAC considered the key valuation metrics and judgements involved in the determination of the fair value of financial instruments. The GAC considered the valuation control framework, valuation metrics, significant year-end judgements and emerging valuation topics and agrees with the judgements applied by management.
Long-term viability and going concern statement The GAC has considered a wide range of information relating to present and future projections of profitability, cash flows, capital requirements and capital resources. These considerations include stressed scenarios that reflect the implications of the Russia-Ukraine war, disrupted supply chains globally and slower Chinese economic activity, as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital and liquidity. | In accordance with the UK and Hong Kong Corporate Governance Codes, the Directors carried out a robust assessment of the principal risks of the Group and parent company. The GAC considered the statement to be made by the Directors and concluded that the Group and parent company will be able to continue in operation and meet liabilities as they fall due, and that it is appropriate that the long-term viability statement covers a period of three years.
Tax-related judgements HSBC has recognised deferred tax assets to the extent that they are recoverable through expected future taxable profits. Significant judgement continues to be exercised in assessing the probability and sufficiency of future taxable profits, future reversals of existing taxable temporary differences and expected outcomes relating to uncertain tax treatments. | The GAC considered the recoverability of deferred tax assets, in particular in the US, France and the UK. The GAC also considered management’s judgements relating to tax positions in respect of which the appropriate tax treatment is uncertain, open to interpretation or has been challenged by the tax authority.
Impact of acquisitions and disposals In 2022, HSBC engaged in a number of business acquisition and disposal activities, notably in Canada, France, Singapore and India. There are a number of accounting impacts that need to be considered, including the timing of recognition of assets held-for-sale, gains or losses, and the measurement of assets and liabilities on acquisition or disposal. | The GAC considered the impacts of the planned exits of the Canadian and French retail businesses, management's judgements in relation to classification as held for sale, and the timing of the accounting recognition of these transactions. The GAC also considered the financial and accounting impacts of other acquisitions and disposals.

HSBC Holdings plc Annual Report and Accounts 2022 | 269

Principal activities and significant issues considered during 2022 (continued)
Areas of focus | Key issues | Conclusions and actions
Group transformation | Transformation and sustainable control environment The GAC will oversee the impact on the risk and control environment from the Group transformation programme. | The Committee received regular updates on the Group transformation programme and the broader change framework, to review the impact on the risk and control environment, to oversee progress of the transformation programme and the continued embedding of the broader change framework. In these updates the Committee monitored the progress of the programme, focused on the continued implementation of the change framework and the progress in the management of the entire change portfolio. This oversight helped the Committee to understand the progress being made in the management of the change portfolio, through the implementation of the change framework. The committee noted the progress on simplifying our change inventory, greater rigour on tracking progress against committed business cases, and strengthening of the lessons learnt process. Management’s updates were supplemented by further focus and assurance work from Global Internal Audit where a dedicated team continuously monitored and reviewed the Group transformation programme. This included carrying out targeted audit reviews, in addition to audits of significant programmes.
Global Finance transformation The Committee reviewed the proposals for the Global Finance organisational design, the migration to Cloud and the impact on financial controls. | The Committee has oversight for the adequacy of resources and expertise, as well as succession planning for the Global Finance function. During 2022, the Committee dedicated significant time to the review and progress of the multi-year Global Finance transformation programme, particularly Finance on the Cloud, with the overall objectives being to improve the control environment and customer outcomes and to make use of technology to increase overall efficiency. The Group Chief Financial Officer had private sessions with the Committee to share his perspectives on the progress of the Global Finance transformation and where additional focus was required.
Regulatory change | IFRS 17 ’Insurance Contracts’ The Committee will oversee the transition to IFRS 17 and consider the wider strategic implications of the change on the insurance business. | During 2022 management provided updates to the Committee on preparations for the implementation of IFRS 17, which is effective from 1 January 2023 with one year of comparative restatements required. The Committee was updated on the production of the transition balance sheet and considered the financial impacts (for which a summary is provided within the Future Accounting Developments section of the Basis of Preparation on page 335), as well as the generation of comparative income statement estimated impacts (for which a high level summary based on estimated 1H22 results is provided on page 99). The Committee also received updates with respect to progress on implementing the supporting operational infrastructure, internal controls over financial reporting, key judgements considered including transition approaches selected, as well as plans for disclosure of related non-GAAP measures and key performance metrics. The first publication of results on an IFRS 17 basis will be at the 1Q23 Earnings Release, and the Committee noted that management intends to publish an IFRS 17 Transition statement together with that announcement.
Basel III Reform The GAC considered the implementation of the Basel III Reform and the impact on the capital requirements and RWA assurance. This was considered in the context of the strategy and structure of the balance sheet. | The Committee received an update on the progress and impact of the Basel III programme on the Group. Management discussed the uncertainty over the final definition of the rules and the actions taken to ensure sufficient flexibility to make changes and mitigate risks from legislation being finalised at a later date and also on a staggered basis across each jurisdiction. The discussion highlighted the dependencies of the Basel III programme with other Group transformation programmes, in particular the dependency on adoption of the Finance on the Cloud solution, risk model development and the impact on data delivery and storage. The Committee noted the completion of the programme restructure, reviewed the ongoing management of risks, issues and dependencies and challenged management to prioritise deliverables across each jurisdiction in line with regulatory timelines, in each case, to ensure that solutions delivered to the minimum required standards. The Committee noted the overall improved status of the programme and requested an update post the Office of the Superintendent of Financial Institutions Canada implementation date of 1 April 2023.

Committee evaluation and effectiveness
The annual review of the effectiveness of the Board committees,
including the GAC, was conducted internally in 2022, led by the Group
Company Secretary and Chief Governance Officer. Overall, the review
concluded that the GAC continued to operate effectively. The Chair’s
management of meetings and leadership of the audit tender process,
in particular, were rated highly. The review also made certain
recommendations for continuous improvement. These included a
need for continued focus on the quality of reporting, oversight of
prioritisation of key programmes, and continued coordination between
the GAC and other Board committees on topics of mutual interest. It
was also suggested that the Committee should dedicate more time to
the oversight of capacity and succession planning in the Finance and
Internal Audit functions. The Committee considered the outcomes of
the evaluation and accepts the findings. The evaluation outcomes
were reported to the Board, and the Committee will track progress
against the recommendations during 2023.
Focus of future activities
In 2023, the Committee will prioritise control remediation and
enhancements, particularly of controls supporting regulatory
reporting. This will include developing a deeper understanding of the
prioritisation and interdependencies in the delivery of key
transformation and regulatory programmes to strengthen the risk and
control environment. It will also monitor domestic and worldwide tax
policy developments and examine the potential impact on accounting
judgements. A key priority will be to further embed ESG and climate-
related disclosures to meet increasing expectations of stakeholders,
in particular the implementation of robust processes and controls to
support these disclosures. Along with other committees of the Board,
the Committee will continue to ensure root cause themes related to
understanding and accountability for data capture, data quality and the
implementation and embedding of data policies are addressed by
management.
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270 | HSBC Holdings plc Annual Report and Accounts 2022

Group Risk Committee

"The GRC closely monitored heightened geopolitical and macroeconomic headwinds throughout the year to anticipate potential impacts to the Group‘s revenue, capital base and continuing ability to support customers." |

Dear Shareholder
I am pleased to present the Group Risk Committee (‘GRC’) report.
Geopolitical risks and the macroeconomic outlook deteriorated rapidly
at the start of the year due to the Russia-Ukraine war. The GRC
closely monitored heightened geopolitical and macroeconomic
headwinds throughout the year to anticipate potential impacts to the
Group’s revenue, capital base and continuing ability to support its
customers. Measures included monitoring the Group’s preparedness
for an expected recession in key markets from rising inflation and
interest rates. The Committee embraced management’s development
of forward-looking sensitivity analysis to assess the potential impacts
on HSBC’s prudential position, franchise resilience and ability to
support customers.
The GRC worked closely with the Group Chief Risk and Compliance
Officer to strengthen the Group’s risk management framework, and
to promote the development of more dynamic and granular risk
appetite statements to manage HSBC’s risk profile.
Throughout the year, the GRC reviewed and challenged management
on the Group’s regulatory submissions, including the Bank of
England’s requirements for the Resolvability Assessment Framework,
internal capital adequacy assessment process (‘ICAAP’) and internal
liquidity adequacy assessment process (‘ILAAP’). The GRC had
primary non-executive responsibility for reviewing the outcomes of
regulatory stress tests, including the Bank of England’s climate
biennial exploratory scenario, and the 2022 annual cyclical scenario
exercise.
The GRC carefully considered the Group’s regulatory remediation and
change programmes, and helped direct management to better
prioritise and understand where there are interdependencies. In
particular, the GRC reviewed and challenged the Group’s data
management plans and interest rate risk in the banking book strategy.
The GRC also provided oversight and support to risk transformation
activities to develop stronger risk management capabilities and
outcomes across the Group.
The GRC continued to review its committee composition, skills and
experience. In June, we welcomed Geraldine Buckingham and James
Forese as new members, and we expressed sincere gratitude to José
Antonio Meade Kuribreña and Eileen Murray, who stepped down to
assume new Board governance responsibilities.
Jackson Tai
Chair
Group Risk Committee
21 February 2023

Membership
| Member since | Meeting attendance in 2022 1
Jackson Tai (Chair) | Sep 2016 | 18/18
Geraldine Buckingham 2 | June 2022 | 11/11
Dame Carolyn Fairbairn 3 | Sep 2021 | 17/18
James Forese 4 | June 2022 | 12/13
Steven Guggenheimer 5 | May 2020 | 16/18
José Antonio Meade Kuribreña 6 | May 2019 | 10/10
Eileen Murray 7 | Jul 2020 | 7/9
David Nish 8 | Feb 2020 | 16/18

1 These included seven scheduled meetings, five ad hoc meetings, four
joint meetings with the Group Audit Committee and the Technology
Governance Working Group, and two joint meetings with the Group
Remuneration Committee.
2 Geraldine Buckingham joined the GRC on 1 June 2022.
3 Dame Carolyn Fairbairn was unable to attend one meeting due to a
prior commitment.
4 James Forese joined the GRC on 1 June 2022. He was unable to
attend one meeting due to a prior commitment.
5 Steven Guggenheimer was unable to attend two meetings due to
personal circumstances.
6 José Antonio Meade Kuribreña stepped down from the GRC on 1 June
2022.
7 Eileen Murray stepped down from the GRC on 1 June 2022. She was
unable to attend two meetings due to personal circumstances.
8 David Nish was unable to attend two meetings due to a prior
commitment.
Key responsibilities
The GRC has overall non-executive responsibility for the oversight of
risk-related matters and the risks impacting the Group. The GRC’s key
responsibilities include:
•overseeing and advising the Board on all risk-related matters,
including financial and non-financial risks;
•advising the Board on risk appetite-related matters, and key
regulatory submissions;
•reviewing the effectiveness of the Group’s risk management
framework and internal controls systems (other than internal
financial controls overseen by the GAC);
•reviewing and challenging the Group’s stress testing exercises;
and
•overseeing the Group’s approach to conduct, fairness and
preventing financial crime.
Committee governance
The Group Chief Risk and Compliance Officer, Group Chief Financial
Officer, Group Chief Operating Officer, Group Company Secretary and
Chief Governance Officer, Group Chief Human Resources Officer,
Group Chief Legal Officer, Group Head of Internal Audit, Group Head
of Finance and Group Head of Risk Strategy and Macroeconomic Risk
are standing attendees at GRC meetings. The Chair and members of
the GRC also hold private meetings with the Group Chief Risk and
Compliance Officer, the Group Head of Internal Audit and external
auditor, PwC, following scheduled GRC meetings.
The participation of our senior business leaders, including the Group
Chief Executive who attended six scheduled GRC meetings in 2022,
reaffirmed the ownership and accountability of risks in the first line of
defence.
The Chair meets regularly with the Group Chief Risk and Compliance
Officer to discuss priorities and track progress on key actions. The
Chair also has regular meetings with members of senior management
to discuss specific risk matters that arise outside formal meetings.
The Chair also meets regularly with the GRC Secretary to ensure the
GRC addresses its governance responsibilities. A summary of
coverage is set out in the ’Matters considered during 2022’ table on
page 272.

HSBC Holdings plc Annual Report and Accounts 2022 | 271

Matters considered during 2022
| Jan | Feb | Mar | Apr | May | Jun | Jul | Sep | Oct | Dec
Holistic enterprise risk monitoring including Group risk profile 1 | l | l | l | l | l | l | l | l | ô | l
Risk framework and/or policies | l | l | ô | ô | ô | ô | l | ô | ô | ô
Treasury risk | ô | l | l | l | l | l | l | l | l | l
Wholesale/retail credit risk | ô | l | ô | l | l | ô | l | ô | l | l
Financial reporting risk | ô | l | ô | ô | ô | l | ô | ô | ô | ô
Resilience risk (including IT and operational risk) | ô | ô | l | l | l | l | l | l | ô | l
Financial crime risk | ô | l | l | l | ô | l | l | ô | ô | ô
People and conduct risk | ô | l | ô | ô | l | ô | ô | l | ô | l
Regulatory compliance risk | ô | l | ô | l | l | ô | l | l | l | l
Legal risk | ô | l | ô | l | ô | ô | l | l | ô | l
Model risk | ô | ô | ô | ô | ô | ô | ô | l | ô | ô
ESG risk | ô | ô | ô | ô | ô | ô | l | l | l | l

l | Matter considered | ô | Matter not considered

1 The GRC receives updates on all risk types through the Group risk profile, which is presented to the majority of meetings. The Committee also met
with the Group Chief Risk and Compliance Officer and Risk and Compliance Executive Committee members in November 2022 to review the GRC
agenda, particularly matters relating to risk transformation, financial crime and conduct.
How the Committee discharged its
responsibilities
Activities outside formal meetings
The GRC held a number of meetings outside its regular schedule to
facilitate deeper and more effective oversight of the risks impacting
the Group. In particular, Directors’ education meetings and GRC
Chair’s preview meetings strengthened the understanding of more
technical topics and promoted constructive challenge. Areas covered
included risk transformation, interest rate risk in the banking book,
stress testing, ICAAP and ILAAP preparations, as well as recovery and
resolution planning. Further details on these sessions are included in
the ’Principal activities and significant issues considered during 2022’
table starting on page 273.
Connectivity with principal subsidiary risk committees
During 2022, the GRC continued to actively engage with principal
subsidiary risk committees through the scheduled participation of
principal subsidiary risk committee chairs at GRC meetings, and
through a connectivity meeting with the principal subsidiary risk
committee chairs. This participation and connectivity promoted the
sharing of information and best practices between the GRC and
principal subsidiary risk committees.
The GRC also received reports on the key risks facing principal
subsidiaries at its regular meetings and continued to review escalated
reports and certifications from the principal subsidiary risk
committees. The certifications confirmed that the principal subsidiary
risk committees had challenged management on the quality of the
information provided, reviewed the actions proposed by management
to address any emerging issues and that risk management and
internal control systems had been operating effectively.
These interactions furthered the GRC’s understanding of the risk
profile of the principal subsidiaries, leading to more comprehensive
review and challenge by the GRC.
Engagement with the Risk and Compliance Executive
Committee
During 2022, the GRC met with the Risk and Compliance Executive
Committee to promote information sharing and encourage active
engagement with executive management.
During the engagement meeting, the GRC developed a better
understanding of the efforts to strengthen our capabilities across the
Group Risk and Compliance function. There were also in-depth
discussions on the efforts to embed the right risk culture into our
global operations to support our transformation activities. The
engagement also promoted a healthy working relationship between
GRC members and executive management.
Collaborative oversight by the GRC, GAC and Technology
Governance Working Group
The GRC worked closely with the GAC and the Technology
Governance Working Group to address any areas of significant
overlap, and to oversee risk more comprehensively through inter-
committee communications and joint meetings.
The GRC, GAC and the Technology Governance Working Group
convened on four occasions to consider the Group's data strategy and
ambitions, the Finance on the Cloud transformation programme, and
internal control issues across key components of Digital Business
Services.
Further details on each of these sessions can be found under the
’Collaborative oversight by the GAC, GRC and Technology
Governance Working Group’ section of the GAC report on page 266.
The committees worked closely to ensure appropriate alignment in
the review, discussion, challenge and conclusions on topics including
risk and control issues relating to Digital Business Services, and the
transition of core capabilities to the Cloud. This ensured that the
committees benefited from each other’s expertise and challenge. The
GRC Chair also included the GAC Chair for pre-meetings on technical
matters such as interest rate risk in the banking book and stress
testing.
Coordination between the GRC, GAC and the Technology Governance
Working Group is supported by cross-membership. The GRC and GAC
Chairs are members of both committees in order to strengthen
connectivity and the flow of information between the committees.
The GRC Chair is also a member of the Technology Governance
Working Group, and each of the co-Chairs of the Technology
Governance Working Group are members of the GRC and GAC,
respectively.
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272 | HSBC Holdings plc Annual Report and Accounts 2022

Principal activities and significant issues considered during 2022
Risk areas | Key issues | Conclusions and actions
Holistic enterprise risk monitoring, including Group risk profile | Geopolitical and macroeconomic risks continue to present significant challenges to revenue growth, operational resilience, and our commitment to serve customers and local markets. | The GRC closely monitored global geopolitical and macroeconomic risks that could impact the Group’s strategy, business performance or operations. These risks were exacerbated by the Russia-Ukraine conflict and by related regulatory and reputational risks impacting our operations globally. The GRC continued to track top and emerging risks, our risk appetite and other management information metrics, as well as other early warning measures to understand sensitivities and the likelihood of the potential impact to our operations, customers and stakeholders. The GRC encouraged management to examine and maintain a timely and up-to-date book of strategic management actions.
Risk framework/ policies | The Group risk appetite statement defines the Group’s risk appetite and tolerance thresholds and forms the basis of the first and second lines of defence’s management of risks, the Group’s capacity and capabilities to support customers, and the achievement of strategic goals. | The GRC maintained oversight of the Group’s risk management framework and changes to the Group’s risk appetite statements, which provided the basis for the Committee’s interactive review of financial and non-financial risk management information at each scheduled GRC meeting. The GRC continued to promote the development of more dynamic and granular risk appetite statements that were forward looking and risk-responsive. The GRC provided oversight for the linkage between risk appetite statements with the Group’s corporate strategy, stress testing, financial resource plan, as well as the Group’s move towards stronger, sustainably higher returns for shareholders. The GRC recommended changes to the Group’s risk appetite statement, including in the areas of interest rate risk in the banking book, insurance risk, climate risk, resilience risk, financial crime risk, regulatory compliance and liquidity risk.
Treasury risk, including stress testing and recovery and resolution | The Group takes active steps to safeguard its capital and liquidity positions. It also performs internal and regulatory stress tests to measure its resilience and performance against stress, and to consider strategic management actions that could be applied against anticipated stress events and headwinds. The Group is also required to show how its resolution strategy could be carried out in an orderly way, and identify any risks to successful resolution. | The GRC reviewed the Group’s ongoing treasury, capital and liquidity risk management activities, including early warning indicators, scenario stress testing, interest rate risk in the banking book (’IRRBB’) strategy and remediation activity, capital and liquidity reporting, and capital and liquidity adequacy. The GRC conducted its annual review, challenge and recommendation of the Group’s ICAAP and ILAAP to the Board for approval. GRC members previewed the ICAAP and ILAAP submissions in depth, with input from principal subsidiary risk committee chairs as appropriate. The GRC evaluated the Group’s IRRBB strategy and progress on the multi-year liquidity improvement programme. The GRC will continue to monitor the Group’s IRRBB strategy closely through regular updates in 2023. In relation to stress testing exercises, the GRC reviewed the Bank of England’s 2022 annual cyclical scenarios, and following a detailed review of principal subsidiary and global businesses inputs, approved the results of the 2022 annual cyclical scenario exercise in December 2022. The GRC also reviewed the implications of the results of the severely adverse scenario stress test from the Federal Reserve’s Comprehensive Capital Analysis and Review in relation to HSBC North America Holdings, and considered actions being progressed by management in response. The GRC continued its oversight of the Group’s progress in developing its capabilities against the Bank of England’s requirements for recovery and resolvability. In 2022, the GRC reviewed and challenged the Group recovery plan, including with an assessment of the financial resources and recovery capacity needed to stabilise the Group. The GRC considered views of all lines of defence to determine credibility and ability to execute the plan. In advance of the review by the GRC, the GRC and GAC Chairs met with management to consider the principal subsidiary risk committee components. The GRC was heavily involved in the governance of the resolvability assessment framework (‘RAF’). This included oversight of the addendum to the Group’s RAF self-assessment that set out HSBC’s progress since submission of the original self-assessment in October 2021. The GRC also reviewed the RAF public disclosure prior to its submission, and considered remedial actions to address the feedback provided by the Bank of England. In addition, the GRC assessed the adequacy of the recovery and resolution planning programme that is expected to deliver improvements, in line with management expectation and the PRA’s feedback.
Wholesale/ retail credit risk | HSBC faces risk from the possibility of losses resulting from the failure of a counterparty to meet its agreed obligations to pay the Group. | The GRC reviewed updates on the strategy and approach to managing credit risk and credit risk capabilities. The GRC received quarterly updates on the Group’s expected credit losses and provisions, loan impairment charges and the credit risk arising from the wholesale portfolio and mortgage books. The GRC also reviewed the potential impact of a likely recession in our key markets due to rising inflation and interest rates to assess management’s readiness and approach to drive stronger credit risk management practices. The GRC continued its emphasis on building even stronger credit capabilities for specialty sectors, the development of stronger portfolio management capabilities and further improving the Group’s credit risk culture.

HSBC Holdings plc Annual Report and Accounts 2022 | 273

Principal activities and significant issues considered during 2022 (continued)
Risk areas | Key issues | Conclusions and actions
Financial reporting risk | HSBC is exposed to the risk where controls supporting the reporting of its financial statements are not effective, resulting in material error or misstatement. | The GRC receives regular reports on entity level control assessments to enable the oversight of the effectiveness of such controls in support of the Group's financial reporting. The GRC also receives notable audit reports that provide an assessment of control effectiveness, where applicable. While the GAC assumes primary responsibility for the oversight of financial reporting capabilities, the GAC collaborated with the GRC and the Technology Governance Working Group to assess the progress in developing these capabilities. Further details on the joint meeting are included in the ’Collaborative oversight by the GAC, GRC and Technology Governance Working Group’ section on page 272.
Resilience risk (technology and operational risk) | Resilience risk is where we may be unable to provide our customers with critical business services due to significant disruption. Technology risk is where there may be unmanaged disruption to any IT system within HSBC, as a result of malicious acts, accidental actions or poor IT practice or IT system failure. The operational resilience programme defines the Group’s policies and practices to strengthen its ability and readiness to serve customers in the event of unforeseen disruptions in key markets. | The GRC continued its oversight of the Group’s implementation of operational resilience capabilities in line with PRA and FCA policies. The GRC reviewed and challenged the operational resilience self-assessment against regulatory expectations, and worked with management to ensure that ownership and the delivery of resilience outcomes were embedded within the business and with function leaders. The GRC advocated for the early adoption of operational resilience requirements across key markets and businesses. The GRC will oversee the progress in extending the programme of operational resilience globally throughout 2023. The GRC regularly reviewed reports on the Group’s technology risk profile, as well as reports on cybersecurity risks. The GRC also maintained a strong focus on understanding the Group’s data risk landscape, its data strategy and data management programme.
Financial crime risk | The Group is committed to closely monitoring and managing the risk that HSBC’s products and services will be exploited for criminal activity, including fraud, bribery and corruption, tax evasion, sanctions and export control violations, money laundering, terrorist financing and proliferation financing. | The GRC continued to review the Group’s approach to managing its financial crime risk across geographies and businesses. This included reviewing the Group’s progress in enhancing its transaction monitoring framework, as well as monitoring the fraud landscape and the strategies for managing such risk. In light of the Russia-Ukraine war, the GRC also maintained oversight of the ever- changing and increasingly complex international sanctions landscape in which the Group and its customers operate, as well as the Group’s approach to managing its compliance with multiple and differing sanctions regimes globally.
People and conduct risk | The Group promotes a culture that is effective in managing risk and leads to fair conduct outcomes. It seeks to actively manage the risk of not having the right people with the right skills doing the right thing, including risks associated with employment practices and relations. | The GRC monitored people risk and employee conduct, with support from the Group Chief Human Resources Officer and Group Chief Risk and Compliance Officer. The GRC considered people risk issues with a focus on capacity, capability, culture and conduct. It also considered remuneration risks, and strategies to retain talent and acquire new capabilities and skills in key areas. The GRC also placed strong emphasis on policies and practices relating to conduct and fairness to customers, especially on vulnerable customers given heightened macroeconomic pressures and stress on customers across markets. The GRC and Group Remuneration Committee met jointly in September and December, and reviewed the Group’s risk and reward alignment framework to promote sound and effective risk management in meeting PRA and FCA remuneration rules and expectations.
Regulatory compliance risk | The Group operates in multiple jurisdictions, and is exposed to risks associated with inappropriate market conduct or breaching related financial services regulatory standards or expectations. | The GRC receives feedback from regulators, and monitors the progress of any regulatory remediation activities, with the support from the Group Chief Risk and Compliance Officer as well as principal subsidiary risk committee chairs. During the year, the GRC had oversight over reports providing feedback from regulators, including a summary of regulatory deliverables to ensure HSBC remains in line with regulatory standards and expectations.
Legal risk | HSBC is exposed to the risk of financial loss, legal or regulatory action resulting from contractual risk, dispute management risk, breach of competition law or intellectual property risk. | The GRC oversees and receives regular updates on key legal developments and material legal issues from the Group Chief Legal Officer. The updates also cover material litigation and regulatory enforcement matters and an overview of the legal risk profile of HSBC.
Model risk | HSBC faces risk from the 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. | The GRC continued to oversee the Group’s progress in managing model risk through the Group Chief Risk and Compliance Officer’s Group risk profile report. The GRC oversaw the progress in achieving our model risk vision and the strengthening of our model risk management capabilities. In particular, the GRC reviewed model risk deliverables against external review findings, improvements made to enhance first line of defence engagement in the model lifecycle, progress made to transform the Model Risk Management function and the implementation of new global model risk policy and standards.

Report of the Directors | Corporate governance report | Board committees

274 | HSBC Holdings plc Annual Report and Accounts 2022

Principal activities and significant issues considered during 2022 (continued)
Risk areas | Key issues | Conclusions and actions
ESG risk | Successful delivery of our climate ambition will be determined by our ability to measure and manage all components of environmental, social and governance (’ESG’) risk, including climate risk. | The GRC remained focused on ESG risk, including climate risk, and has reviewed quarterly reports on climate risk management, while maintaining oversight of delivery plans to ensure that the Group develops robust climate risk management capabilities. The GRC also has oversight over ESG-related initiatives and reviews these to assess the risk profile. The GRC approved the Group’s climate biennial exploratory scenario stress test submission to the PRA in March 2022. In preparation, the GRC reviewed the scenario and considered planned engagement with clients, strategic management actions; the challenges in relation to data, modelling and infrastructure support; and the impact of climate change on our physical risks including through our residential and corporate real estate mortgage books.

Committee evaluation
During 2022, the GRC implemented the recommendations of the
external committee evaluation conducted by Lintstock in consultation
with the Group Company Secretary and Chief Compliance Officer in
December 2021. This included strengthening the focus of meeting
agendas, and continuing the GRC’s engagement with the Risk and
Compliance Executive Committee and principal subsidiary risk
committee chairs.
Continuing the commitment to regular evaluation, the Group
Company Secretary and Chief Governance Officer performed an
annual review of the effectiveness of the GRC in December 2022.
The evaluation concluded that the GRC continued to operate
effectively and in line with regulatory requirements, and identified
enhancements. The outcomes of the evaluation have been reported
to the Board, and the GRC will track the progress in implementing
recommendations during 2023.
Focus of future activities
The GRC’s focus for 2023 will include the following activities. It will:
•oversee risk transformation activities to develop even stronger risk
management capabilities;
•oversee the continued enhancement of the Group's risk appetite
and risk management framework, especially in light of continued
geopolitical and macroeconomic headwinds;
•continue to oversee treasury risk to strengthen our capital and
liquidity management capabilities, including proactive management
of interest rate risk in the banking book;
•continue to review and challenge the consistency of our risk
appetite statements, our financial resource plan, and the outcomes
from our stress testing exercise;
•monitor our ESG progress, including the delivery against the
climate commitments and the development of appropriate data
and model management tools and capabilities;
•continue the oversight of recovery and resolution planning
activities to assess our resolvability capabilities if such situation
arises;
•continue the oversight of the delivery of technology-related
programmes including the adoption of Cloud platforms, and
enhancement of the Group’s IT systems/platform;
•continue to oversee financial crime risk and the strengthening of
the financial crime control framework, including proactive
management by the business; and
•assess our strategic opportunities and risks including exposures to
digital currencies or assets and use of timely application of
technology such as machine learning or artificial intelligence.

HSBC Holdings plc Annual Report and Accounts 2022 | 275

Directors’ remuneration report

Contents

276 | Committee Chair’s statement
279 | Executive remuneration at a glance
282 | Annual report on Directors’ remuneration
298 | Additional regulatory remuneration disclosures

All disclosures in the Directors’ remuneration report are unaudited
unless otherwise stated. Disclosures marked as audited should be
considered audited in the context of financial statements taken as a
whole.

"This year we have refreshed our reward strategy to inspire a dynamic culture as we focus on energising for growth and delivering sustainable value to our shareholders, customers and colleagues." |

Dear Shareholder
I am pleased to present our 2022 Directors’ remuneration report on
behalf of the members of the Group Remuneration Committee, and
my first as Chair of the Committee. I would like to thank our previous
Chair, Pauline van der Meer Mohr, for her excellent stewardship of
the Committee.
I also thank you for your support of our remuneration resolutions at
the 2022 Annual General Meeting (‘AGM’). Our current policy and its
implementation received 96% of votes in favour.
In addition to our usual agenda, the Committee has been focused on
aligning performance measures and remuneration more closely with
our strategy. We have been engaging with our major shareholders
and other investor groups, who have shared valuable feedback.
We have refreshed our wider reward strategy and proposition for the
workforce in response to the new or elevated challenges we are
facing as we move beyond the Covid-19 pandemic, including the cost
of living pressures many of our colleagues are experiencing. The
commitments we make to colleagues are critical to support us in
energising for growth and delivering sustainable performance.
Performance in 2022
Financial performance
Financial performance in 2022 was supported by a rise in global
interest rates, which materially improved our net interest income, and
we maintained our strong focus on cost discipline, despite inflationary
pressures and continued investment in technology. While our revenue
outlook remains positive, there are continued risks around inflation
and increasing macroeconomic uncertainty in many of the markets in
which we operate.
Adjusted profit before tax increased by $3.4 bn to $24.0 bn, as a rise in
adjusted revenue of 18% to $55.3 bn was partly offset by an adjusted
expected credit losses charge of $3.6 bn, compared with a net release
in 2021 of $0.8 bn, and growth in adjusted operating expenses of 1%.
Our return on average tangible equity (‘RoTE‘) was 9.9%, an increase
of 1.6% on 2021, and we have now exceeded our ambition of $120 bn
of risk-weighted asset (‘RWA‘) gross saves since the start of our
programme in 2020.

Membership
| Member since | Meeting attendance in 2022
Dame Carolyn Fairbairn (Chair) | Sept 2021 | 6/6
Geraldine Buckingham | May 2022 | 4/4
Rachel Duan | Sept 2021 | 6/6
James Forese | May 2020 | 6/6
José Antonio Meade Kuribreña | May 2021 | 6/6
Pauline van der Meer Mohr 1 | Jan 2016 | 2/2

1 Pauline van der Meer Mohr stepped down from the Committee and
Board at the conclusion of the AGM on 29 April 2022.
In 2022, we approved dividends of $0.32 per share, equivalent to a
payout ratio of 44% of reported earnings per share. We are
establishing a dividend payout ratio of 50% of reported earnings per
share for 2023 and 2024, excluding material significant items, and we
intend to revert to paying quarterly dividends from the first quarter of
2023.
Non-financial performance
In our employee Snapshot survey, our Employee engagement and
Inclusion indices both increased by 1% year on year to 73% and 76%,
respectively, which are both above the financial services benchmarks.
The percentage of Black heritage colleagues in senior leadership
globally increased by 0.3% to 2.5%, meeting our stretch goal. The
percentage of women in senior leadership also increased by 1.6% to
33.3% since 2021, and we are on track to meet our commitment of
35% by 2025.
For customer satisfaction, net promoter score (’NPS’) performance
has been positive relative to our competitors in some areas of our
business, with work to do in others. In WPB, our NPS increased in the
UK and Hong Kong, and we were ranked in first place in Hong Kong.
In CMB, our NPS increased in Hong Kong but declined in the UK, and
we were ranked in second place in Hong Kong. In GBM, our global
NPS improved and our global rank remained in fifth place. In WPB and
CMB digital businesses in Hong Kong, we were ranked in first and
third places, respectively. In GBM globally, our digital trade finance
platforms maintained first place for the quality of platforms. Our
PayMe payments app was also ranked in second place for digital
wallets. In WPB, our NPS increased in mainland China and Singapore,
remained unchanged in Mexico, and in India saw a small decline. In
CMB, our NPS increased in mainland China, Singapore and Mexico,
and our rank positions in those markets either improved compared
with 2021 or were in the top three against competitors.
Workforce reward
Group variable pay pool
The Committee determined an overall variable pay pool of $3,359m
(2021: $3,495m) following a review of our performance against
financial and non-financial metrics set out in the Group risk
framework. The Committee considered our strong 2022 financial
performance, with a 17% increase in adjusted profit before tax, a
RoTE of 9.9% and adjusted cost growth of 1% year on year. The
Committee also considered the external environment, the challenging
economic outlook and projected outcomes across the market to
ensure we remain competitive to attract and retain talent.
The distribution of the pool was differentiated by business
performance. Overall year-on-year variable pay outcomes were
strongest in CMB, followed by WPB but down in GBM to reflect
relative performance. There was robust differentiation for individual
performance so that our highest performers received meaningful
variable pay increases on the previous year. We have protected
variable pay for junior colleagues, which was up on average,
recognising the inflationary and cost of living challenges experienced
across most of our markets.
In determining 2023 fixed pay increases, we considered the impact of
inflation in each country where we operate. Increases were targeted
towards more junior and middle management colleagues as fixed pay
is a larger proportion of their overall pay. Across the Group, there was
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276 | HSBC Holdings plc Annual Report and Accounts 2022

an overall increase of 5.5% in fixed pay, compared with 3.6% for
2022. The level of increases varied by country, depending on the
economic situation and individual roles. There were no fixed pay
increases for most of our senior leaders, including our executive
Directors.
Supporting colleagues in 2022
We monitored the global economic situation carefully and took action
to support our colleagues according to the market, given local inflation
and cost of living pressures. We continued to support our colleagues
in those markets still significantly impacted by the pandemic. In
mainland China and Hong Kong, we provided care packages and
increased well-being sessions. In mainland China, we also delivered
food essentials and provided inconvenience allowances. In Argentina
and Türkiye, we made regular adjustments to fixed pay given the
continuing inflationary pressures. In Sri Lanka, we made one-off
payments and fixed pay increases during the year to address high
inflation. In the UK, we provided almost 17,000 junior colleagues with
a one-off payment of £1,500 to help with energy cost pressures.
We continued to focus on well-being, benefits, financial guidance,
employee assistance programmes and access to hardship funds, as
well as pay.
Key remuneration decisions for Directors
Executive Director changes
Georges Elhedery was appointed Group Chief Financial Officer from
1 January 2023. Ewen Stevenson is leaving the Group on 30 April
2023 and will receive a payment in lieu of notice until 25 October
2023. All remuneration decisions in respect of this change were made
in accordance with our shareholder-approved policy, and are detailed
in the annual report on remuneration.
Georges Elhedery’s remuneration was set on appointment with a
base salary of £780,000 per annum, a fixed pay allowance of
£1,085,000 per annum, a pension allowance of 10% of his base salary
(in line with most UK employees) and variable remuneration and
benefits in accordance with our policy.
In recognition of the services that Ewen Stevenson provided to HSBC
during his tenure and the circumstances of his departure, he has been
treated as a good leaver for the purpose of unvested incentive
awards. He remained eligible for a 2022 annual incentive but will not
receive a long-term incentive award for the 2023 to 2025 performance
period.
Executive Directors‘ annual incentive
The Group's financial performance was reflected in the performance
against the measures in the executive Directors’ annual scorecards. In
particular, the Committee recognised: adjusted profit before tax was
$24.0bn, which represented an increase of 17% compared with 2021;
strong cost controls were demonstrated, despite inflationary
pressures and continued investment in technology, with adjusted
costs at $30.5bn; and RoTE was 9.9%, an improvement on the 8.3%
achieved in 2021.
Overall, combined with non-financial measures, this level of
performance resulted in a formulaic scorecard outcome of 79.32% of
the maximum opportunity for Noel Quinn (2021: 57.30%) and 76.65%
for Ewen Stevenson (2021: 60.43%). The increase relative to 2021
reflected performance against targets and is largely a result of
stronger financial performance in 2022.
The annual incentive scorecard is also subject to a risk and
compliance modifier, which provides the Committee with the
discretion to adjust down the overall scorecard outcome. Taking into
account the Group’s performance against risk metrics, inputs from
the Group Risk Committee and the overall accountability of the
executive Directors with regards to specific matters around capital
management in the year, the Committee used its judgement and
applied a downward adjustment of 5% and 15% to Noel Quinn’s and
Ewen Stevenson’s annual incentive outcomes, respectively. The
difference in adjustments reflected the degree of accountability and
relative proximity for capital management. This resulted in an adjusted
incentive outcome of 75.35% of maximum opportunity for Noel Quinn
and 65.15% for Ewen Stevenson. This represented amounts of
£2,164,000 for Noel Quinn (2021: £1,590,000) and £1,091,000 for
Ewen Stevenson (2021: £978,000).
The year-on-year increase in annual incentive for the Group Chief
Executive is based on a formulaic assessment of performance against
financial and non-financial targets set by the Board at the start of last
year, taking into account the Group’s 2022 financial plan and strategic
priorities and commitments.
While the variable pay pool is determined by the Group’s overall
performance, it is not set in a formulaic manner. Our approach is to
smooth the variable pay pool outcomes over time to protect overall
pay for colleagues from material volatility in performance caused by
market conditions. In years of lower Group performance, we protect
colleagues from significant downside in pay outcomes, including in
2020 when adjusted profit before tax fell 45% year on year, but the
variable pay pool decreased just 20%. In years of stronger
performance, such as in 2022, a similar approach is taken on the
upside.
The Committee carefully considered the executive Directors’ pay
outcomes in the context of pay decisions made for the wider
workforce and determined that these are an appropriate reflection of
Group, business and individual performance delivered in 2022.
Long-term incentive (‘LTI‘) for executive Directors
For LTI awards for the 2023 to 2025 performance period, we will
continue to use measures and targets relating to: RoTE; capital
reallocation to Asia; relative total shareholder return (‘TSR’); and
environmental impact.
Following feedback from some of our shareholders, the Committee
reviewed the TSR performance peer group, with the objective of
including more Asian peers to better reflect the balance of markets
and businesses of the Group. The new peer group will be used for the
relative TSR measure for LTI awards with a 2023 to 2025
performance period, and now includes Bank of China (Hong Kong),
China Merchants Bank and OCBC Bank. No change will be made to
the performance peer group for any LTI awards granted prior to the
2023 to 2025 LTI award.
For the 2023 to 2025 performance period: Noel Quinn will receive an
LTI award of £4,275,000 (320% of salary) in respect of his
performance for 2022; Georges Elhedery will receive an LTI award of
£1,248,000 (160% of salary) in respect of his performance for 2022
when he was not an executive Director; and Ewen Stevenson will not
receive an LTI award.
Ewen Stevenson participated in the LTI for the 2020 to 2022
performance period that will vest in March 2023. The TSR and RoTE
performance targets were not met and therefore these elements of
the award lapsed in full. The customers measure was determined to
be 57% met and therefore 19% of the overall award will vest on a
pro-rata basis over the next five years.
Executive Directors‘ fixed pay for 2023
The Committee decided that there will be no increase to the base
salary or fixed pay allowances for Noel Quinn for 2023. The fixed pay
for Georges Elhedery for 2023 was set on appointment.
Ordinarily, an increase would have been considered for Noel Quinn to
ensure that his total remuneration opportunity is competitive in the
market. However, given the broader economic context and
inflationary and cost of living pressures for colleagues across many of
our markets, we targeted increases to our more junior and lower paid
colleagues this year.
Looking ahead
We note the UK government’s consultation around the variable to
fixed pay ratio, and anticipate that this will eventually allow us to place
more emphasis on variable pay in the overall package. We will keep
our approach under review and consult with shareholders on any
potential changes to our overall remuneration framework for
executive Directors. In the meantime, our approach for 2023 will be
consistent with the current approved policy and regulatory
requirements.
We are committed to opening up a world of opportunity for all our
people in 2023 and beyond. Our refreshed reward proposition
articulates how we are building a dynamic culture where the best

HSBC Holdings plc Annual Report and Accounts 2022 | 277

want to work, where we reward colleagues responsibly and reward
their successes. We will continue to do the right thing for our
colleagues, rewarding them fairly and supporting them to grow.
We continue to protect value for our shareholders and customers, and
manage our costs. We will also continue to engage with all our
stakeholders on executive pay matters.
We believe that our decisions on executive pay for 2022 have struck
the right balance for all stakeholders and are also fair relative to
performance. As Chair of the Committee, I hope you will support the
2022 Directors’ remuneration report, which will be subject to an
advisory vote at our 2023 AGM.
Dame Carolyn Fairbairn
Chair
Group Remuneration Committee
21 February 2023
Remuneration decisions in context

We have given serious consideration to how we manage competing variables when deciding pay outcomes this year. We feel the decisions that have been made strike a balance between prioritising fixed pay increases for those who need it the most, and variable pay increases for our most exceptional performers. We will continue to listen carefully to all stakeholders – colleagues, customers and shareholders, as well as our regulators – in making these important judgements.
What are we doing to support colleagues? | How was fixed and variable pay determined for executive Directors?
A key aspect of the Committee’s activities this year has been ensuring that we support our colleagues through the challenges that many are facing. In recognition of the broader environment, we are spending more on fixed pay than we have in recent years, and we have increased the total funding by 5.5% globally. We want to make sure that colleagues can avoid facing financial hardship, and we support the senior leadership’s decision to focus fixed pay increases on our more junior and middle management employees, where this is a larger proportion of their overall pay. We have taken a number of targeted actions to support our colleagues during 2022, taking the local context into consideration, as detailed in the Chair’s letter. This includes support for those particularly impacted by inflationary pressures in Argentina, Türkiye and Sri Lanka. It also includes support in mainland China and Hong Kong where colleagues are still significantly impacted by the pandemic. In the UK, we supported colleagues facing energy cost pressures. We have continued to provide a wide range of resources to all our colleagues globally, including wider support on financial guidance, employee assistance programmes and access to hardship funds. | The Committee makes decisions on executive Director pay based on a policy that is agreed with our shareholders. The performance against targets in the executive Directors’ annual scorecards reflects their individual contribution to the Group's strong financial performance in 2022. We set clear targets at the start of the year, and then the Committee assesses if they have been met or not. The annual incentive scorecard is also subject to a risk and compliance modifier. Overall, this has resulted in a higher annual incentive outcome for our executive Directors for 2022. Details of these outcomes are set out in our annual report on remuneration below. There have been no fixed pay increases for our executive Directors.
How was fixed and variable pay funding determined for all employees? The Group has increased fixed pay funding by 5.5% for 2023, compared with 3.6% for 2022. We have allocated fixed pay by market, with outcomes differentiated based on the economic circumstances, and particularly wage inflation, in each market. We have taken into account the impact of the current economic environment and targeted fixed pay increases towards more junior and middle management colleagues where fixed pay is a larger part of their total compensation and who may be most impacted by inflation and cost of living pressures. There have been no fixed pay increases for most of our senior leaders for 2023, including our executive Directors. The Group variable pay pool is determined by reviewing Group performance against key financial and non-financial metrics. Although we have improved our financial performance this year, we have kept the pool broadly flat when compared with 2021. Our approach is to smooth the variable pay pool outcomes over time to protect overall pay for colleagues from material volatility in performance caused by market conditions. Within the overall variable pay pool, there has been significant differentiation to reward our best performing businesses and recognise excellent individual performance. Outcomes for colleagues vary significantly depending on their role, business area and performance. | What are the key areas of focus for the Committee over the coming year? The Committee notes the UK government’s consultation around the bonus cap, and we anticipate that this will eventually lead to a remuneration structure with a greater focus on variable pay for performance. We intend to review the remuneration arrangements for our executive Directors in due course in light of the UK government’s proposals, and will consult with shareholders on any potential changes to our overall remuneration framework. The Committee continues to keep the performance metrics used for our executive scorecards under review to ensure that they continue to support the successful execution of our strategy, while also taking into account views of our major shareholders, and investor and regulatory guidance in this area. As the Group continues to progress on our environmental, social and governance (’ESG’) journey, the Committee has discussed how we ensure our environmental and social commitments continue to be appropriately reflected in the performance scorecards for members of the Group Executive Committee. This is an area the Committee intends to consider further over the coming year.

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Executive remuneration at a glance
This section sets out an overview of our performance, our 2022 remuneration outcomes for executive Directors and a summary of the policy
approved by shareholders at our 2022 AGM, including how we will implement the policy in 2023.
Our performance

Adjusted profit before tax $24.0bn (2021: $20.6bn) | Net new invested assets $80bn (2021: $64bn) | Adjusted costs $30.5bn (2021: $30.1bn) | Return on average tangible equity 9.9% (2021: 8.3%)
Employee engagement index 73% (2021: 72%) | Inclusion index 76% (2021: 75%) | Colleagues reporting HSBC cares about their well-being 70% (up from 50% in 2016 when we first ran the survey) | Percentage of women in senior leadership roles 33.3% (2021: 31.7%)

Remuneration outcomes for executive Directors
Summary remuneration outcomes for 2022 are set out below. Further details are set out in our annual report on remuneration.

Noel Quinn

Total remuneration (£000)

Ewen Stevenson

Total remuneration (£000)
Annual incentive outcome
Shareholding (% of salary)1
1 Executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment. Noel Quinn and Ewen
Stevenson were appointed on 5 August 2019 and 1 January 2019 respectively.

HSBC Holdings plc Annual Report and Accounts 2022 | 279

Remuneration policy summary – executive Directors
This section summarises our remuneration policy for executive Directors. The policy was approved at the AGM on 29 April 2022. The full
remuneration policy can be found on pages 257 to 265 of our Annual Report and Accounts 2021 and in the Directors’ Remuneration Policy
Supplement, which is available under Group results and reporting in the 'Investors' section of www.hsbc.com.

Elements and objectives | Operation | Implementation in 2023
Base salary | •Base salary is paid in cash on a monthly basis. •Other than in exceptional circumstances, the base salary for the current executive Directors will not increase by more than 15% above the level at the start of the policy period in total for the duration of the policy. | Base salary will not be increased for 2023 and will remain as follows: •Noel Quinn: £1,336,000 •Georges Elhedery: £780,000
Fixed pay allowance (‘FPA’) | •The FPA is granted in instalments of immediately vested shares. •On vesting, shares equivalent to the net number of shares delivered (after those sold to cover any income tax and social security) are subject to a retention period and released annually on pro-rata basis over five years, starting from the March immediately following the end of the financial year for which the shares are granted. •Dividends are paid on the vested shares held during the vesting period. | FPA for 2023 will not be increased for 2023 and will remain as follows: •Noel Quinn: £1,700,000 •Georges Elhedery: £1,085,000
Cash in lieu of pension | •Cash in lieu of pension is paid on a monthly basis as 10% of base salary. •This allowance, as a percentage of salary, is aligned with the maximum contribution rate, as a percentage of salary, that HSBC could make for a majority of employees who are defined contribution members of the HSBC Bank (UK) Pension Scheme. | •No change to percentage of base salary.
Annual incentive | •The maximum opportunity for the annual incentive is up to 215% of base salary. •Annual incentive performance is measured against an individual scorecard. •At least 50% of any award is delivered in shares, which are normally immediately vested. •On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators. •Awards will be subject to clawback (i.e. repayment or recoupment of paid vested awards) for a period of seven years from the date of award, extending to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. Any unvested awards will be subject to malus (i.e. reduction and/or cancellation) during any applicable deferral period. | •No change to quantum. •See page 286 for details of 2023 annual incentive measures.
Long-term incentive (‘LTI’) | •The maximum opportunity for LTI awards is up to 320% of base salary. •The LTI award is granted if the Committee considers that there has been satisfactory performance over the prior year and subject to a forward-looking three-year performance period from the start of the financial year in which the awards are granted. •At the end of the performance period, awards will vest in five equal instalments, with the first vesting on or around the third anniversary of the grant date and the last instalment vesting on or around the seventh anniversary of the grant date. •On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators. •Awards are subject to malus provisions prior to vesting. Vested shares are subject to clawback for a period of seven years from the date of award, extending to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. •Awards may be entitled to dividend equivalents during the vesting period, paid on vesting. Where awards do not receive dividend equivalents, the number of shares awarded can be determined using the share price discounted for the expected dividend yield. | •No change to quantum. •See page 285 for details of performance measures for the LTI awards with a 2023 to 2025 performance period.
Benefits | •Benefits include the provision of medical insurance, accommodation, car, club membership, independent legal advice in relation to a matter arising out of the performance of employment duties for HSBC, tax return assistance or preparation, and travel assistance (including any associated tax due, where applicable). •Additional benefits may also be provided when an executive is relocated or spends a substantial proportion of his/her time in more than one jurisdiction for business needs. | •Benefits to be provided as per policy. Details will be disclosed in the Annual Report and Accounts 2023 single figure of remuneration table.
Shareholding guidelines | Executive Directors are expected to satisfy the following shareholding requirement as a percentage of base salary within five years from the date of their appointment: •Group Chief Executive: 400% •Group Chief Financial Officer: 300% | •No change to percentage of base salary.
All-employee share plans | Executive Directors are eligible to participate in all-employee share plans, such as HSBC Sharesave, on the same basis as all other employees. | •Participation in any such plans will be disclosed in the Annual Report and Accounts 2023, as required.

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Our approach to workforce reward
Our refreshed reward proposition
During 2022, the Committee refreshed our reward strategy, to
strengthen our focus on inspiring a dynamic culture where the best
want to work. This work was underpinned by comprehensive internal
and external research, including reviewing two years of feedback and
data from our Snapshot and pay surveys, and exit interviews about
what makes colleagues join, leave and engaged at HSBC.
Our workforce proposition is rooted in our purpose and values. Our
commitment to reward colleagues fairly, along with the opportunity to
do inspiring work and contribute within our international network,
creates a unique proposition for colleagues. Our refreshed principles
and supporting commitments articulate the experience for
employees, and provide a clear framework to creating a dynamic
culture where the best talent are motivated to deliver high
performance. These principles are:
•We will reward you responsibly through fixed pay security and
protection through core benefits, a competitive total compensation
opportunity, and pay equity with a more inclusive and sustainable
benefits proposition over time.
•We will recognise your success through our performance culture
and routines, including feedback and recognition, pay for
performance, and all employee share ownership opportunities.
•We will support you to grow through our proposition beyond pay,
with a focus on future skills and development, your mental,
physical, social and financial well-being, and flexibility in working
practices.
We live up to many of these commitments today. We will also set
new goals to continue to improve over time, with plans to focus on
improving colleague sentiment through more transparency and
structure in pay design, and better communications on how we make
reward decisions.
Aligned with these commitments, we have developed a roadmap to
build on our strong benefits and well-being programme, including
flexible working, and more inclusive and sustainable benefits.
We have set clear measures and key performance indicators to track
our progress, including by listening to colleague feedback.
Supporting colleagues in 2022
In 2022, our colleagues faced a backdrop of increasing economic
instability, with rising energy prices and inflation, which increased
their cost of living. While we continued to focus on making
responsible reward decisions for our colleagues through our annual
pay review, we also took a number of actions throughout 2022.
Given this context and our focus on pay security, we allocated more
to fixed pay increases than in prior years, and this was based on
consistent principles to help address the impact of rising inflation in
many of our locations.
In determining 2023 fixed pay increases, we considered the impact of
inflation in each market where we operate. Increases were targeted
towards more junior and middle management colleagues as fixed pay
is a larger proportion of their overall pay. Across the Group, there was
an overall increase of 5.5% in fixed pay, compared with 3.6% for
2022. The level of increases varied by market, depending on the
economic situation and individual roles.
The distribution of the variable pay pool was differentiated by
business performance. There was robust differentiation for individual
performance so that our highest performers received meaningful
variable pay increases on the previous year. We have protected
variable pay for junior colleagues, which is up on average, recognising
the inflationary and cost of living challenges experienced across most
of our markets.
Considering the macroeconomic environment and cost of living
challenges impacting colleagues, we provided specific support to
those most affected. For example, in the UK and the Channel Islands
we paid our more junior colleagues a one-off payment of £1,500 to
help with the cost of living pressures, driven primarily by rising energy
costs. In Argentina, Sri Lanka and Türkiye, where colleagues were
impacted by inflationary challenges, we gave our colleagues fixed pay
increases throughout the year. In other areas we provided our
colleagues support in the form of meal vouchers to help with rising
food costs, and we increased flexibility around how and where our
colleagues work. Some of our colleagues are still significantly
impacted by the pandemic and we have ensured support in these
specific markets. In mainland China and Hong Kong, we provided care
packages and increased well-being sessions. In mainland China, we
also delivered food essentials and provided inconvenience
allowances. Where colleagues have been impacted by the Russia-
Ukraine war we offered free independent and professional
counselling, alongside hosting regular public webinars to manage
topics such as stress and dealing with anxiety. Our colleagues in
Poland have been providing direct assistance to people crossing the
border and we quickly made available financial resources for them to
continue to directly support refugees.
The well-being of our people remained a critical focus in 2022, and in
particular, the financial well-being of our colleagues and their families.
Guided by data and colleague feedback, the pillars of our well-being
programme are mental, physical, financial and social well-being.
Despite the immense challenges, sentiment remained high. A total of
70% of colleagues believe HSBC genuinely cares about their well-
being. In a September survey, 84% of colleagues rated their mental
well-being as positive, 71% rated their overall physical well-being
positively and 60% of colleagues reported their financial well-being as
positive.
We measure our colleagues’ sentiment on performance and pay
through our annual pay review surveys. Considering the challenges
colleagues faced, it was encouraging to see that check-ins happened
regularly, with 66% of colleagues having frequent conversations with
their managers (2021: 60%). Our colleagues tell us that these have a
positive impact on their performance, development and well-being,
and are important in motivating them to perform at their best.
Throughout the year we recognise our colleagues for demonstrating
our values. The ‘At Our Best’ recognition online platform allows for
real-time recognition and communication of positive behaviours by
colleagues, in line with our purpose and values. We also run annual
spotlight campaigns, with the campaign in 2022 focusing on ESG
issues to recognise colleagues for exceptional actions in supporting
our need to work responsibly. Our colleagues made over 1.2 million
recognitions during 2022, a record high and an 11% increase on the
previous year.

HSBC Holdings plc Annual Report and Accounts 2022 | 281

Annual report on Directors’
remuneration
This section sets out how our approved Directors’ remuneration
policy was implemented during 2022.
Determining executive Directors’ incentive
outcomes
(Audited)
F or any annual incentive award to be made, each executive Director
must achieve a minimum standard of conduct and values-aligned
behaviour. For 2022, both executive Directors met this requirement.
The award is determined by applying the outcome of their annual
incentive scorecard to the maximum opportunity, which was set at
215% of salary. The scorecard measures, weightings and targets
were determined at the start of the financial year taking into account
the Group’s plan for 2022 and the Group’s strategic priorities and
commitments. For strategic measures, the assessment was against
targets set for employee diversity, survey results for employee
experience and customer satisfaction measures, as well as progress
made and momentum generated to achieve our strategic priorities.
The Group’s financial performance was reflected in the achievement
against the measures in the executive Directors’ annual scorecards. In
particular, the Committee recognised:
•adjusted profit before tax was $24.0bn, which represented an
increase of 17% compared with $20.6bn in 2021;
•strong cost controls were demonstrated, despite inflationary
pressures and continued investment in technology, with adjusted
costs at $30.5bn; and
•RoTE was 9.9%, an improvement on 8.3% in 2021.
Our Employee engagement and Inclusion indices in the Snapshot
survey both increased and were above the financial services
benchmarks. The percentage of Black heritage colleagues in senior
leadership globally increased, as did the percentage of women in
senior leadership. For customer satisfaction, NPS performance is
assessed with reference to rank movements against our competitors
and underlying NPS scores. Performance details for employees and
customers measures are set out in the table in the section below.
Overall, this level of performance resulted in a formulaic scorecard
outcome of 79.32% of the maximum for Noel Quinn and 76.65% for
Ewen Stevenson.
The annual incentive scorecard is also subject to a risk and
compliance modifier, which provides the Committee with the
discretion to adjust down the overall scorecard outcome. Taking into
account the Group’s performance against risk metrics, inputs from
the Group Risk Committee and the overall accountability of the
executive Directors with regards to specific matters around capital
management in the year, the Committee used its judgement and
applied a downward adjustment of 5% to Noel Quinn’s annual
incentive outcome and 15% to Ewen Stevenson’s. The difference in
adjustments reflected the degree of accountability and relative
proximity for capital management. This resulted in an adjusted
incentive outcome of 75.35% of maximum opportunity for Noel Quinn
and 65.15% for Ewen Stevenson. This represented amounts of
£2,164,000 for Noel Quinn (2021: £1,590,000) and £1,091,000 for
Ewen Stevenson (2021: £978,000).
As detailed in the Chair’s letter, the Committee considered carefully
the executive Directors’ pay outcomes in the context of pay decisions
made for the wider workforce and determined that these were an
appropriate reflection of Group, business and individual performance
delivered in 2022.
Annual incentive scorecard assessment
(Audited)

Summary assessment
| Minimum (25% payout) | Maximum (100% payout) |  | Noel Quinn | Ewen Stevenson
Performance | Weighting (%) | Assessment (%) | Outcome (%) | Weighting (%) | Assessment (%) | Outcome (%)
Group adjusted profit before tax ($bn) | 16.66 | 19.51 | 24.01 | 20.00 | 100.00 | 20.00 | 15.00 | 100.00 | 15.00
Group lending growth – customer loans and advances (third party) | 2.96% | 5.93% | 1.45% | 7.50 | — | — | 5.00 | — | —
Growth in net new invested assets ($bn) | 52.36 | 76.17 | 79.83 | 7.50 | 100.00 | 7.50 | 5.00 | 100.00 | 5.00
Reported RoTE | 3.00% | 5.00% | 9.90% | 15.00 | 100.00 | 15.00 | 15.00 | 100.00 | 15.00
Group adjusted cost total ($bn) | 30.87 | 29.47 | 30.47 | 10.00 | 46.43 | 4.64 | 10.00 | 46.43 | 4.64
Customer satisfaction | See following tables for commentary | 15.00 | 60.33 | 9.05 | 15.00 | 60.33 | 9.05
Employee experience | 15.00 | 87.50 | 13.13 | 15.00 | 87.50 | 13.13
Personal objectives | 10.00 | 100.00 | 10.00 | 20.00 | 74.15 | 14.83
Total |  |  |  | 100.00 |  | 79.32 | 100.00 |  | 76.65
Annual incentive formulaic outcome (000) |  |  |  |  |  | £2,278 |  |  | £1,284
Risk adjustments as a result of Committee judgement (000) |  |  |  |  |  | £(114) 5% |  |  | £(193) 15%
Annual incentive (000) |  |  |  |  |  | £2,164 |  |  | £1,091

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282 | HSBC Holdings plc Annual Report and Accounts 2022

Strategic measures for Noel Quinn and Ewen Stevenson
| Measures | Weighting (%) | Assessment considerations by the Committee | Assessment (%) | Outcome (%)
Customer satisfaction | Maintain and improve NPS in the UK and Hong Kong, in digital markets, and in key growth markets | 15.00% | •UK and Hong Kong (assessed at 59%). In WPB, our NPS improved in the UK and Hong Kong, and we were ranked in first place in Hong Kong. In CMB, our NPS improved in Hong Kong but fell in the UK, and we were ranked in second place in Hong Kong. In GBM, our global NPS improved and our global rank remained in fifth. •Digital markets (assessed at 68%). In WPB and CMB digital businesses in Hong Kong, we were ranked in first and third. In GBM globally, our digital trade finance platforms maintained first place for the quality of platforms. Our PayMe payments app was ranked in second place for digital wallets. •Key growth markets (assessed at 54%). In WPB, our NPS improved in mainland China and Singapore, remained unchanged in Mexico, and in India saw a small decrease. In CMB, our NPS increased in mainland China, Singapore and Mexico, and our rank positions in those markets either improved compared with 2021 or were in the top three against competitors. | 60.33% | 9.05%
Employee experience | Improve engagement, and diversity and inclusion | 15.00% | •Our Snapshot Employee engagement and Inclusion indices both increased one percentage point year on year to 73% and 76%, respectively, above maximum targets and the financial services benchmarks. •The percentage of Black heritage colleagues in senior leadership increased by 0.3% to 2.5%, meeting our maximum target. •The percentage of women in senior leadership increased by 1.6% to 33.3% since 2021, within the target range of 33.2% to 33.7%. | 87.50% | 13.13%

Personal objectives for Noel Quinn and Ewen Stevenson
For each executive Director, personal objectives were set at the start of the year and measured by the Committee with respect to key performance indicators under our strategy levers.
Noel Quinn | Weighting | Assessment | Performance achievement
Technology transformation | 2.5% | 100% | •The Committee's assessment reflects strong progress automating our organisation at scale against targets set. Our Cloud adoption rate, which is the percentage of our technology services on the private or public Cloud, increased to 35% (2021: 27%). At the end of 2022, approximately 49% of our WPB customers were 'mobile active' users (2021: 43%).
Execution of inorganic initiatives in Asia | 2.5% | 100% | •The targets for inorganic initiatives were delivered in 2022. We completed the acquisition of L&T Investment Management Limited, making us the 12th largest mutual fund management company in India, bringing in $10.8bn assets under management and 2.4 million active portfolios. We raised our stake in HSBC Qianhai in China to 90%, completed our acquisition of the remaining 50% shares in HSBC Life Insurance in China. We renewed our exclusive life distribution partnership with Allianz in Asia, resulting in the combined group being the fourth largest health insurer and seventh largest life insurer in Singapore.
Progress on exits identified | 2.5% | 100% | •The planned sales of our banking business in Canada, branch operations in Greece and business in Russia were announced, reflecting strong progress in reshaping our portfolio.
Progress on innovation programmes | 2.5% | 100% | •In CMB, we launched an industry-leading native bank account service with Oracle Netsuite Enterprise Resource Planning. We also launched Business Go, a platform that brings together international SMEs with providers of expert advice and business optimisation tools. In GBM, we launched HSBC Orion, our new proprietary tokenisation platform used for digital bond issuance. In WPB, we launched our international credit offering, allowing customers to gain access to credit in a new country based on credit history in their home country.
Total | 10% out of 10% |
Ewen Stevenson | Weighting | Assessment | Performance achievement
Finance for the future | 12% | 67% | •The financial implications of financed emissions targets for the oil and gas, and power and utilities sectors and for the $750 bn to $1 tn target were included in our financial resource plan, meeting the objectives set. •The second round of the climate biennial exploratory scenario and stress tests for the Monetary Authority of Singapore and European Central Bank were completed, with no material issues. •Plans have been delivered for IFRS 17 compliant reporting, in line with external reporting and disclosure requirements. •The Bank of England Resolvability Assessment Framework and regulatory reporting enhancement objectives were delivered in line with the targets set. •Resolved 100% of market risk RWA-related issues and over 80% of liquidity-related issues, which were previously identified and managed under the regulatory reporting enhancement programme. •The programme to deliver timely, accurate and complete customer-centric management information using a single data Cloud platform, with enhanced controls and reduced operational risks, is on track to the agreed scope, costs and timeline.
Global Finance employee experience and function efficiency | 4% | 96% | •Targets were met with increased Employee engagement index at 75% favourable (2021: 68%). •Female representation in senior management roles across Finance increased to 32.1% (2021: 30.2%). •Finance costs overall were within 2022 targets. The number of FTEs at the end of 2022 was slightly higher than the maximum target, mainly due to growth in key areas where new capabilities are required.
Creating strong corporate development and Group transformation functions | 4% | 75% | •The Group Transformation function has made strong progress in aligning our change portfolio to the Group's strategy and systematically documenting a full change inventory. Achievements include clear reporting with associated costs on how the change portfolio is enabling the delivery of Group strategy, and stronger governance of the change portfolio, with an expanded remit of the Transformation Oversight Executive Committee to cover the entire change portfolio with improved accountability via targeted reviews of high impact programmes. •Major transactions included planned sales of our banking business in Canada, branch operations in Greece and business in Russia were announced; the planned merger of Oman operations with Sohar International Bank; the completion of the Axa Singapore acquisition; the sale of US domestic mass market retail banking; and the acquisition of L&T Investment Management Limited in India.
Total | 14.83% out of 20% |

HSBC Holdings plc Annual Report and Accounts 2022 | 283

Single figure of remuneration
(Audited)
The following table shows the single figure of total remuneration of each executive Director for 2022, together with comparative figures.

Single figure of remuneration
| Noel Quinn | Ewen Stevenson
(£000) | 2022 | 2021 | 2022 | 2021
Base salary 1 | 1,329 | 1,288 | 775 | 751
Fixed pay allowance (’FPA’)1 | 1,700 | 1,700 | 1,085 | 1,062
Cash in lieu of pension | 133 | 129 | 77 | 75
Taxable benefits 2 | 119 | 95 | 7 | 3
Non-taxable benefits 2 | 86 | 71 | 50 | 42
Total fixed | 3,367 | 3,283 | 1,994 | 1,933
Annual incentive | 2,164 | 1,590 | 1,091 | 978
Notional returns 3 | 31 | 22 | — | —
Replacement award 4 | — | — | 1,180 | 754
Long term incentive 5 | — | — | 436 | —
Total variable | 2,195 | 1,612 | 2,707 | 1,732
Total fixed and variable | 5,562 | 4,895 | 4,701 | 3,665

1 Executive Directors made the personal decision to dona te 100% o f their base salary increases for 2021 to charity. Ewen Stevenson also donated his
FPA increase for 2021 to charity. Figures in the table above are the gross figures before charitable donations.
2 Taxable benefits include the provision of medical insurance, car and tax return assistance (including any associated tax due, where applicable). Non-
taxable benefits include the provision of life assurance and other insurance cover.
3 The deferred cash awards granted in prior years include a right to receive notional returns for the period between the grant and vesting date. This is
determined by reference to a rate of return specified at the time of grant and paid annually, with the amount disclosed on a paid basis.
4 In 2019, Ewen Stevenson was granted replacement awards to replace unvested awards, which were forfeited as a result of him joining HSBC. The
awards, in general, match the performance, vesting and retention periods attached to the awards forfeited. The values included in the table for 2022
relate to his 2018 replacement award granted by the Royal Bank of Scotland Group plc, now renamed as NatWest Group plc ('NatWest') for
performance year 2018 and was subject to a pre-vest performance test assessed and disclosed by NatWest in its Annual Report and Accounts 2021
(page 158). As no adjustment was proposed for Ewen Stevenson by NatWest, a total of 241,988 shares granted in respect of his 2018 replacement
award ceased to be subject to performance conditions. These awards were granted at a share price of £6.643 and the HSBC share price was £4.8772
when the first tranche of these awards vested and all tranches were no longer subject to performance conditions, with no value attributable to share
price appreciation. The values included in the table for 2021 are explained in the Annual Report and Accounts 2021.
5 An LTI award over 476,757 shares was made in February 2020 (in respect of 2019) at a share price of £5.6220 for which the performance period
ended on 31 December 2022. The value has been computed based on a share price of £4.816, the average share price during the three-month period
to 31 December 2022. There is no value attributable to share price appreciation. See the following section for details of the assessment outcomes,
which resulted in 19% vesting due to performance.
Benefits
The values of the significant benefits in the single figure table are set out in the following table 1. The insurance benefit for Noel Quinn has
increased year on year because of the increase in premium at annual renewal.

| Noel Quinn
(£000) | 2022 | 2021
Insurance benefit (non-taxable) | 82 | 67
Car and driver (UK and Hong Kong) | 69 | 87

1 The insurance and car benefits for Ewen Stevenson are not included in the above table as they were not deemed significant.
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284 | HSBC Holdings plc Annual Report and Accounts 2022

Long-term incentive (’LTI’) awards
(Audited)
LTI awards over 2020 to 2022 performance period
The 2019 LTI award was granted to Ewen Stevenson in February
2020. Noel Quinn did not receive a 2019 LTI award. Based on the
performance outcome, 90,584 shares will vest for Ewen Stevenson.
The awards will vest in five equal annual instalments commencing in
February 2023.
The Committee is mindful of executives not experiencing ’windfall
gains’ through the granting of LTI awards when a share price is
particularly low. We introduced an upfront windfall gains check for
2020 LTI awards. The Committee agreed that if the LTI grant share
price experienced a greater than 30% decline since the previous
grant, that an adjustment percentage equal to half the share price
percentage decline would be applied to the awards to mitigate the
potential for windfall gains. Although this was not in place for the
2019 LTI award, no pre-grant adjustment would have been applied if it
had been. The value of awards at vesting is less than at grant and the
Committee determined that there are no windfall gains to consider for
this award.

Assessment of the 2019 LTI award (performance period 1 January 2020 to 31 December 2022)
Measures (weighting)1 | Minimum (25% payout) | Target (50% payout) | Maximum (100% payout) | Actual | Assessment | Outcome
Average RoTE with CET1 underpin 2 (33.3%) | 10.0% | 11.0% | 12.0% | 9.9% | 0.0% | 0.00%
Relative TSR 3 (33.3%) | At median of the peer group | Straight-line vesting between minimum and maximum | At upper quartile of peer group | Below median | 0.0% | 0.00%
Customers (33.3%) | Performance was assessed by the Committee based on: •customer satisfaction scores at the start and end of the three-year performance period for our global businesses in home and scale markets, which resulted in a formulaic 64% outcome. This comprised: –UK and Hong Kong (assessed at 58%) – in WPB and CMB, we were ranked in first and second place in Hong Kong, with improved NPS scores. In GBM, our global NPS improved and our global rank remained in fifth; –Digital markets (assessed at 77%) – in WPB and CMB digital markets, we were ranked in top three positions in Hong Kong, and in GBM globally, our digital trade finance platforms were ranked in first place; and –Key growth markets (assessed at 56%) – in WPB, our NPS increased in mainland China, Singapore and Mexico, and in India saw a small decline, and in CMB, our NPS increased in Mexico, with slight decreases in the other markets, but our rank positions in all four markets were in the top three against competitors. •progress against customer objectives linked to our strategy over 2020 to 2022. It was determined that it broadly represented target performance and therefore 50% of this element was achieved. The main items driving this assessment are our growth in international and Premier customers and in specific growth markets, where our overall performance has been broadly in line with plan and expectations. These two percentages (64% and 50%) averaged to 57%. | 57.0% | 19.00%
Total |  |  |  |  |  | 19.00%

1 Awards vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2 Assessed based on RoTE in the 2022 financial year, which was not met. The CET1 underpin was met.
3 The peer group was: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan
Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.
LTI awards over 2023 to 2025 performance period
After taking into account performance for 2022, the Committee
decided to grant Noel Quinn an LTI award of £4,275,000.
The 2022 LTI awards will have a three-year performance period
starting 1 January 2023. During this period, performance will be
assessed based on four equally weighted measures: two financial
measures to incentivise value creation for our shareholders; a
measure linked to our climate ambitions; and relative total shareholder
return (’TSR’). This is consistent with the measures used for our last
LTI awards.
The Committee regularly reviews the TSR peer group to ensure it
remains an appropriate performance comparison, taking into account
strategic shifts in our geographical and business mix, notably future
growth investment in Asia and wealth business. Following feedback
from some of our shareholders, the Committee reviewed the TSR
performance peer group, with the objective of including more Asian
peers to better reflect the balance of markets and businesses of the
Group. The new peer group will be used for the relative TSR measure
for LTI awards for the 2023 to 2025 performance period and now
includes Bank of China (Hong Kong), China Merchants Bank and
OCBC Bank. No change will be made to the performance peer group
for subsisting LTI awards.
The LTI continues to be subject to a risk and compliance modifier,
which gives the Committee the discretion to adjust down the overall
outcome to ensure that the Group operates soundly when achieving
its financial targets. For this purpose, the Committee will r eceive
information including any risk metrics outside of tolerance for a
significant period of time and any risk management failures that have
resulted in significant customer detriment, reputational damage and/
or regulatory censure.
The RoTE and capital reallocation to Asia measures are also subject to
a CET1 underpin. If the CET1 ratio at the end of the performance
period is below the CET1 risk tolerance level set in the risk appetite
statement, then the assessment for these measures will be reduced
to nil.
As the awards are not entitled to dividend equivalents in accordance
with regulatory requirements, the number of shares to be awarded
will be adjusted to reflect the expected dividend yield of the shares
over the vesting period.
To the extent performance conditions are satisfied at the end of the
three-year performance period, the awards will vest in five equal
annual instalments commencing from around the third anniversary of
the grant date. On vesting, shares equivalent to the net number of
shares that have vested (after those sold to cover any income tax and
social security payable) will be held for a retention period of up to one
year, or such period as required by regulators.

HSBC Holdings plc Annual Report and Accounts 2022 | 285

Performance conditions for LTI awards in respect of 2022 (performance period 1 January 2023 to 31 December 2025)
Measures 1 | Minimum (25% payout) | Target (50% payout) | Maximum (100% payout) | Weighting %
RoTE with CET1 underpin 2 | 13.0% | 14.3% | 15.5% | 25.0
Capital reallocation to Asia with CET1 underpin 3 | 49.0% | 50.5% | 52.0% | 25.0
Transition to net zero 4 | Carbon reduction (own emissions) | 64.0% | 68.0% | 72.0% | 25.0
Sustainable finance and investment | $588.0bn | $700.0bn | $756.0bn
Relative TSR 5 | At the median of the peer group | Straight-line vesting between minimum and maximum | At the upper quartile of the peer group | 25.0
Subject to risk and compliance modifier

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2 To be assessed based on RoTE at the end of the performance period. This metric will be subject to the CET1 underpin.
3 To be assessed based on share of Group tangible equity (on a reported basis and excluding associates) allocated to Asia by 31 December 2025. This
metric will be subject to the CET1 underpin.
4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2025 using 2019 as
the baseline. The sustainable finance and investment metric will assess the cumulative amount provided and facilitated over the period ending 31
December 2025.
5 The peer group for the 2022 award is: Bank of China (Hong Kong), Barclays, BNP Paribas, China Merchants Bank, Citigroup, DBS Group Holdings, JP
Morgan Chase & Co., Lloyds Banking Group, OCBC Bank, Standard Chartered and UBS Group.
Annual incentive measures for 2023
The 2023 annual incentive scorecard measures for our executive
Directors have been set to deliver growth and business
transformation. They were selected by the Committee after taking
into account the Group’s strategic pivot to Asia and feedback received
from our major shareholders during engagement in the year. The
targets have been set to reflect the Group’s 2023 plan, while
considering macroeconomic uncertainty, including the interest-rate
environment and rising inflation.
The Committee will continue to retain discretion to adjust the
formulaic outcomes of scorecards, taking into account factors such as
Group profits, wider business performance and stakeholder
experience, to ensure executive reward is aligned with underlying
Group performance and the broader stakeholder experience.
The weightings and performance measures for the 2023 annual
incentive award for executive Directors are disclosed below. In
previous years, the weightings were different for the Group Chief
Executive and Group Chief Financial Officer. For 2023, these have
been aligned, reflecting feedback from shareholders and to simplify
our approach. The performance targets are commercially sensitive
and it would be detrimental to the Group’s interests to disclose them
at the start of the financial year. Subject to commercial sensitivity, we
will disclose the targets for a given year in the Directors’
remuneration report for that year.

2023 annual incentive performance measures | Weighting
Financial (subject to CET1 underpin) | 60%
Reported profit before tax | 15%
Reported operating expenses | 15%
Reported Group RoTE | 15%
Reported Asia RoTE | 5%
Fee income growth | 5%
Net new invested assets growth | 5%
Stakeholders | 30%
Customer satisfaction (improvement in NPS scores/rank) | 15%
Employee experience (gender and ethnicity representation and Inclusion index score) | 15%
Personal objectives Group Chief Executive: technology transformation, innovation, and simplification of processes and organisation Group Chief Financial Officer: regulatory priorities (regulatory reporting enhancement programme, resolution recovery planning, and ESG and climate), Finance change transformation and digitisation, energised Finance workforce, and liquidity usage and capital management | 10%
Subject to risk and compliance modifier |

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286 | HSBC Holdings plc Annual Report and Accounts 2022

Scheme interests awarded during 2022
(Audited)
The table below sets out the scheme interests granted to executive Directors during 2022 in respect of performance year 2021, as disclosed in
the 2021 Directors’ remuneration report. No non-executive Directors received scheme interests during the financial year.

Scheme awards in 2022
(Audited)
| Type of interest awarded | Basis on which award made | Date of award | Face value awarded 1 £000 | Percentage receivable for minimum performance | Number of shares awarded | End of performance period
Noel Quinn | LTI deferred shares 2 | % of salary 2 | 28 February 2022 | 5,290 | 25 | 983,339 | 31 December 2024
Ewen Stevenson | LTI deferred shares 2 | % of salary 2 | 28 February 2022 | 3,086 | 25 | 573,674 | 31 December 2024

1 The face value of the award has been computed using HSBC’s closing share price of £5.380 taken on 25 February 2022. LTI awards are conditional
share awards subject to a three-year forward-looking performance period and vest in five equal annual instalments, between the third and seventh
anniversary of the award date, subject to performance achieved. On vesting, awards will be subject to a one-year retention period. Awards are subject
to malus during the vesting period and clawback for a maximum period of 10 years from the date of the award.
2 In line with regulatory requirements, scheme interests awarded during 2022 were not eligible for dividend equivalents. In accordance with the
remuneration policy approved by shareholders at the 2019 AGM, the LTI award was determined at 320% of salary for Noel Quinn and 320% of salary
for Ewen Stevenson. The number of shares to be granted was determined by taking HSBC’s closing share price of £5.380 taken on 25 February 2022,
and applying a discount based on HSBC’s expected dividend yield of 5% per annum for the vesting period (£4.201).
The above table does not include details of shares issued as part of the fixed pay allowance and shares issued as part of the 2021 annual
incentive award that vested on grant and were not subject to any further service or performance conditions. Details of the performance
measures and targets for the 2021 LTI award are below:

Performance conditions for LTI awards in respect of 2021 (performance period 1 January 2022 to 31 December 2024) (Audited)
Measures 1 | Minimum (25% payout) | Target (50% payout) | Maximum (100% payout) | Weighting %
RoTE (with CET 1 underpin)2 | 8.0% | 9.5% | 11.0% | 25.0
Capital reallocation to Asia (with CET1 underpin)3 | 46.0% | 48.0% | 50.0% | 25.0
Environment and sustainability 4 | Carbon reduction | 52.0% | 56.0% | 60.0% | 25.0
Sustainable finance and investment | $285.0bn | $340.0bn | $370.0bn
Relative TSR 5 |  | At median of the peer group | Straight-line vesting between minimum and maximum | At upper quartile of peer group | 25.0

1 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.
2 To be assessed based on RoTE at the end of the performance period. The measure will also be subject to a CET1 underpin. If the CET1 ratio at the
end of the performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be
reduced to nil.
3 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December
2024. This metric will be subject to the CET1 underpin outlined above.
4 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2024 using 2019 as
the baseline. The sustainable finance and investment metric will assess cumulative financing provided over the period commencing on 1 January 2020
and ending on 31 December 2024.
5 The peer group for the 2021 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank,
J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.
Executive Directors’ interests in shares
(Audited)
The shareholdings of executive Directors in 2022, including the
shareholdings of their connected persons, at 31 December 2022 (or
the date they stepped down from the Board, if earlier) are set out
below. The following table shows the comparison of shareholdings
with the company shareholding guidelines. There have been no
changes in the shareholdings of the executive Directors from
31 December 2022 to the date of this report.
Individuals have five years from their appointment date to build up the
recommended levels of shareholding. In line with investor guidance,
for executive Directors, unvested shares that are not subject to
forward-looking performance conditions (on a net of tax basis) will
count towards their shareholding requirement under the shareholder-
approved policy.
The Committee reviews compliance with the shareholding
requirement and has full discretion in determining if any unvested
shares should be taken into consideration for assessing compliance
with this requirement, taking into account shareholder expectations
and guidelines. The Committee also has full discretion in determining
any penalties for non-compliance.
With regard to post-employment shareholding arrangements, we
believe that our remuneration structure achieves the objective of
ensuring there is ongoing alignment of executive Directors' interests
with shareholder experience post-cessation of their employment due
to the following features of the policy:
•Shares delivered to executive Directors as part of the fixed pay
allowance have a five-year retention period, which continues to
apply following a departure of an executive Director.
•Shares delivered as part of an annual incentive award are subject
to a one-year retention period, which continues to apply following
a departure of an executive Director.
•LTI awards have a seven-year vesting period with a one-year post-
vesting retention period, which is not accelerated on departure.
The weighted average holding period of an LTI award within HSBC
is therefore six years, in excess of the five-year holding period
typically implemented by FTSE-listed companies. When an
executive Director ceases employment as a good leaver under our
policy, any LTI awards granted will continue to be released over a
period of up to eight years, subject to the outcome of performance
conditions.
HSBC operates a policy under which individuals are not permitted to
enter into any personal hedging strategies in relation to HSBC shares
subject to a vesting and/or retention period.

HSBC Holdings plc Annual Report and Accounts 2022 | 287

Shares
(Audited)
| Shareholding guidelines (% of salary) | Shareholding at 31 Dec 2022 2 (% of salary) | At 31 Dec 2022
|  | Scheme interests
| Share interests (number of shares) | Share options 3 | Shares awarded subject to deferral 1
| without performance conditions 4 | with performance conditions 5
Executive Directors |  |  |  |  |
Noel Quinn 6 | 400% | 513% | 1,422,650 | — | 415,771 | 2,101,893
Ewen Stevenson 6 | 300% | 658% | 1,064,626 | — | 383,587 | 1,687,628

1 The gross number of shares is disclosed. A portion will be sold at vesting to cover any income tax and social security that falls due at the time of
vesting.
2 The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2022 (£4.816).
3 At 31 December 2022, Noel Quinn and Ewen Stevenson did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).
4 The amount for Ewen Stevenson reflects the award granted in May 2019, replacing the 2015 to 2018 LTIs forfeited by the Royal Bank of Scotland
Group plc, now renamed as NatWest Group plc (’NatWest’), and is subject to any performance adjustments assessed and disclosed in the relevant
NatWest Annual Report and Accounts.
5 L TI awards granted in February 2021 and 2022 are subject to the performance conditions as set out in the preceding sections above.
6 E xecutive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment (Noel Quinn and Ewen
Stevenson were appointed on 5 August 2019 and 1 January 2019, respectively).
Service contracts
The service contracts of executive Directors do not have a fixed term.
The notice periods of executive Directors are set at the discretion of
the Committee, taking into account market practice, governance
considerations, and the skills and experience of the particular
candidate at that time.
Service agreements for each executive Director are available for
inspection at HSBC Holdings’ registered office. Consistent with
the best interests of the Group, the Committee will seek to minimise
termination payments. Directors may be eligible for a payment in
relation to statutory rights.

| Contract date (rolling) | Notice period (Director and HSBC)
Noel Quinn | 18 March 2020 | 12 months
Ewen Stevenson | 1 December 2018 | 12 months

Total pension entitlements
(Audited)
No employees who served as executive Directors during the year
have a right to amounts under any HSBC final salary pension scheme
for their services as executive Directors or are entitled to additional
benefits in the event of early retirement. There is no retirement age
set for Directors, but the normal retirement age for colleagues is 65.
Payments to past Directors
(Audited)
No payments were made to, or in respect of, former Directors in the
year in excess of the minimum threshold of £50,000 set for this
purpose.
Payments for loss of office
(Audited)
Departure terms for Ewen Stevenson
Ewen Stevenson is leaving the Group on 30 April 2023. He will
receive payments totalling £703,519 from the Group in lieu of his
base salary and pension allowance from 1 January until 25 October
2023. He will also receive his fixed pay allowance in respect of the
same period, which totals £885,836, and will be awarded in
immediately vested shares. The fixed pay allowance will be subject to
a retention period and released on a pro-rata basis over five years.
Ewen Stevenson will not be eligible for an LTI award in respect of the
2022 performance year, or any annual incentive award in respect of
the 2023 performance year.
In accordance with the contractual terms agreed and our approved
Directors’ remuneration policy, Ewen Stevenson was granted good
leaver status in respect of his outstanding unvested share awards.
Good leaver status is conditional upon him not taking up a role with a
defined list of competitor financial services firms for a year from his
departure date. As a good leaver, his deferred share awards will
continue to vest and be released on their scheduled vesting dates,
subject to the relevant terms (including post-vesting retention periods,
malus and, where applicable, clawback). Any vesting of his LTI
awards will be pro-rated for the period up to the departure date and
will be subject to the relevant terms (including post-vesting retention
periods, malus and clawback) and the achievement of the required
performance conditions. For this purpose, his 2020 and 2021 LTI
awards have been pro-rated for time with the maximum number of
shares, being 495,597 and 254,966 respectively, still subject to
performance.
The Group will make a contribution towards Ewen Stevenson's legal
fees incurred in connection with his departure arrangements. In line
with the Directors' remuneration policy, Ewen Stevenson will be
eligible to receive certain post-departure benefits for a period of up to
seven years after the departure date.
Ewen Stevenson will receive no other compensation or payment for
the termination of his service agreement or his ceasing to be a
Director of the Group.
No other payments for loss of office were made to, or in respect of,
former or current Directors in the year.
External appointments
During 2022, executive Directors did not receive any fees from
external appointments.
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288 | HSBC Holdings plc Annual Report and Accounts 2022

Summary of shareholder return and Group
Chief Executive remuneration
The graph shows HSBC TSR performance (based on the daily spot
Return Index in sterling) against the FTSE 100 Total Return Index for
the 10-year period ended 31 December 2022.
The FTSE 100 Total Return Index has been chosen as a recognised
broad equity market index of which HSBC Holdings is a member. The
single figure remuneration for the Group Chief Executive over the
past 10 years, together with the outcomes of the respective
annual incentive and LTI awards, are presented in the following table.

HSBC TSR and FTSE 100 Total Return Index

| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022
Group Chief Executive | Stuart Gulliver | Stuart Gulliver | Stuart Gulliver | Stuart Gulliver | Stuart Gulliver | Stuart Gulliver | John Flint | John Flint | Noel Quinn | Noel Quinn | Noel Quinn | Noel Quinn
Total single figure £000 | 8,033 | 7,619 | 7,340 | 5,675 | 6,086 | 2,387 | 4,582 | 2,922 | 1,977 | 4,154 | 4,895 | 5,562
Annual incentive 1 (% of maximum) | 49% | 54% | 45% | 64% | 80% | 76% | 76% | 61% | 66% | 32% | 57% | 75%
Long-term incentive 1,2,3 (% of maximum) | 49% | 44% | 41% | –% | –% | 100% | –% | –% | –% | –% | –% | –%

1 The 2012 annual incentive figure for Stuart Gulliver includes 60% of the annual incentive disclosed in the 2012 Directors’ remuneration report, which
was deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US
Department of Justice, entered into in December 2012 (’AML DPA’) as determined by the Committee. The AML DPA performance condition was met
and the award vested in 2018. The value of the award at vesting was included in the 2018 single figure of remuneration and included as long-term
incentive for 2018.
2 Long-term incentive awards are included in the single figure for the year in which the performance period is deemed to be substantially completed.
For Group Performance Share Plan (’GPSP’) awards, this is the end of the financial year preceding the date of grant. GPSP awards shown in 2013 to
2015 are therefore related to awards granted in 2014 to 2016.
3 The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made for 2016. LTI awards have a three-year
performance period and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total
single figure of remuneration of the year in which the performance period ends. Noel Quinn did not receive the 2019 LTI award that had a
performance period ended on 31 December 2022.
Voting results from Annual General Meeting

2022 Annual General Meeting voting results
| For | Against | Withheld
Remuneration report (votes cast) | 95.83% | 4.17% | ––
7,675,588,519 | 334,152,471 | 6,830,718
Remuneration policy (votes cast) | 95.73% | 4.27% | ––
7,666,488,029 | 342,320,697 | 7,773,468

HSBC Holdings plc Annual Report and Accounts 2022 | 289

Group Remuneration Committee
The Group Remuneration Committee is responsible for setting the
overarching principles, parameters and governance of the Group’s
remuneration framework for our colleagues, and the remuneration of
executive Directors, the Group Chairman and other senior Group
colleagues. The Committee regularly reviews the framework to
ensure it supports the Group’s purpose, values, culture and strategy,
as well as promoting sound risk management. The Committee also
reviews the framework to satisfy itself that it complies with the
regulatory requirements of multiple jurisdictions.
All members of the Committee are independent non-executive
Directors of HSBC Holdings plc. No Directors are involved in deciding
their own remuneration. A copy of the Committee’s terms of
reference can be found on our website at www.hsbc.com/who-we-
are/leadership-and-governance/board-committees.
The Committee met six times during 2022. Pauline van der Meer
Mohr stepped down from the Committee and the Board after the
2022 AGM, and was succeeded as Group Remuneration Committee
Chair by Dame Carolyn Fairbairn. Geraldine Buckingham was
appointed as a member of the Committee in June 2022. The
following is a summary of the Committee’s key activities during 2022.

Matters considered during 2022
| Jan | Feb | May | Jul | Sep | Dec
Remuneration framework and governance
Group variable pay pool, workforce performance and pay matters, pay gap report, and employee insights | l | l | l | l | l | l
Directors’ remuneration policy design | l | ô | ô | ô | ô | ô
Executive Director remuneration policy implementation, scorecards and pay proposals | l | l | l | l | l | l
Remuneration for other senior executives of the Group | l | l | l | l | l | l
Directors’ remuneration report | l | l | ô | ô | ô | l
Regulatory, risk and governance
Information on material risk and audit events, and performance and remuneration impacts for individuals involved | l | l | l | l | l | l
Regulatory updates, including approach and outcomes for the identification of Material Risk Takers | l | l | l | l | l | l
Governance matters | l | l | l | l | l | l
Principal subsidiaries
Matters from subsidiary committees | l | ô | l | l | l | l

l | Matter considered | ô | Matter not considered

Advisers
The Committee received input and advice from different advisers on
specific topics during 2022. Deloitte provided independent advice to
the Committee. Deloitte also provided tax compliance and other
advisory services to the Group in 2022. Deloitte is a founding member
of the Remuneration Consultants Group and voluntarily operates
under the code of conduct in relation to executive remuneration
consulting in the UK.
The Committee also received advice from Willis Towers Watson on
market data and remuneration trends. Willis Towers Watson provides
actuarial support to Global Finance and benchmarking data and
services related to benefits administration for our Group employees.
The Committee was satisfied the advice provided by Deloitte and
Willis Towers Watson was objective and independent in 2022.
For 2022, total fees of £203,800 and £79,803 were incurred in relation
to remuneration advice provided by Deloitte and Willis Towers
Watson, respectively. This was based on pre-agreed fees and a time-
and-materials basis.
During the year, the Committee conducted a tender process for its
independent remuneration adviser. This involved participating firms
submitting proposals and meeting with the Committee Chair and
management. Following this process, Deloitte was reappointed as the
Committee’s independent advisers.
Attendees and interaction with other Board
committees
During the year, Noel Quinn as the Group Chief Executive provided
regular briefings to the Committee. In addition, the Committee
engaged with, and received updates from, the following:
•Mark Tucker, Group Chairman;
•Elaine Arden, Group Chief Human Resources Officer;
•Ewen Stevenson, who was Group Chief Financial Officer until
31 December 2022;
•Jenny Craik, Group Head of Performance, Reward and Employee
Relations;
•Pam Kaur, Group Chief Risk and Compliance Officer;
•Bob Hoyt, Group Chief Legal Officer;
•Shawn Chen, former Global General Counsel for Litigation and
Regulatory Enforcement;
•Maureen Lewis, Interim Global General Counsel for Litigation and
Investigation; and
•Aileen Taylor, Group Company Secretary and Chief Governance
Officer.
The Committee also received feedback and input from the Group Risk
Committee and Group Audit Committee on risk, conduct and
compliance-related matters relevant to remuneration.
No Director is present at Group Remuneration Committee meetings
when their own remuneration is discussed.
In addition to the meetings above, the Group Risk Committee
convened two joint meetings with the Group Remuneration
Committee in September 2022 and December 2022. They reviewed
the Group’s risk and reward alignment framework, which is designed
to promote sound and effective risk management in meeting PRA and
FCA remuneration rules and expectations.
Committee effectiveness
The annual review of the effectiveness of the Board committees,
including the Group Remuneration Committee, was conducted
internally in 2022, led by the Group Company Secretary and Chief
Governance Officer. Overall, the review concluded that the
Committee continued to operate effectively and in line with regulatory
requirements.
Areas for continued enhancement were identified, including the need
to focus on: a differentiated, fair and transparent reward framework;
ESG performance metrics; and in particular, sustainability; the
development of climate performance measures aligned to strategic
net zero goals; and greater coordination with the Group Risk
Committee. Given the anticipated changes to remuneration
regulations and evolving shareholder views on remuneration, a
structured training programme will be developed and delivered by the
Committee’s independent remuneration advisers. The outcomes of
the 2022 annual review have been reported to the Board, and the
Group Remuneration Committee will track the progress in
implementing recommendations during 2023.
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290 | HSBC Holdings plc Annual Report and Accounts 2022

Non-executive Directors
(Audited)
The following table shows the total fees and benefits of non-executive Directors for 2022, together with comparative figures for 2021.

Fees and benefits
(Audited) | Fees 1 | Benefits 2 | Total
(£000) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021
Geraldine Buckingham 3 | 155 | — | — | — | 155 | —
Rachel Duan 4 | 225 | 67 | 5 | — | 230 | 67
Dame Carolyn Fairbairn 5 | 265 | 80 | 1 | — | 266 | 80
James Forese 6 | 689 | 572 | — | — | 689 | 572
Steven Guggenheimer | 262 | 250 | 10 | — | 272 | 250
Irene Lee 7 | 488 | 556 | — | — | 488 | 556
José Antonio Meade Kuribreña 8 | 242 | 223 | 14 | — | 256 | 223
Pauline van der Meer Mohr 9 | 92 | 291 | 18 | — | 110 | 291
Eileen Murray 10 | 262 | 266 | — | — | 262 | 266
David Nish | 477 | 482 | 22 | 10 | 499 | 492
Jackson Tai | 377 | 350 | 25 | — | 402 | 350
Mark Tucker | 1,500 | 1,500 | 113 | 33 | 1,613 | 1,533
Total (£000) | 5,034 | 4,637 | 208 | 43 | 5,242 | 4,680
Total ($000) | 6,199 | 5,710 | 256 | 53 | 6,455 | 5,763

1 Fees are in line with the Directors’ remuneration policy that was approved at the 2022 AGM. No travel allowance was paid to non-executive Directors
during 2021 due to travel restrictions. The payment of the travel allowance of £4,000 per annum (pro-rata) was paid following the resumption of travel
by the Board in 2022.
2 Benefits include taxable expenses such as accommodation, travel and subsistence relating to attendance at Board and other meetings at HSBC
Holdings' registered offices. Amounts disclosed have been grossed up using a tax rate of 45%, where relevant.
3 Appointed to the Board and the Group Nomination & Corporate Governance Committee on 1 May 2022, and appointed as a member of the Group
Remuneration Committee and Group Risk Committee on 1 June 2022.
4 Appointed as a member of the Group Audit Committee on 1 June 2022.
5 Appointed as Chair of the Group Remuneration Committee effective 29 April 2022.
6 Stepped down as a member of the Group Audit Committee on 1 June 2022 and joined the Group Risk Committee on 1 June 2022. Includes fees of
£447,000 (2021: £332,000) in relation to his role as Chair of HSBC North America Holdings, Inc. This fee was deferred for 2022.
7 Retired from the Board effective 29 April 2022. Includes fees of £434,000 (2021: £380,000) in relation to her roles as non-executive Director and
Remuneration Committee Chair, Audit Committee member and Risk Committee member of The Hongkong and Shanghai Banking Corporation Limited
and non-executive Chair, Nomination Committee Chair and member of the Audit, Risk and Remuneration Committees of Hang Seng Bank Limited.
8 Retired from the Group Risk Committee on 1 June 2022. Appointed as the designated workforce engagement non-executive Director on 1 June 2022.
9 Retired from the Board effective 29 April 2022.
10 Retired from the Group Risk Committee on 1 June 2022, and appointed as a member of Group Audit Committee on 1 June 2022.
Non-executive Directors’ interests in shares
(Audited)
The shareholdings of persons who were non-executive Directors in
2022, including the shareholdings of their connected persons, at
31 December 2022, or date of cessation as a Director if earlier, are
set out below.
N on-executive Directors are expected to meet the shareholding
guidelines within five years of the date of their appointment. All non-
executive Directors who had been appointed for five years or more at
31 December 2022 met the guidelines.

Shares
| Shareholding guidelines (number of shares) | Share interests (number of shares)
Geraldine Buckingham (appointed to the Board on 1 May 2022) | 15,000 | 15,000
Rachel Duan | 15,000 | 15,000
Dame Carolyn Fairbairn | 15,000 | 15,000
James Forese | 15,000 | 115,000
Steven Guggenheimer | 15,000 | 15,000
Irene Lee (retired on 29 Apr 2022) | 15,000 | 15,000
José Antonio Meade Kuribreña | 15,000 | 15,000
Eileen Murray | 15,000 | 75,000
David Nish | 15,000 | 50,000
Jackson Tai | 15,000 | 66,515
Mark Tucker | 15,000 | 307,352
Pauline van der Meer Mohr (retired on 29 Apr 2022) | 15,000 | 15,000

HSBC Holdings plc Annual Report and Accounts 2022 | 291

2023 fees for non-executive Directors
The table below sets out the 2023 fees for non-executive Directors.

|  | 2023 fees
Position |  | £
Non-executive Group Chairman 1 |  | 1,500,000
Non-executive Director (base fee) |  | 127,000
Senior Independent Director |  | 200,000
Group Risk Committee | Chair | 150,000
| Member | 40,000
Group Audit Committee and Group Remuneration Committee | Chair | 75,000
| Member | 40,000
Nomination & Corporate Governance Committee | Chair | ––
| Member | 33,000
Technology Governance Working Group | Co-Chair | 60,000
Designated workforce engagement non-executive Director |  | 40,000

1 The Group Chairman does not receive a base fee or any other fee in respect of chairing of the Nomination & Corporate Governance Committee.
Service contracts
Non-executive Directors are appointed for fixed terms not exceeding
three years, which may be renewed subject to their re-election by
shareholders at AGMs. Non-executive Directors do not have service
contracts, but are bound by letters of appointment issued for and on
behalf of HSBC Holdings, which are available for inspection at HSBC
Holdings’ registered office. There are no obligations in the non-
executive Directors’ letters of appointment that could give rise to
remuneration payments or payments for loss of office.

2023 AGM | 2024 AGM | 2025 AGM
Geraldine Buckingham 1 | James Forese | Rachel Duan
Kalpana Morparia 1 | Steven Guggenheimer | Dame Carolyn Fairbairn
David Nish | Eileen Murray | José Antonio Meade Kuribreña
| Mark Tucker |

1 Geraldine Bucking and Kalpana Morparia were appointed following the 2022 AGM and therefore their initial three-year appointment terms are subject
to approval of their election by shareholders at the 2023 AGM. Their initial three-year term of appointment will end at the conclusion of the 2026 AGM,
subject to annual re-election by shareholders’ at the relevant AGMs.
Our approach to workforce remuneration
Remuneration alignment with executive Directors
Total compensation, which comprises fixed and variable pay, is the key focus of our remuneration framework, with variable pay differentiated by
performance and demonstration of value-aligned behaviours. We set out below the key features and design characteristics of our remuneration
framework, which will apply on a Group-wide basis, subject to compliance with local laws:

Overview of remuneration structure for employees
Remuneration components and objectives | Application for Group employees | Approach for executive Directors
Fixed pay Attract and retain employees with market competitive pay for the role, skills and experience required. | •Fixed pay may include salary, fixed pay allowance, cash in lieu of pension and other cash allowances in accordance with local market practice. •It is based on predetermined criteria, non-discretionary, transparent and not reduced based on performance. •It represents a higher proportion of total compensation for more junior employees. •Fixed pay may change to reflect an individual’s position, role or grade, cost of living in the country, individual skills, capabilities and experience. •Fixed pay is generally delivered in cash on a monthly basis. | •Consistent with approach for Group colleagues except fixed pay allowance paid in shares.
Benefits Support the physical, mental and financial health of a diverse workforce in accordance with local market practice. | •Benefits may include, but are not limited to, the provision of a pension, medical insurance, life insurance, health assessment and relocation support. | •Provision of medical insurance, life insurance, car and tax return assistance. Group Chief Executive is eligible to receive accommodation and a car benefit in Hong Kong.
Annual incentive Incentivise and reward performance based on annual financial and non-financial measures consistent with the medium- to long-term strategy, stakeholder interests and values- aligned behaviours. | •All employees are eligible to be considered for a discretionary variable pay award. Individual awards are determined against objectives for performance set at the start of the year. •Annual incentives represent a higher proportion of total compensation for more senior employees and will be more closely aligned to Group and business performance as seniority increases. •Variable pay for Group employees identified as Material Risk Takers (’MRTs’) under European Union Regulatory Technical Standard (’RTS’) 2021/923 is limited to 200% of fixed pay, as approved by shareholders at the 2014 AGM held on 23 May 2014 (98% in favour). •Awards are generally paid in cash and shares. For MRTs, at least 50% of the awards are in shares and/or where required by regulations, in units linked to asset management funds. | •Annual incentive is determined based on the outcomes of annual scorecard of financial and non-financial measures. •Executive Directors and Group Executives are also eligible to be considered for a long-term incentive award, which is subject to three-year forward-looking performance measures.

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Overview of remuneration structure for employees (continued)
Remuneration components and objectives | Application for Group employees | Approach for executive Directors
Buy-out awards Support recruitment of key individuals. | •Buy-out awards may be offered if an individual holds any outstanding unvested awards that are forfeited on resignation from the previous employer. •The terms of the buy-out awards will not be more generous than the terms attached to the awards forfeited on cessation of employment with the previous employer. | •For new hires, the approach is consistent with the approach taken for employees and policy approved by shareholders.
Target variable remuneration Support recruitment of key individuals. | •Target variable pay is an indicative value, which is awarded in exceptional circumstances for new hires, and is limited to the individual's first year of employment only, and is subject to a number of factors (such as the respective performance of the Group, business unit and individual), and the final value paid remains at the full discretion of HSBC. •The exceptional circumstances would typically involve a critical new hire and would also depend on the factors such as the seniority of the individual, where the new hire candidate is forfeiting any awards and the timing of the hire during the performance year. | •For new hires, the approach is consistent with the approach taken for employees and policy approved by shareholders.
Deferral Align employee interests with the medium- to long-term strategy, stakeholder interests and values- aligned behaviours. | •A Group-wide deferral approach is applicable to all employees. A portion of annual incentive awards above a specified threshold is deferred in shares vesting annually over a three-year period (33% vesting on the first and second anniversaries of grant and 34% on the third). •For MRTs, awards are generally subject to a minimum 40% deferral (60% for awards of £500,000 or more) over a minimum period of four years. •A deferral period of five years is applied for senior management and individuals in specified roles with managerial responsibilities as prescribed under the PRA and FCA remuneration rules and seven years for individuals in PRA-designated senior management functions. •In line with the PRA and FCA remuneration rules, and in compliance with local regulations, the deferral requirement for MRTs is not applied to individuals where their total variable pay is £44,000 or less and variable pay is not more than one-third of total compensation. For these individuals, the Group standard deferral applies. •Individuals based outside the UK and identified as MRTs under local regulations, would be subject to local requirements where necessary. •All deferred awards are subject to malus provisions, subject to compliance with local laws. Awards granted to MRTs on or after 1 January 2015 and awards granted to non- MRTs on or after 1 January 2022 are subject to clawback. •HSBC operates an anti-hedging policy for all employees, which prohibits employees from entering into any personal hedging strategies in respect of HSBC securities. •For all Group MRTs and the majority of local MRTs, excluding executive Directors, a minimum 50% of the deferred awards is in HSBC shares and the rest into deferred cash. Local regulatory requirements would also apply where necessary. •For some employees in our asset management business, where required by the relevant regulations, at least 50% of the deferred award is linked to fund units reflective of funds managed by those entities, with the remaining portion in deferred cash awards. •Variable pay awards made in HSBC shares or linked to relevant fund units granted to MRTs are generally subject to a one-year retention period post-vesting. •MRTs who are subject to a five-year deferral period, except senior management or individuals in PRA- and FCA-designated senior management functions, have a six-month retention period applied to their awards. •Where an employee is subject to more than one regulation, the requirement specific to the sector and/or country in which the individual is working is applied. | •All of the LTI award, or at least 60% of the total variable award (including LTI), is deferred. The deferred awards will vest in five equal annual instalments, with the first vesting on or around the third anniversary of the grant date and the last instalment vesting on or around the seventh anniversary of the grant date. •All deferred awards are in HSBC shares and subject to a post-vesting retention period of one year.
Severance payments Adhere to contractual agreements with involuntary leavers. | •Where an individual’s employment is terminated involuntarily for gross misconduct then, subject to compliance with local laws, the Group’s policy is not to make any severance payment in such cases and all outstanding unvested awards are forfeited. •For other cases of involuntary termination of employment, the determination of any severance will take into consideration the performance of the individual, contractual notice period, applicable local laws and circumstances of the case. •Generally, all outstanding unvested awards will normally continue to vest in line with the applicable vesting dates. Where relevant, any performance conditions attached to the awards, and malus and clawback provisions, will remain applicable to those awards. •Severance amounts awarded to MRTs are not considered as variable pay for the purpose of application of the deferral and variable pay cap rules under the PRA and FCA remuneration rules where such amounts include: (i) payments of fixed remuneration that would have been payable during the notice and/or consultation period; (ii) statutory severance payments; (iii) payments determined in accordance with any approach applicable in the relevant jurisdictions; and (iv) payments made to settle a potential or actual dispute. | •Any payments will be in line with the policy on loss of office

HSBC Holdings plc Annual Report and Accounts 2022 | 293

Link between risk, performance and reward
Our remuneration practices promote sound and effective risk
management while supporting our business objectives and the
delivery of our strategy.
We set out below the key features of our framework, which help
enable us to achieve alignment between risk, performance and
reward, subject to compliance with local laws and regulations:

Framework elements | Application
Variable pay pool | The Group variable pay pool is expected to reflect Group performance, based on a range of financial, non-financial and contextual factors. We use a countercyclical funding methodology, with both a floor and a ceiling, with the payout ratio generally reducing as performance increases to avoid pro-cyclicality. The floor recognises that even in challenging times, remaining competitive is important. The ceiling recognises that at higher levels of performance it is not always necessary to continue to increase the variable pay pool, thereby limiting the risk of inappropriate behaviour to drive financial performance. The main quantitative and qualitative performance and risk metrics used for assessment of performance include: •Group and business unit financial performance, taking into account contextual factors driving performance, and capital requirements; •current and future risks, taking into consideration performance against the risk appetite, financial and resourcing plan and global conduct outcomes; and •fines, penalties and provisions for customer redress, which are automatically included in the Committee’s definition of profit for determining the pool. In the event that the Group was unable to distribute dividends to shareholders for reasons such as capital adequacy, then the Group may determine that as a year of weak performance. In such a year, the Group may withhold some, or all, variable pay for employees including unvested share awards, using the metrics outlined above as a basis for that determination.
Individual performance scorecard | •Assessment of individual performance is made with reference to clear and relevant financial and non-financial objectives. Objectives for senior management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint; facilitating financing to help clients with their transition to net zero; employee diversity targets; and risk and compliance measures. A mandatory global risk objective is included in the scorecard of all other employees. All employees receive a behaviour rating as well as a performance rating, which ensures performance is assessed not only on what is achieved but also on how it is achieved.
Control function staff | •The performance and reward of individuals in control functions, including risk and compliance employees, are assessed according to a balanced scorecard of objectives specific to the functional role they undertake. •Their remuneration is determined independent of the performance of the business areas they oversee. •The Committee is responsible for approving the remuneration for the Group Chief Risk and Compliance Officer and Group Head of Internal Audit. •Group policy is for control functions staff to report into their respective function. Remuneration decisions for senior functional roles are made by the global function head. •Remuneration is carefully benchmarked with the market and internally to ensure it is set at an appropriate level.
Variable pay adjustments and conduct recognition | •Variable pay awards may be adjusted downwards in circumstances including: – detrimental conduct, including conduct that brings HSBC into disrepute; – involvement in events resulting in significant operational losses, or events that have caused or have the potential to cause significant harm to HSBC; and – non-compliance with the values-aligned behaviours and other mandatory requirements or policies. •Rewarding positive conduct may take the form of use of our global recognition programme, At Our Best, or positive adjustments to variable pay awards.
Malus | Malus can be applied to unvested deferred awards (up to 100% of awards) granted in prior years in circumstances including: •detrimental conduct, including conduct that brings the business into disrepute; •past performance being materially worse than originally reported; •restatement, correction or amendment of any financial statements; and •improper or inadequate risk management.
Clawback | Clawback can be applied to vested or paid awards granted to MRTs on or after 1 January 2015 (and awards granted to non-MRTs on or after 1 January 2022) for a period of seven years, extended to 10 years for employees in PRA and FCA designated senior management functions in the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may be applied in circumstances including: •participation in, or responsibility for, conduct that results in significant losses; •failing to meet appropriate standards and propriety; •reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract of employment; and •a material failure of risk management suffered by HSBC or a business unit in the context of Group risk-management standards, policies and procedures.
Sales incentives | •We generally do not operate commission-based sales plans, unless aligned with local market practice and with appropriate safeguards to avoid incentivising inappropriate sales behaviours.
Identification of MRTs | •We identify individuals as MRTs based on the qualitative and quantitative criteria set out in the RTS and using the following key principles that underpin HSBC’s identification process: –MRTs are identified at Group, HSBC Bank (consolidated) and HSBC UK Bank level. –MRTs are also identified at other solo regulated entity level as required by the regulations. –When identifying an MRT, HSBC considers an employee’s role within its matrix management structure. The global business and function that an individual works within takes precedence, followed by the geographical location in which they work. •We also identify additional MRTs based on our own internal criteria, which include compensation thresholds and individuals in certain roles and grades who otherwise would not be identified as MRTs under the criteria prescribed in the RTS.

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Pay ratio
The following table shows the ratio between the total pay of the
Group Chief Executive and the lower quartile, median and upper
quartile pay of our UK employees.

Total pay ratio
| Method | Lower quartile | Median | Upper quartile
2022 | A | 167:1 | 95:1 | 49:1
2021 | A | 154:1 | 90:1 | 46:1
2020 | A | 139:1 | 85:1 | 43:1
2019 | A | 169:1 | 105:1 | 52:1

Total pay and benefits amounts used to calculate the ratio
(£) | Method | Lower quartile | Median | Upper quartile
Total pay and benefits | Total salary | Total pay and benefits | Total salary | Total pay and benefits | Total salary
2022 | A | 33,284 | 24,615 | 58,257 | 41,000 | 113,778 | 95,000
2021 | A | 31,727 | 27,666 | 54,678 | 41,500 | 106,951 | 84,000
2020 | A | 29,833 | 23,264 | 48,703 | 36,972 | 96,386 | 75,000
2019 | A | 28,920 | 24,235 | 46,593 | 41,905 | 93,365 | 72,840

The increase in median ratio is primarily driven by a higher annual
incentive payout than in 2021 to the Group Chief Executive, reflecting
the improvement in the financial performance of the Group. This is
described further in the Committee Chair‘s letter.
The total pay and benefits for the median employee for 2022 was
£58,257, a 6.5% increase compared with 2021.
Our UK workforce comprises a diverse mix of employees across
different businesses and levels of seniority, from junior cashiers in our
retail branches to senior executives managing our global business
units. We aim to deliver market-competitive pay for each role, taking
into consideration the skills and experience required for the business.
Pay structure varies across roles in order to deliver an appropriate mix
of fixed and variable pay. Junior employees have a greater portion of
their pay delivered in a fixed component, which does not vary with
performance and allows them to predictably meet their day-to-day
needs. Our senior management, including executive Directors,
generally have a higher portion of their total compensation opportunity
structured as variable pay and linked to the performance of the Group,
given their role and ability to influence the strategy and performance
of the Group. Executive Directors also have a higher proportion of
their variable pay delivered in shares, which vest over a period of
seven years with a post-vesting retention period of one year. During
this deferral and retention period, the awards are linked to the share
price so the value of award realised by them after the vesting and
retention period will be aligned to the performance of the Group.
We are satisfied that the median pay ratio is consistent with the pay,
reward and progression policies for our UK workforce, taking into
account the diverse mix of our UK employees, the compensation
structure mix applicable to each role and our objective of delivering
market competitive pay for each role subject to Group, business and
individual performance.
Our ratios have been calculated using the option ‘A’ methodology
prescribed under the UK Companies (Miscellaneous Reporting)
Regulations 2018. Under this option, the ratios are calculated using
full-time equivalent pay and benefits of all employees providing
services in the UK at 31 December 2022. We believe this approach
provides accurate information and representation of the ratios. The
ratio has been computed taking into account the pay and benefits of
nearly 35,000 UK employees, other than the individual performing the
role of Group Chief Executive. We calculated our pay quartiles and
benefits information for our UK employees using:
•full-time equivalent annualised fixed pay, which includes salary and
allowances, at 31 December 2022;
•variable pay awards for 2022;
•return on deferred cash awards granted in prior years. The
deferred cash portion of the annual incentive granted in prior years
includes a right to receive notional returns for the period between
the grant date and vesting date, which is determined by reference
to a rate of return specified at the time of grant. A payment of
notional return is made annually and the amount is disclosed on a
paid basis in the year in which the payment is made;
•gains realised from exercising awards from taxable employee
share plans; and
•full-time equivalent value of taxable benefits and pension
contributions.
Full-time equivalent fixed pay and benefits for each employee have
been calculated by using each employee’s data as at 31 December
2022. Where an employee works part-time, fixed pay and benefits are
grossed up, where appropriate, to full-time equivalent. One-off
benefits have not been included in calculating the ratios as these are
not permanent in nature and in some cases, depending on individual
circumstances, may not truly reflect a benefit to the employee.
Total pay and benefits for the Group Chief Executive is the single
figure of remuneration table for Noel Quinn. Total remuneration does
not include an LTI as he has not received an LTI award with a
performance period that ended during 2022. In a year in which the
value of an LTI is included in the single figure table of remuneration,
the ratios could be higher.
Given differences in business mix and size; employment and
compensation practices; methodologies for computing pay ratios; and
assumptions used by companies, the reported ratios may not be
comparable to our international and listed peers on the FTSE 100.
Relative importance of spend on pay
The following chart shows the change in:
•total staff pay between 2021 and 2022; and
•dividends and share buy-backs in respect of 2021 and 2022.
In 2022, total spend on pay was slightly lower than in 2021, while the
distribution to shareholders increased by 29% compared with 2021,
reflecting a higher dividend and the capital return to shareholders
through the $1bn share buy-back announced in February 2022, which
concluded in 2022. Dividends include an approximation of the amount
payable in April 2023 in relation to the second interim dividend of
$0.23 per ordinary share.
Relative importance of spend on pay

Total return to shareholder | 2022 — |  | $8,144m |  | $1,000m | $9,144m |  | ↑
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | 29%
2021 — |  | $5,070m | $2,000m | $7,070m |
Employee pay | 2022 — |  |  |  | $18,366m |  |  |  | ↓
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | -2%
2021 — |  |  |  | $18,742m |  |  |  |
|  |  | Employee pay |  |  |  | Dividends |  | Share buy-back

HSBC Holdings plc Annual Report and Accounts 2022 | 295

Comparison of Directors’ and employees’
pay
The following table compares the changes in each Director’s salary,
taxable benefits and annual incentive between 2020 and 2022 with
the percentage change in each of those elements of pay for UK-based
employees of HSBC Group Management Services Limited, the
employing entity of the executive Directors.
There were no changes to the fees or benefits of the non-executive
Directors between 2022 and 2020. The year-on-year percentage
change in fees noted in the table below is primarily driven by any pro-
rated fees received by the non-executive Director for 2022 and/or
2021 and/or 2020 based on time served by them on the Board and
the relevant Board committees and any additional responsibilities
taken on by the non-executive Director during each year. The value of
benefits received by the non-executive Directors reflect the taxable
expense reimbursements claimed, and the associated gross-up tax, in
relation to attending the Board meetings in each year. Non-executive
Directors who joined after 1 January 2022 are not included, which
includes Geraldine Buckingham who joined on 1 May 2022.

Annual percentage change in remuneration
| 2020 | 2021 | 2022
Director/employees | Base salary/fees | Benefits | Annual incentive | Base salary/fees | Benefits | Annual incentive 1 | Base salary/fees | Benefits | Annual incentive
Executive Directors |  |  |
Noel Quinn 2 | 151.7% | 353.7% | 20.2% | 1.7% | -48.9% | 99.0% | 3.2% | 25.3% | 36.1%
Ewen Stevenson (retired on 31 December 2022) | 2.6% | -25.0% | -58.4% | 1.8% | -75.0% | 117.3% | 3.2% | 133.3% | 11.6%
Non-executive Directors 3
Kathleen Casey (retired on 24 April 2020) | -65.0% | 200.0% | — | — | — | — | — | — | —
Laura Cha (retired on 28 May 2021)4 | 97.0% | — | — | -58.8% | — | — | — | — | —
Henri de Castries (retired on 28 May 2021)4,5 | 4.1% | -75.0% | — | -59.4% | 2,100.0% | — | — | — | —
Rachel Duan 6 | — | — | — | — | — | — | 235.8% | — | —
Dame Carolyn Fairbairn 7 | — | — | — | — | — | — | 231.1% | — | —
James Forese 8 | — | — | — | 257.5% | — | — | 20.5% | — | —
Steven Guggenheimer 9 | — | — | — | 86.6% | — | — | 4.8% | — | —
Irene Lee (retired on 29 April 2022) | 20.3% | -100.0% | — | 1.8% | — | — | -12.2% | — | —
José Antonio Meade Kuribreña 10 | 28.7% | 100.0% | — | 10.4% | -100.0% | — | 8.5% | — | —
Pauline van der Meer Mohr (retired on 29 April 2022)10 | 17.7% | -75.0% | — | -6.7% | -100.0% | — | -68.4% | — | —
Heidi Miller (retired on 28 May 2021)4,5 | 1.1% | -100.0% | — | -60.3% | 171.4% | — | — | — | —
Eileen Murray 7 | — | — | — | 121.7% | — | — | -1.5% | — | —
David Nish | 108.7% | -50.0% | — | 0.4% | 25.0% | — | -1.0% | 120.0% | —
Sir Jonathan Symonds (retired on 18 February 2020) | -86.5% | -4.8% | — | — | — | — | — | — | —
Jackson Tai 10 | -10.8% | -78.9% | — | -1.4% | -100.0% | — | 7.7% | — | —
Mark Tucker | — | -77.5% | — | — | -36.5% | — | — | 242.4% | —
Employee group 11 | 2.0% | 2.3% | -20.0% | 1.0% | 1.3% | 25.2% | 3.1% | 7.0% | 3.7%

1 Noel Quinn and Ewen Stevenson both voluntarily waived the cash portion of their 2020 annual incentive. The year-on-year percentage change
between 2020 and 2021 would be -1% for Noel Quinn and 9% for Ewen Stevenson without this cash waiver.
2 Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on
17 March 2020. The annual percentage change in 2020 for Noel Quinn is based on remuneration reported in his 2019 single figure of remuneration (for
the period 5 August 2019 to 31 December 2019) and his 2020 single figure of remuneration (for the period 1 January 2020 to 31 December 2020).
Based on his annualised 2019 compensation as an executive Director, his percentage change in salary, benefits and annual incentive was 2.1%,
85.2% and -50.9%, respectively for 2020.
3 In some instances, non-executive Directors may have served only part of the year resulting in large year-on-year percentage changes in fees and/or
benefits. Page 291 provides the underlying single figure of remuneration for non-executive Directors used to calculate the figures above.
4 Retired from the Board during 2021 and therefore fees received during 2021 were lower than the fees received in 2020.
5 There was no change to the benefit provided. The year-on-year change reflected the increase in taxable expense reimbursement claimed in 2021 for
attending Board and other meetings at HSBC Holdings’ registered offices.
6 Appointed as member of the Group Audit Committee on 1 June 2022.
7 Appointed as Chair of the Group Remuneration Committee effective 29 April 2022.
8 Appointed as non-executive Chair of HSBC North America Holdings, Inc in 2021. Fees for 2021 included fees in relation to this role.
9 Joined the Board during 2020 and therefore received fees for only part of 2020.
10 Received no taxable benefits in 2021, resulting in a 100% reduction from 2021.
11 Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no
individuals are employed directly by HSBC Holdings.
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296 | HSBC Holdings plc Annual Report and Accounts 2022

Policy alignment with UK Corporate Governance Code
The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in
respect of the Directors' remuneration policy:

Provision | Approach
Clarity | •The Committee regularly engages and consults with key shareholders to take into account shareholder feedback and to ensure there is transparency on our policy and its implementation. •Details of our remuneration practices and our remuneration policy for Directors are published and available to all our employees.
Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce.
Simplicity | •Our Directors' remuneration policy has been designed so that it is easy to understand and transparent, while complying with the provisions set out in the UK Corporate Governance Code and the remuneration rules of the UK's PRA and FCA, as well as meeting the expectations of our shareholders. The objective of each remuneration element is explained and the amount paid in respect of each element of pay is clearly set out.
Remuneration structures should avoid complexity and their rationale and operation should be easy to understand.
Risk | •In line with regulatory requirements, our remuneration practices promote sound and effective risk management while supporting our business objectives. •The Group Chief Risk and Compliance Officer attends Committee meetings and updates the Committee on the overall risk profile of the Group. The Committee also seeks inputs from the Group Risk Committee when making remuneration decisions. •Risk and conduct considerations are taken into account in setting the variable pay pool, from which any executive Director variable pay is funded. •Executive Directors' annual incentive and LTI scorecards include a mix of financial and non- financial measures. Financial measures in the scorecards are subject to a CET1 capital underpin to ensure CET1 capital remains within risk tolerance levels while achieving financial targets. In addition, the overall scorecard outcome is subject to a risk and compliance modifier. •The deferred portion of any awards granted to executive Directors is subject to a seven-year deferral period during which our malus policy can be applied. All variable pay awards that have vested are subject to our clawback policy for a period of up to seven years from the award date (extending to 10 years where an investigation is ongoing).
Remuneration structures should identify and mitigate against reputational and other risks from excessive rewards, as well as behavioural risks that can arise from target-based incentive plans.
Predictability | •The charts set out in our shareholder approved policy report (available in our Annual Report and Accounts 2021) show how the total value of remuneration and its composition vary under different performance scenarios for executive Directors.
The range of possible values of rewards to individual Directors and any other limits or discretions should be identified and explained at the time of approving the policy.
Proportionality | •The annual incentive and LTI scorecards reward achievement of our financial and resource plan targets, as well as long-term financial and shareholder value creation targets. •The Committee retains the discretion to adjust the annual incentive and LTI payout based on the outcome of the relevant scorecards, if it considers that the payout determined does not appropriately reflect the overall position and performance of the Group during the performance period.
The link between individual awards, the delivery of strategy and the long-term performance of the Group should be clear and outcomes should not reward poor performance.
Alignment with culture | •In order for any annual incentive award to be made, each executive Director must achieve a required behaviour rating, which is assessed by reference to the HSBC Values. •Annual incentive and LTI scorecards contain non-financial measures linked to our wider social obligations. These include measures related to reducing the environmental impact of our operations, improving customer satisfaction, diversity and employee engagement. •Each year senior employees participate in a 360 degree survey, which gathers feedback on values- aligned behaviours from peers, direct reports, skip level reports and managers.
Incentive schemes should drive behaviours consistent with the Group's purpose, values and strategy.

HSBC Holdings plc Annual Report and Accounts 2022 | 297

Additional regulatory remuneration
disclosures
This section provides disclosures required under the Hong Kong
Ordinances, Hong Kong Listing Rules and the Pillar 3 remuneration
disclosures.
For the purpose of the Pillar 3 remuneration disclosures, executive
Directors and non-executive Directors are considered to be members
of the management body. Members of the Group Executive
Committee other than the executive Directors are considered as
senior management.
MRT remuneration disclosures
The following tables set out the remuneration disclosures for
individuals identified as MRTs for HSBC Holdings.
Remuneration information for individuals who are only identified as
MRTs at HSBC Bank plc, HSBC UK Bank plc or other solo-regulated
entity levels is included, where relevant, in those entities’ disclosures.
The 2022 variable pay information included in the following tables is
based on the market value of awards. For share awards, the market
value is based on HSBC Holdings’ share price at the date of grant
(unless indicated otherwise). For cash awards, it is the value of
awards expected to be paid to the individual over the deferral period.

Remuneration awarded for the financial year (REM1)
|  | Supervisory function | Management function | Other senior management | Other identified staff
Fixed remuneration | Number of identified staff | 12.0 | 2.0 | 18.9 | 1,203.1
Total fixed pay ($m) | 6.4 | 6.3 | 43.6 | 656.8
of which: cash-based ($m)1 | 6.4 | 2.9 | 43.6 | 656.8
of which: shares or equivalent ownership interests ($m)2 | — | 3.4 | — | —
of which: share-linked instruments or equivalent non-cash instruments ($m) | — | — | — | —
of which: other instruments ($m) | — | — | — | —
of which: other forms ($m) | — | — | — | —
Variable remuneration 3 | Number of identified staff | 12.0 | 2.0 | 18.9 | 1,203.1
Total variable remuneration ($m)4,5 | — | 11.0 | 65.4 | 641.0
of which: cash-based ($m) | — | 1.6 | 30.0 | 321.0
– of which: deferred ($m) | — | — | 17.9 | 151.9
of which: shares or equivalent ownership interests ($m)2 | — | 9.4 | 35.4 | 305.9
– of which: deferred ($m) | — | 7.8 | 23.3 | 170.0
of which: share-linked instruments or equivalent non-cash instruments ($m) | — | — | — | 8.7
– of which: deferred ($m) | — | — | — | 4.7
of which: other instruments ($m) | — | — | — | —
– of which: deferred ($m) | — | — | — | —
of which: other forms ($m) | — | — | — | 5.4
– of which: deferred ($m) | — | — | — | 3.3
Total remuneration ($m) | 6.4 | 17.3 | 109.0 | 1,297.8

1 Cash-based fixed remuneration is paid immediately.
2 Paid in HSBC shares. Vested shares are subject to a retention period of up to one year.
3 Variable pay awarded in respect of 2022. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable
component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.
4 The Group has used the discount rate under PRA remuneration rule 15.13 for 7 individuals for the purpose of calculating the ratio between fixed and
variable components of 2022 total remuneration.
5 27 identified staff members were exempt from the application of the remuneration structure requirements for MRTs under the PRA and FCA
remuneration rules. Their total remuneration is $6.2 m, of which $5.1 m is fixed pay and $1.1 m is variable remuneration.

Special payments to staff whose professional activities have a material impact on institutions’ risk profile (REM2)
| Supervisory function | Management function | Other senior management | Other identified staff
Guaranteed variable remuneration awards 1
Number of identified staff | — | — | — | —
Total amount ($m) | — | — | — | —
– of which guaranteed variable remuneration awards paid during the financial year, that are not taken into account in the bonus cap ($m) | — | — | — | —
Severance payments awarded in previous periods, that have been paid out during the financial year 2
Number of identified staff | — | — | — | —
Total amount ($m) | — | — | — | —
Severance payments awarded during the financial year 2
Number of identified staff | — | — | — | 59.8
Total amount ($m) | — | — | — | 26.9
– of which paid during the financial year ($m) | — | — | — | 21.1
– of which deferred ($m) | — | — | — | —
– of which severance payments paid during the financial year, that are not taken into account in the bonus cap ($m) | — | — | — | 26.9
– of which highest payment that has been awarded to a single person ($m) | — | — | — | 2.2

1 No guaranteed variable remuneration was awarded in 2022. HSBC would offer a guaranteed variable remuneration award in exceptional
circumstances for new hires, and for the first year of employment only. It would typically involve a critical new hire, and would also depend on factors
such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance
year.
2 Includes payments such as payment in lieu of notice, statutory severance, outplacement service, legal fees, ex-gratia payments and settlements
(excludes pre-existing benefit entitlements triggered on terminations).
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298 | HSBC Holdings plc Annual Report and Accounts 2022

Deferred remuneration at 31 December 1 (REM3)
$m | Total amount of deferred remuneration awarded for previous performance periods | of which: due to vest in the financial year | of which: vesting in subsequent financial years | Amount of performance adjustment made in the financial year to deferred remuneration that was due to vest in the financial year | Amount of performance adjustment made in the financial year to deferred remuneration that was due to vest in future performance years | Total amount of adjustment during the financial year due to ex post implicit adjustments | Total amount of deferred remuneration awarded before the financial year actually paid out in the financial year | Total amount of deferred remuneration awarded for previous performance period that has vested but is subject to retention periods
Supervisory function | — | — | — | — | — | — | — | —
Cash-based | — | — | — | — | — | — | — | —
Shares | — | — | — | — | — | — | — | —
Share-linked instruments | — | — | — | — | — | — | — | —
Other instruments | — | — | — | — | — | — | — | —
Other forms | — | — | — | — | — | — | — | —
Management function | 31.1 | 2.6 | 28.5 | -2.4 | — | 1.9 | 2.7 | 1.0
Cash-based | 2.9 | 0.5 | 2.4 | — | — | — | 0.5 | —
Shares | 28.2 | 2.1 | 26.1 | -2.4 | — | 1.9 | 2.2 | 1.0
Share-linked instruments | — | — | — | — | — | — | — | —
Other instruments | — | — | — | — | — | — | — | —
Other forms | — | — | — | — | — | — | — | —
Other senior management | 114.3 | 15.7 | 98.6 | — | — | 3.0 | 16.0 | 3.0
Cash-based | 43.3 | 6.4 | 36.9 | — | — | — | 6.5 | —
Shares | 70.0 | 8.5 | 61.5 | — | — | 2.9 | 8.7 | 2.7
Share-linked instruments | 1.0 | 0.8 | 0.2 | — | — | 0.1 | 0.8 | 0.3
Other instruments | — | — | — | — | — | — | — | —
Other forms | — | — | — | — | — | — | — | —
Other identified staff | 853.1 | 232.5 | 620.6 | — | — | 21.6 | 235.4 | 38.1
Cash-based | 359.1 | 85.2 | 273.9 | — | — | — | 86.0 | —
Shares | 474.2 | 139.0 | 335.2 | — | — | 21.6 | 142.1 | 34.9
Share-linked instruments | 13.9 | 5.4 | 8.5 | — | — | 0.7 | 5.5 | 2.4
Other instruments | — | — | — | — | — | — | — | —
Other forms | 5.9 | 2.9 | 3.0 | — | — | -0.7 | 1.8 | 0.8
Total amount | 998.5 | 250.8 | 747.7 | -2.4 | — | 26.5 | 254.1 | 42.1

1 This table provides details of balances and movements during performance year 2022. For details of variable pay awards granted for 2022, refer to the
’Remuneration awarded for the financial year’ table. Deferred remuneration is made in cash and/or shares. Share-based awards are made in HSBC
shares.

Identified staff - remuneration by band 1 (REM4) |
| Identified staff that are high earners as set out in Article 450(i) CRR
€1,000,000 – 1,500,000 | 246
€1,500,000 – 2,000,000 | 107
€2,000,000 – 2,500,000 | 48
€2,500,000 – 3,000,000 | 26
€3,000,000 – 3,500,000 | 12
€3,500,000 – 4,000,000 | 8
€4,000,000 – 4,500,000 | 7
€4,500,000 – 5,000,000 | 5
€5,000,000 – 6,000,000 | 6
€6,000,000 – 7,000,000 | 2
€7,000,000 – 8,000,000 | 3
€8,000,000 – 9,000,000 | 1
€9,000,000 – 10,000,000 | 1
€10,000,000 – 11,000,000 | —
€11,000,000 – 12,000,000 | 1

1 Table prepared in euros in accordance with Article 450 of the European Union Capital Requirements Regulation, using the exchange rates published by
the European Commission for financial programming and budget for December of the reported year as published on its website.

HSBC Holdings plc Annual Report and Accounts 2022 | 299

Information on remuneration of staff whose professional activities have a material impact on institutions’ risk profile (REM5)
| Management body | Business areas | Total
| Supervisory function | Management function | Total | Investment banking | Retail banking | Asset management | Corporate function | Independent internal control function | All other
Total number of identified staff |  |  |  |  |  |  |  |  |  | 1,236.0
– of which members of the Board | 12.0 | 2.0 | 14.0 |  |  |  |  |  |  |
– of which senior management |  |  |  | 2.0 | 2.0 | — | 6.9 | 2.0 | 6.0 |
– of which other identified staff |  |  |  | 548.5 | 228.0 | 32.0 | 151.0 | 172.0 | 71.6 |
Total remuneration of identified staff ($m) | 6.4 | 17.3 | 23.7 | 704.8 | 225.2 | 40.5 | 189.0 | 123.8 | 123.5 |
– of which variable remuneration ($m)1 | — | 11.0 | 11.0 | 368.6 | 107.6 | 21.0 | 92.4 | 53.9 | 62.9 |
– of which fixed remuneration ($m) | 6.4 | 6.3 | 12.7 | 336.2 | 117.6 | 19.5 | 96.6 | 69.9 | 60.6 |

1 Variable pay awarded in respect of 2022. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable
component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.
Directors’ emoluments
The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2022 are set out below:

Emoluments
| Noel Quinn | Ewen Stevenson | Non-executive Directors 1
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021
| £000 | £000 | £000 | £000 | £000 | £000
Directors' base salary, allowances and benefits in kind | 3,367 | 3,283 | 1,994 | 1,933 |  |
Non-executive Directors' fees and benefits in kind |  |  |  |  | 5,242 | 4,680
Pension contributions | — | — | — | — | — | —
Performance-related pay paid or receivable 2 | 6,439 | 5,721 | 1,091 | 3,388 | — | —
Inducements to join paid or receivable | — | — | 1,180 | 754 | — | —
Compensation for loss of office | — | — | — | — | — | —
Notional return on deferred cash | 31 | 22 | — | — | — | —
Total | 9,837 | 9,026 | 4,265 | 6,075 | 5,242 | 4,680
Total ($000) | 12,113 | 12,414 | 5,252 | 8,356 | 6,455 | 5,763

1 Fees and benefits in kind for 2021 reflects the population as per the single figure table for non-executive Directors, which excludes individuals who
have stepped down from the Board during 2021.
2 Includes the value of the deferred and LTI awards at grant.
The aggregate amount of Directors’ emoluments (including both
executive Directors and non-executive Directors) for the year ended
31 December 2022 was $23,820,419. As per our policy, benefits in
kind may include, but are not limited to, the provision of medical
insurance, income protection insurance, health assessment,
life assurance, club membership, tax assistance, car benefit, travel
assistance, provision of company owned-accommodation and
relocation costs (including any tax due on these benefits, where
applicable). Post-employment medical insurance benefit was provided
to former Directors, including Douglas Flint valued at £6,706 ($8,258),
Stuart Gulliver valued at £6,706 ($8,258), John Flint valued at £9,996
($12,309), and Marc Moses valued at £15,851 ($19,519). Tax return
support was also provided to John Flint valued at £5,441 ($6,700), and
Marc Moses valued at £2,500 ($3,079). The total aggregate value of
benefits provided to former executive Directors was £47,200
($58,123). The aggregate value of Director retirement benefits for
current Directors is nil. Amounts are converted into US dollars based
on the average year-to-date exchange rates for the respective year.
There were payments under retirement benefit arrangements with
two former Directors of $405,660. The provision at 31 December
2022 in respect of unfunded pension obligations to former Directors
amounted to $5,387,659. This relates to unfunded unapproved
retirement benefits schemes.
Emoluments of senior management and five highest paid
employees
The following tables set out the details of emoluments paid to senior
management, which in this case comprises executive Directors and
members of the Group Executive Committee, for the year ended
31 December 2022, or for the period of appointment in 2022 as a
Director or member of the Group Executive Committee. Details of the
remuneration paid to the five highest paid employees, comprising one
executive Director and four Group Executives, for the year ended
31 December 2021, are also presented.

Emoluments |
£000s | Five highest paid employees | Senior management
Basic salaries, allowances and benefits in kind | 13,404 | 41,639
Pension contributions | 99 | 611
Performance-related pay paid or receivable 1 | 23,237 | 56,616
Inducements to join paid or receivable | — | —
Compensation for loss of office | — | —
Total | 36,740 | 98,866
Total ($000) | 45,242 | 121,745

1 Includes the value of deferred shares awards at grant.
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300 | HSBC Holdings plc Annual Report and Accounts 2022

Emoluments by bands
Hong Kong dollars | US dollars | Number of highest paid employees | Number of senior management
$10,500,001 – $11,000,000 | $1,340,909 – $1,404,762 | — | 1
$19,500,001 – $20,000,000 | $2,490,259 – $2,554,112 | — | 1
$24,000,001 – $24,500,000 | $3,064,935 – $3,128,787 | — | 1
$25,500,001 – $26,000,000 | $3,256,493 – $3,320,346 | — | 1
$29,500,001 – $30,000,000 | $3,767,315 – $3,831,168 | — | 1
$39,500,001 – $40,000,000 | $5,044,371 – $5,108,224 | — | 1
$41,000,001 – $41,500,000 | $5,235,930 – $5,299,782 | — | 1
$44,000,001 – $44,500,000 | $5,619,047 – $5,682,899 | — | 1
$44,500,001 – $45,000,000 | $5,682,899 – $5,746,752 | — | 1
$45,500,001 – $46,000,000 | $5,810,605 – $5,874,458 | — | 1
$52,500,001 – $53,000,000 | $6,704,544 – $6,768,397 | — | 1
$53,000,001 – $53,500,000 | $6,768,397 – $6,832,250 | — | 1
$55,500,001 – $56,000,000 | $7,087,661 – $7,151,514 | — | 1
$56,500,001 – $57,000,000 | $7,215,367 – $7,279,219 | — | 1
$60,500,001 – $61,000,000 | $7,726,189 – $7,790,042 | — | 1
$61,000,001 – $61,500,000 | $7,790,042 – $7,853,894 | — | 1
$64,000,001 – $64,500,000 | $8,173,158 – $8,237,011 | 1 | 1
$69,000,001 – $69,500,000 | $8,811,686 – $8,875,539 | 1 | 1
$76,000,001 – $76,500,000 | $9,705,626 – $9,769,478 | 1 | 1
$82,500,001 – $83,000,000 | $10,535,712 – $10,599,565 | 1 | 1
$135,000,001 – $135,500,000 | $17,240,256 – $17,304,109 | 1 | 1

Share capital and other related
disclosures
Share buy-bac k programme
On 20 April 2022, HSBC Holdings concluded a share buy-back
programme of its ordinary shares of $0.50 each that had been
announced in October 2021. Under this buy-back programme in 2022,
a total of 191,466,093 ordinary shares were repurchased for
cancellation on UK trading venues, including the London Stock
Exchange, BATS, Chi-X, Turquoise and/or Aquis Exchange.
On 3 May 2022, HSBC Holdings commenced a further share buy-back
programme of its ordinary shares of $0.50 each up to a maximum
consideration of $1.0bn. This programme concluded on 28 July 2022,
with 86,606,357 ordinary shares repurchased for cancellation on the
UK trading venues and 70,066,800 ordinary shares repurchased for
cancellation on The Stock Exchange of Hong Kong Limited (’HKEx’).
The purpose of both buy-back programmes was to reduce HSBC’s
number of outstanding ordinary shares.
As at 31 December 2022, the total number of ordinary shares
purchased and cancelled during the year was 348,139,250,
representing a nominal value of $174,069,625 and an aggregate
consideration paid by HSBC of £1,426,598,865 on the UK trading
venues and HK$3,514,580,618 on the HKEx. The shares cancelled
represent 1.72% of the shares in issue and 1.74% of the shares in
issue, excluding treasury shares.
The table that follows outlines details of the shares purchased and
cancelled on a monthly basis during 2022.

| Number of shares purchased and cancelled | Highest price paid per share | Lowest price paid per share | Average price paid per share | Aggregate price paid
First share buy-back on UK trading venues in 2022 |  | £ | £ | £ | £
Month shares cancelled |  |  |  |  |
Jan-22 | 25,382,519 | 5.2700 | 4.4555 | 4.9784 | 126,363,981
Feb-22 | 19,064,151 | 5.5510 | 5.1530 | 5.3395 | 101,793,492
Mar-22 | 72,125,062 | 5.4040 | 4.4935 | 4.9129 | 354,343,000
Apr-22 | 74,894,361 | 5.4100 | 5.1460 | 5.2608 | 394,002,122
Total | 191,466,093 |  |  |  | 976,502,595
| Number of shares purchased and cancelled | Highest price paid per share | Lowest price paid per share | Average price paid per share | Aggregate price paid
Second share buy-back on UK trading venues in 2022 |  | £ | £ | £ | £
Month shares cancelled |  |  |  |  |
May-22 | 21,447,447 | 5.2700 | 4.7800 | 4.9911 | 107,047,291
Jun-22 | 31,082,904 | 5.4960 | 4.9780 | 5.2729 | 163,897,398
Jul-22 | 33,126,211 | 5.5530 | 5.0840 | 5.2598 | 174,235,941
Aug-22 | 949,795 | 5.2170 | 5.1230 | 5.1755 | 4,915,640
Total | 86,606,357 |  |  |  | 450,096,270

HSBC Holdings plc Annual Report and Accounts 2022 | 301

| Number of shares purchased and cancelled | Highest price paid per share | Lowest price paid per share | Average price paid per share | Aggregate price paid
Second share buy-back on HKEx in 2022 |  | (HK$) | (HK$) | (HK$) | (HK$)
Month shares purchased |  |  |  |  |
May-22 | 5,244,800 | 52.8500 | 46.5000 | 50.8537 | 266,717,438
Jun-22 | 31,582,400 | 52.7000 | 48.2500 | 50.8657 | 1,606,461,400
Jul-22 | 33,239,600 | 52.3000 | 47.4000 | 49.3809 | 1,641,401,780
Total | 70,066,800 |  |  |  | 3,514,580,618

Dividends
Dividends for 2022
An interim dividend of $0.09 for the 2022 half-year was paid on
29 September 2022. For further details of the dividends approved in
2022, see Note 8 on the financial statements.
On 21 February 2023, the Directors approved a second interim
dividend for 2022 of $0.23 per ordinary share, making a total of $0.32
for the 2022 full-year. The second interim dividend for 2022 will be
payable on 27 April 2023 in cash in US dollars, or in sterling or Hong
Kong dollars at exchange rates to be determined on 17 April 2023. As
the second interim dividend for 2022 was approved after
31 December 2022, it has not been included in the balance sheet of
HSBC as a liability. The distributable reserves of HSBC Holdings at
31 December 2022 were $35.2bn.
A quarterly dividend of £0.01 per Series A sterling preference share
was paid on 15 March, 15 June, 15 September and 15 December
2022.
Dividends for 2023
The Group intends to pay quarterly dividends during 2023.
A dividend of £0.01 per Series A sterling preference share was
approved on 21 February 2023 for payment on 15 March 2023.
Share capital
Issued share capital
The nominal value of HSBC Holdings’ issued share capital paid up at
31 December 2022 was $10,146,803,705 divided into 20,293,607,410
ordinary shares of $0.50 each and one non-cumulative preference
share of £0.01, representing approximately 100.00% and 0.00%
respectively of the nominal value of HSBC Holdings’ total issued
share capital paid up at 31 December 2022.
Rights, obligations and restrictions attaching to shares
The rights and obligations attaching to each class of ordinary and non-
cumulative preference shares in our share capital are set out in full in
our Articles of Association. The Articles of Association may be
amended by special resolution of the shareholders and can be found
on our website at www.hsbc.com/who-we-are/leadership-and-
governance/board-responsibilities.
Ordinary shares
HSBC Holdings has one class of ordinary share, which carries no right
to fixed income. There are no voting restrictions on the issued
ordinary shares, all of which are fully paid. On a show of hands, each
member present has the right to one vote at general meetings. On a
poll, each member present or voting by proxy is entitled to one vote
for every $0.50 nominal value of share capital held.
There are no specific restrictions on transfers of ordinary shares,
which are governed by the general provisions of the Articles of
Association and prevailing legislation.
Information on the policy adopted by the Board for paying interim
dividends on the ordinary shares may be found in the ’Shareholder
information’ section on page 418.
Dividend waivers
HSBC Holdings’ employee benefit trusts, which hold shares in HSBC
Holdings in connection with the operation of its share plans, have
lodged standing instructions to waive dividends on shares held by
them that have not been allocated to employees. Shares held by
custodians in connection with the vesting of employee share awards
also lodged instructions to waive dividends. The total amount of
dividends waived during 2022 was $10.7m.
Preference shares
The preference shares, which have preferential rights to income and
capital, do not, in general, confer a right to attend and vote at general
meetings.
There are three classes of preference shares in the share capital of
HSBC Holdings: non-cumulative US dollar preference shares of $0.01
each (‘dollar preference shares’); non-cumulative preference shares of
£0.01 each (‘sterling preference shares’); and non-cumulative
preference shares of €0.01 (‘euro preference shares’).
The sterling preference share in issue is a Series A sterling preference
share. There are no dollar preference shares or euro preference
shares in issue.
Information on dividends approved for 2021 and 2022 may be found
in Note 8 on the financial statements on page 359.
Further details of the rights and obligations attaching to the HSBC
Holdings’ issued share capital may be found in Note 32 on the
financial statements.
Compliance with Hong Kong Listing Rule 13.25A(2)
HSBC Holdings has been granted a waiver from strict compliance
with Rule 13.25A(2) of the Rules Governing the Listing of Securities
on the Stock Exchange of Hong Kong.
Under this waiver, HSBC’s obligation to file a Next Day Return
following the issue of new shares, pursuant to the vesting of share
awards granted under its share plans to persons who are not
Directors, would only be triggered where it falls within one of the
circumstances set out under Rule 13.25A(3).
Share capital changes in 2022
In addition to the share buy-back programme, the following events
occurred during the year in relation to the ordinary share capital of
HSBC Holdings:
Scrip dividends
There were no scrip dividends issued during the year.
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302 | HSBC Holdings plc Annual Report and Accounts 2022

All-employee share plans 1
| HSBC Holdings ordinary shares issued | Aggregate nominal value | Market value per share
| from | to
|  | $ | £ | £
HSBC International Employee Share Purchase Plan | 234,830 | 117,415 | 4.9385 | 5.1

1 In respect of the HSBC Holdings Savings Related Share Option Plan (UK), no new shares were issued under this plan. All exercises were satisfied by
market purchased shares. See page 309 for details of options granted, exercised and lapsed.

HSBC share plans
| HSBC Holdings ordinary shares issued | Aggregate nominal value | Market value per share
| from | to
|  | $ | £ | £
Vesting of awards under the HSBC Share Plan 2011 | 9,991,391 | 4,995,696 | 4.789 | 5.498

Authorities to allot and to purchase shares and
pre-emption rights
At the AGM in 2022, shareholders renewed the general authority for
the Directors to allot new shares up to 13,475,996,328 ordinary
shares, 15,000,000 non-cumulative preference shares of £0.01 each,
15,000,000 non-cumulative preference shares of $0.01 each and
15,000,000 non-cumulative preference shares of €0.01 each.
Shareholders also renewed the authority for the Directors to make
market purchases of up to 2,021,399,449 ordinary shares. The
Directors exercised their market purchase authority from both the
2021 and 2022 AGMs and purchased 348,139,250 ordinary shares
during the year.
In addition, shareholders gave authority for the Directors to grant
rights to subscribe for, or to convert any security into, no more than
4,042,798,898 ordinary shares in relation to any issue by HSBC
Holdings or any member of the Group of contingent convertible
securities that automatically convert into or are exchanged for
ordinary shares in HSBC Holdings in prescribed circumstances. For
further details on the issue of contingent convertible securities, see
Note 32 on the financial statements.
Other than as disclosed in the tables above headed ‘Share capital
changes in 2022’, the Directors did not allot any shares during 2022.
Debt securities
In 2022, HSBC Holdings issued the equivalent of $25.4 bn of debt
securities in the public capital markets in a range of currencies and
maturities in the form of senior and subordinated securities to ensure
it meets the current and proposed regulatory rules, including those
relating to the availability of adequate total loss-absorbing capacity.
For details of capital instruments and subordinated bail-inable debt,
see Notes 29 and 32 on pages 393 and 402.
Treasury shares
In accordance with the terms of a waiver granted by the Hong Kong
Stock Exchange on 19 December 2005, HSBC Holdings will comply
with the applicable law and regulation in the UK in relation to the
holding of any shares in treasury and with the conditions of the waiver
in connection with any shares it may hold in treasury. At
31 December 2022, pursuant to Chapter 6 of the UK Companies Act
2006, 325,273,407 ordinary shares were held in treasury. This was
the maximum number of shares held at any time during 2022,
representing 1.60% of the shares in issue as at 31 December 2022.
The nominal value of shares held in treasury was $162,636,704.
Notifiable interests in share capital
During 2022, HSBC Holdings did not receive any notification of major
holdings of voting rights pursuant to the requirements of Rule 5 of the
Disclosure Guidance and Transparency Rules (’Rule 5 of the DTRs’).
On 13 February 2023, pursuant to Rule 5 of the DTRs, Norges Bank
gave notice that on 10 February 2023 it had the following: a direct
interest in HSBC Holdings ordinary shares of 598,657,162; and
qualifying financial instruments with 9,249,895 voting rights that may
be acquired if the instruments are exercised or converted,
representing 2.998% and 0.046% respectively, of the total voting
rights at that date.
No further notifications had been received between 31 December
2022 and 15 February 2023. Previous notifications received are as
follows:
•BlackRock, Inc. gave notice on 3 March 2020 that on 2 March
2020 it had the following: an indirect interest in HSBC Holdings
ordinary shares of 1,235,558,490; qualifying financial instruments
with 7,294,459 voting rights that may be acquired if the
instruments are exercised or converted; and financial instruments
with a similar economic effect to qualifying financial instruments,
which refer to 2,441,397 voting rights, representing 6.07%, 0.03%
and 0.01%, respectively, of the total voting rights at 2 March 2020.
•Ping An Asset Management Co., Ltd. gave notice on 6 December
2017 that on 4 December 2017 it had an indirect interest in HSBC
Holdings ordinary shares of 1,007,946,172, representing 5.04% of
the total voting rights at that date.
At 31 December 2022, according to the register maintained by HSBC
Holdings pursuant to section 336 of the Securities and Futures
Ordinance of Hong Kong:
•BlackRock, Inc. gave notice on 9 March 2022 that on 4 March
2022 it had the following interests in HSBC Holdings ordinary
shares: a long position of 1,701,656,169 shares and a short
position of 19,262,061 shares, representing 8.27% and 0.09%,
respectively, of the ordinary shares in issue at that date.
•Ping An Asset Management Co., Ltd. gave notice on
25 September 2020 that on 23 September 2020 it had a long
position of 1,655,479,531 in HSBC Holdings ordinary shares,
representing 8.00% of the ordinary shares in issue at that date.
Sufficiency of float
In compliance with the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited, at least 25% of the total
issued share capital has been held by the public at all times during
2022 and up to the date of this report.
Dealings in HSBC Holdings listed securities
The Group has policies and procedures that, except where permitted
by statute and regulation, prohibit specified transactions in respect of
its securities listed on The Stock Exchange of Hong Kong Limited.
Except for dealings as intermediaries or as trustees by subsidiaries of
HSBC Holdings, and purchases by HSBC Holdings under the share
buy-back programme, neither HSBC Holdings nor any of its
subsidiaries has purchased, sold or redeemed any of its securities
listed on The Stock Exchange of Hong Kong Limited during the year
ended 31 December 2022.

HSBC Holdings plc Annual Report and Accounts 2022 | 303

Directors’ interests
Pursuant to the requirements of the UK Listing Rules and according to
the register of Directors’ interests maintained by HSBC Holdings
pursuant to section 352 of the Securities and Futures Ordinance of
Hong Kong, the Directors of HSBC Holdings at 31 December 2022
had certain interests, all beneficial unless otherwise stated, in the
shares or debentures of HSBC Holdings and its associated
corporations.
Save as stated in the following table, no further interests were held
by Directors, and no Directors or their connected persons were
awarded or exercised any right to subscribe for any shares or
debentures in any HSBC corporation during the year.
No Directors held any short position as defined in the Securities and
Futures Ordinance of Hong Kong in the shares or debentures of
HSBC Holdings and its associated corporations.

Directors’ interests – shares and debentures
|  | At 31 Dec 2022 or date of cessation, if earlier
| At 1 Jan 2022, or date of appointment, if later | Beneficial owner | Child under 18 or spouse | Jointly with another person | Trustee | Total interests
HSBC Holdings ordinary shares |  |  |  |  |  |
Geraldine Buckingham 1 (appointed to the Board on 1 May 2022) | — | 15,000 | — | — | — | 15,000
Rachel Duan 1 | — | 15,000 | — | — | — | 15,000
Dame Carolyn Fairbairn | — | 15,000 | — | — | — | 15,000
James Forese 1 | 115,000 | 115,000 | — | — | — | 115,000
Steven Guggenheimer 1 | 15,000 | — | — | 15,000 | — | 15,000
Irene Lee (retired on 29 Apr 2022) | 15,000 | 15,000 | — | — | — | 15,000
José Antonio Meade Kuribreña 1 | 15,000 | 15,000 | — | — | — | 15,000
Eileen Murray 1 | 75,000 | 75,000 | — | — | — | 75,000
David Nish | 50,000 | — | 50,000 | — | — | 50,000
Noel Quinn 2 | 1,131,278 | 1,422,650 | — | — | — | 1,422,650
Ewen Stevenson 2 | 838,154 | 1,064,626 | — | — | — | 1,064,626
Jackson Tai 1,3 | 66,515 | 32,800 | 11,965 | 21,750 | — | 66,515
Mark Tucker | 307,352 | 307,352 | — | — | — | 307,352
Pauline van der Meer Mohr (retired on 29 Apr 2022) | 15,000 | 15,000 | — | — | — | 15,000

1 Geraldine Buckingham has an interest in 3,000, Rachel Duan has an interest in 3,000, James Forese has an interest in 23,000, Steven Guggenheimer
has an interest in 3,000, José Antonio Meade Kuribreña has an interest in 3,000, Eileen Murray has an interest in 15,000 and Jackson Tai has an
interest in 13,303 listed American Depositary Shares (’ADS’), which are categorised as equity derivatives under Part XV of the Securities and Futures
Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.
2 Executive Directors’ other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the
HSBC Share Plan 2011 are set out in the Scheme interests in the Directors’ remuneration report on page 276. At 31 December 2022, the aggregate
interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee
share plans and the interests above were: Noel Quinn – 3,940,314; and Ewen Stevenson – 3,135,841. Each Director’s total interests represents
approximately 0.02% of the shares in issue and 0.02% of the shares in issue excluding treasury shares.
3 Jackson Tai has a non-beneficial interest in 11,965 shares of which he is custodian.
There have been no changes in the shares or debentures of the
current Directors from 31 December 2022 to the date of this report.
Listing Rule 9.8.4 and other disclosures
This section of the Annual Report and Accounts 2022 forms part of
and includes certain disclosures required in the Report of the
Directors incorporated by cross-reference, including under Listing
Rule 9.8.4 and otherwise as applicable by law.

Content | Page references
Long-term incentives | 285
Dividend waivers | 302
Dividends | 302
Share buy-back | 301
Emoluments waivers | 291
Emissions | 47
Energy efficiency | 49, 57, 59
Principal activities of HSBC | 12, 31, 108, 382
Business review and future developments | 11–42, 44, 133, 142, 409

Board governance
Appointment and re-election of Directors
A rigorous selection process is followed for the appointment of
Directors. Appointments are made on merit and candidates are
considered against objective criteria, having regard to the benefits of a
diverse Board. Appointments are made in accordance with HSBC
Holdings’ Articles of Association. The Nomination & Corporate
Governance Committee report sets out further details of the Board
selection process.
The Board may at any time appoint any person as a Director or
secretary, either to fill a vacancy or as an additional officer. The Board
may appoint any Director or secretary to hold any employment or
executive office, and may revoke or terminate any such appointment.
Non-executive Directors are appointed for an initial three-year term
and, subject to continued satisfactory performance based upon an
assessment by the Group Chairman and the Nomination & Corporate
Governance Committee, are proposed for re-election by shareholders
at each AGM. They typically serve two three-year terms, with any
individual's appointment beyond six years to be for a rolling one-year
term and subject to thorough review and challenge with reference to
the needs of the Board. Where Directors are appointed beyond six
years, an explanation is provided in the Annual Report and Accounts.
Shareholders vote at each AGM on whether to elect and re-elect
individual Directors. All Directors that stood for election and re-
election at the 2022 AGM were elected and re-elected by
shareholders.
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304 | HSBC Holdings plc Annual Report and Accounts 2022

None of the Directors who retired during the year or who are not
offering themselves for re-election at the 2023 AGM have raised
concerns about the operation of the Board or the management of the
company.
No executive Director is involved in deciding their own remuneration
outcome.
Commitments
The terms and conditions of the appointments of non-executive
Directors are set out in a letter of appointment, which includes the
expectations of them and the estimated time required to perform
their role. Letters of appointment of each non-executive Director are
available for inspection at the registered office of HSBC Holdings. The
anticipated time commitment for a non-executive Director serving on
the Board and as a member of any committee is no more than 75
days per annum. Directors who also chair a large committee are
expected to commit up to 100 days per annum with the Senior
Independent Director expected to serve an additional 30 days per
annum. The time commitment of the Group Risk Committee chair is
up to 150 days per annum. Any additional time commitment
connected with Board-related appointments will be confirmed
separately.
Board approval is required for any non-executive Directors’ external
commitments, with consideration given to their total time
commitments and potential conflicts of interest.
Conflicts of interest
The Board has an established policy and set of procedures, reviewed
and amended in 2022, to ensure that the Board’s management of
Directors’ conflicts of interest is effective. The Board has the power
to authorise conflicts where they arise, in accordance with the
Companies Act 2006 and HSBC Holdings’ Articles of Association.
Details of all Directors’ conflicts of interest are recorded in the
register of conflicts. As part of its 2022 review, the Board agreed that
responsibility for the ongoing review of the conflicts register be
conducted by the Board, having previously been overseen by the
Nomination & Corporate Governance Committee. Upon appointment,
new Directors are advised of the policy and procedures for managing
conflicts. Directors are required to notify the Board of any actual or
potential conflicts of interest and to update the Board with any
changes to the facts and circumstances surrounding such conflicts.
Directors are requested to review and confirm their own and their
respective closely associated persons’ outside interests and
appointments twice each year. The Board has considered, and
authorised (with or without conditions) where appropriate, potential
conflicts as they have arisen during the year in accordance with its
conflicts policy and procedures. All non-executive Directors are re-
vetted by the compliance team every three years following
appointment and as part of such process all conflicts checks are
refreshed.
Joint Company Secretary
Aileen Taylor is the Group Company Secretary and Chief Governance
Officer.
In addition to being appointed as Deputy Group Secretary in
December 2021, for administrative purposes, Hannah Ashdown (46)
was also appointed in October 2022 as Joint Company Secretary. She
is a Fellow of the Chartered Governance Institute UK and Ireland.
Hannah has over 20 years’ governance and regulatory experience
across multiple sectors including financial services, asset
management, energy, leisure and retail.
Directors’ indemnity
The Articles of Association of HSBC Holdings contain a qualifying
third-party indemnity provision, which entitles Directors and other
officers to be indemnified out of the assets of HSBC Holdings against
claims from third parties in respect of certain liabilities.
HSBC Holdings has granted, by way of deed poll, indemnities to the
Directors, including former Directors, against certain liabilities arising
in connection with their position as a Director of HSBC Holdings or of
any Group company. Directors are indemnified to the maximum
extent permitted by law.
The indemnities that constitute a ’qualifying third-party indemnity
provision’, as defined by section 234 of the Companies Act 2006,
remained in force for the whole of the financial year (or, in the case of
Directors appointed during 2022, from the date of their appointment).
The deed poll is available for inspection at the registered office of
HSBC Holdings.
Additionally, Directors and pension trustees have the benefit of both
Directors’ and officers’, and pension trustees’, liability insurances.
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.
Contracts of significance
During 2022, none of the Directors had a material interest, directly or
indirectly, in any contract of significance with any HSBC company.
During the year, all Directors were reminded of their obligations in
respect of transacting in HSBC securities and following specific
enquiry all Directors have confirmed that they have complied with
their obligations.
Shareholder engagement and communication
The Board is directly accountable to, and gives high priority to
communicating with, HSBC’s shareholders. Information about HSBC
and its activities is provided to shareholders in its Interim Reports and
the Annual Report and Accounts as well as on www.hsbc.com.
As set out in the Section 172(1) statement on page 20, the Board
seeks to understand investor needs through ongoing dialogue
between members of the Board and institutional investors throughout
the year. For examples of such engagement, see ’Board decision
making and engagement with stakeholders’ on page 20, the Board’s
engagement with shareholders on page 256 and the Group
Remuneration Committee Chair's letter on page 276. During 2022,
approximately 570 meetings were held with institutional investors and
analysts globally.
Our shareholder communications policy summarises how we
communicate with our shareholders, including through financial
reporting, general shareholder meetings, investor and analyst
meetings and our website. The policy is reviewed annually by the
Board, and in 2022 the Board confirmed that it was satisfied with its
implementation and effectiveness. The policy can be found at
www.hsbc.com/who-we-are/leadership-and-governance/board-
responsibilities.
We also publish our current and past financial results, investor
presentations and shareholder information such as dividend payments
and shareholder meeting details. Stock exchange announcements are
also accessible on our website along with information for fixed
income investors. For further details, see www.hsbc.com/investors.
Directors are encouraged to develop an understanding of the views of
shareholders. Enquiries from individuals on matters relating to their
shareholdings and HSBC’s business are welcomed.
Any individual or institutional investor can make an enquiry by
contacting the investor relations team, Group Chairman, Group Chief
Executive, Group Chief Financial Officer and Group Company
Secretary and Chief Governance Officer. Our Senior Independent
Director is also available to shareholders if they have concerns that
cannot be resolved or for which the normal channels would not be
appropriate. He can be contacted via the Group Company Secretary
and Chief Governance Officer at 8 Canada Square, London E14 5HQ.
Annual General Meeting
The AGM in 2023 is planned to be held in Birmingham, UK at
11:00am on Friday, 5 May 2023. Information on how to vote and
participate, both in advance and on the day, can be found in the
Notice of the 2023 AGM, which will be sent to shareholders on 24
March 2023 and be available on www.hsbc.com/agm. A live webcast
will be available on www.hsbc.com. A recording of the proceedings
will be available on www.hsbc.com shortly after the conclusion of the
AGM. Shareholders should monitor our website and announcements
for any changes to these arrangements. Shareholders may send
enquiries to the Board in writing via the Group Company Secretary
and Chief Governance Officer, HSBC Holdings plc, 8 Canada Square,
London E14 5HQ or by sending an email to
shareholderquestions@hsbc.com.

HSBC Holdings plc Annual Report and Accounts 2022 | 305

General meetings and resolutions
Shareholders may require the Directors to call a general meeting
other than an AGM, as provided by the UK Companies Act 2006. A
valid request to call a general meeting may be made by members
representing at least 5% of the paid-up capital of HSBC Holdings as
carries the right of voting at its general meetings (excluding any paid-
up capital held as treasury shares). A request must state the general
nature of the business to be dealt with at the meeting and may
include the text of a resolution that may properly be moved and is
intended to be moved at the meeting. At any general meeting
convened on such request, no business may be transacted except
that stated by the requisition or proposed by the Board.
Shareholders may request the Directors to send a resolution to
shareholders for consideration at an AGM, as provided by the UK
Companies Act 2006. A valid request must be made by
(i) members representing at least 5% of the paid-up capital of HSBC
Holdings as carries the right of voting at its general meetings
(excluding any paid-up capital held as treasury shares), or (ii) at least
100 members who have a right to vote on the resolution at the AGM
in question and hold shares in HSBC Holdings on which there has
been paid up an average sum, per member, of at least £100.
The request must be received by HSBC Holdings not later than (i) six
weeks before the AGM in question; or (ii) if later, the time at which
the notice of AGM is published.
A request may be in hard copy form or in electronic form, and must
be authenticated by the person or persons making it. A request may
be made in writing to HSBC Holdings at its UK address, referred to in
the paragraph above or by sending an email to
shareholderquestions@hsbc.com.
Articles of Association
New Articles of Association were approved at the 2022 AGM. The
principal changes included updates and changes to articles on hybrid
meetings, general meetings, untraceable shareholders, Director share
qualification, Directors’ reappointment, Directors’ written resolutions,
distribution in specie and dividend forfeiture. The Articles of
Association can be found at www.hsbc.com/who-we-are/leadership-
and-governance/board-responsibilities. For further details of the 2022
Notice of AGM, see www.hsbc.com/agm.
Events after the balance sheet date
For details of events after the balance sheet date, see Note 37 on the
financial statements.
Change of control
The Group is not party to any significant agreements that take effect,
alter or terminate following a change of control of the Group. The
Group does not have agreements with any Director or employee that
would provide compensation for loss of office or employment
resulting from a takeover bid.
Branches
The Group provides a wide range of banking and financial services
through branches and offices in the UK and overseas.
Research and development activities
During the ordinary course of business, the Group develops new
products and services within the global businesses.
Political donations
HSBC does not make any political donations or incur political
expenditure within the ordinary meaning of those words. We have no
intention of altering this policy. However, the definitions of political
donations, political parties, political organisations and political
expenditure used in the UK Companies Act 2006 are very wide. As a
result, they may cover routine activities that form part of the normal
business activities of the Group and are an accepted part of engaging
with stakeholders. To ensure that neither the Group nor any of its
subsidiaries inadvertently breaches the UK Companies Act 2006,
authority is sought from shareholders at the AGM to make political
donations.
HSBC provides administrative support to two political action
committees (’PACs’) in the US funded by voluntary political
contributions by eligible employees. We do not control the PACs, and
all decisions regarding the amounts and recipients of contributions are
directed by a voluntary Board Finance Committee, which consists of
contributing eligible employees. The PACs recorded combined
political donations of $100,250 during 2022 (2021: $15,500).
Charitable contributions
For details of charitable contributions, see page 84.
Internal control
The Board is responsible for maintaining and reviewing the
effectiveness of risk management and internal control systems, and
for determining the level and type of risks the Group 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,
on risk management, internal control and related financial and
business reporting. The procedures have been in place throughout the
year and up to 21 February 2023, the date of approval of the Annual
Report and Accounts 2022.
The key risk management and internal control procedures include the
following:
Global Principles
The Group’s Global Principles set an overarching standard for all
policies and procedures and are fundamental to the Group’s risk
management structure. They inform and connect our purpose, values,
strategy and risk management principles, guiding us to do the right
thing and treat our customers and our colleagues fairly at all times.
Risk management framework
The risk management framework 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 Group Chief
Executive has been delegated authority limits and powers within
which to manage the day-to-day affairs of the Group, including the
right to sub-delegate those limits and powers. Each relevant Group
Executive Committee member or executive Director has delegated
authority within which to manage the day-to-day affairs of the
business or function for which he or she is accountable.
Delegation of authority from the Board requires those individuals to
maintain a clear and appropriate apportionment of significant
responsibilities and to oversee the establishment and maintenance of
systems of control that are appropriate to their business or function.
Authorities to enter into credit and market risk exposures
are delegated with limits to line management of Group companies.
However, credit proposals with specified higher-risk characteristics
require the concurrence of the appropriate global function. Credit and
market risks are measured and reported at subsidiary company level
and aggregated for risk concentration analysis on a Group-wide basis.
Risk identification and monitoring
Systems and procedures are in place to identify, assess, control and
monitor the material risk types facing HSBC as set out in the risk
management framework. 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
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306 | HSBC Holdings plc Annual Report and Accounts 2022

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 process to provide
forward-looking views of issues with the potential to threaten the
execution of our strategy or operations over the medium to long term.
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. The second line of defence sets the policy and
guidelines for managing specific risk areas, provides advice and
guidance in relation to the risk, and challenges the first line of defence
(the risk owners) on effective risk management.
The Board delegated authority to the GAC and it reviewed the
independence, autonomy and effectiveness of the Group’s policies
and procedures on whistleblowing, including the procedures for the
protection of staff who raise concerns of detrimental treatment.
Strategic plans
Strategic plans are prepared for global businesses, global functions
and geographical regions within the framework of the Group’s overall
strategy. Financial resource plans, informed by detailed analysis of
risk appetite describing the types and quantum of risk that the Group
is prepared to take in executing its strategy, are prepared and adopted
by all major Group operating companies and set 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 GRC and the
GAC.
During 2022, the GRC continued to focus on the oversight of risk
transformation activities to strengthen our risk management
capabilities and to develop a best-in-class Risk function. In 2023, the
GRC will continue to focus on overseeing emerging risks and
potential risks arising from new products and offerings.
The GRC and the GAC received assurance from executive
management that a thorough risk assessment had been undertaken
and controls were in place to mitigate the risks arising from the
Group’s key activities. Necessary actions will be taken to remedy any
failings or weaknesses identified from these activities.
Internal control over financial reporting
HSBC 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 2022. In 2014, the GAC endorsed
the adoption of 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 key risk management and internal control procedures over
financial reporting include the following:
Entity level controls
The primary mechanism through which comfort over risk
management and internal control systems is achieved is through
assessments of the effectiveness of controls to manage risk, and the
reporting of issues on a regular basis through the various risk
management and risk governance forums. Entity level controls 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 Group'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 entity level controls are assessed annually as part of
the assessment of the effectiveness of internal controls over financial
reporting. If issues are significant to the Group, they are escalated to
the GRC and also to the GAC, if concerning financial reporting
matters.
Process level transactional controls
Key process level controls that mitigate the 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 of HSBC’s approach to
risk management can be found on page 132. The GAC has continued
to receive regular updates on HSBC’s ongoing activities for improving
the effective oversight of end-to-end business processes, and
management continued to identify opportunities for enhancing key
controls, such as through the use of automation technologies.
Financial reporting
The Group’s financial reporting process is controlled using
documented accounting policies and reporting formats, supported by
detailed instructions and guidance on reporting requirements, issued
to all reporting entities within the Group in advance of each reporting
period end. The submission of financial information from each
reporting entity is supported by a certification by the responsible
financial officer and analytical review procedures at reporting entity
and Group levels.
Group Disclosure and Controls Committee
Chaired by the Group Chief Financial Officer, the Group Disclosure
and Controls Committee supports the discharge of the Group’s
obligations under relevant legislation and regulation including the UK
and Hong Kong listing rules, the UK Market Abuse Regulation and US
Securities and Exchange Commission rules. In so doing, the Group
Disclosure and Controls 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 Group Disclosure and Controls Committee consists of senior
management, including the Group Chief Financial Officer, Group Chief
Risk and Compliance Officer, Group Chief Legal Officer, and Group
Company Secretary and Chief Governance Officer. The Group’s
brokers, external auditors and its external legal counsel also attend as
required. The integrity of disclosures is underpinned by structures and
processes within the Global Finance and Group 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 Group Chief Executive and the Group 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 2022.
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 2022, the Group’s internal control over financial
reporting was effective.
PwC has audited the effectiveness of HSBC’s internal control over
financial reporting and has given an unqualified opinion.

HSBC Holdings plc Annual Report and Accounts 2022 | 307

Other information included in the Annual
Report and Accounts 2022
We include other non-statutory information in the Annual Report and
Accounts to enable a broader perspective of our performance for the
period, including ESG and regulatory capital and liquidity information.
We highlight on pages 14 and 264 that we are seeking to enhance our
governance, process, systems and controls in both areas, although
the scale and nature of the challenges differ between reporting areas.
Our improvements in regulatory reporting are to ensure this reporting
is produced to a comparable standard of control as our financial
reporting. ESG reporting is fast evolving, with few globally consistent
reporting standards and a high reliance on external data. The GAC
provides oversight to our reporting improvements in both areas, and
is also focused on increasing the level of internal and external
assurance in these areas, in line with wider market developments (set
out on page 264).
Going concern
The Board, having made appropriate enquiries, is satisfied that the
Group as a whole has adequate resources to continue operations for a
period of at least 12 months from the date of this report, and it
therefore continues to adopt the going concern basis in preparing the
financial statements.
For further details, see page 42.
Employees
At 31 December 2022, HSBC had a total workforce equivalent to
219,000 full-time employees compared with 220,000 at the end of
2021. Our main centres of employment were India with
approximately 39,000 employees, the UK with 33,000, mainland
China with 32,000, Hong Kong with 27,000, Mexico with 17,000 and
France with 6,000.
Our business spans many cultures, communities and continents. We
aspire to provide a high-performing environment where our
colleagues can fulfil their potential by building their skills and
capabilities while focusing on the development of a diverse and
inclusive culture. We use employee surveys to assess progress and
make changes. We want to provide an open culture, where our
colleagues feel connected and supported to speak up, and where our
leaders encourage and use feedback. Where we make organisational
changes, we support our colleagues, in particular where there are job
impacts.
Employee relations
We consult with and, where appropriate, negotiate with employee
representative bodies where we have them. It is our policy to
maintain well-developed communications and consultation
programmes with all employee representative bodies. There have
been no material disruptions to our operations from labour disputes
during the past five years.
We are committed to complying with the applicable employment laws
and regulations in the jurisdictions in which we operate, including in
relation to working hours and rest periods. HSBC’s global
employment practices and relations policy provides the framework
and controls through which we seek to uphold that commitment.
Diversity and inclusion
Our customers, colleagues and communities span many cultures and
continents. We value difference and believe that diversity makes us
stronger. We are dedicated to building a diverse and connected
workforce where everyone feels a sense of belonging. In 2022, we
introduced a social well-being index that measures the
connectedness of our colleagues as we embrace hybrid working
practices.
Our Group People Committee, which is made up of Group Executive
Committee members, governs our diversity and inclusion agenda. It
meets regularly to agree actions to improve diverse representation
and build a more inclusive culture where our colleagues can bring
their best selves to work. Members of our Group Executive
Committee are held to account for the actions they take on diversity
via aspirational targets contained within their performance scorecards.
We expect all colleagues at HSBC to treat each other with dignity and
respect to ensure an inclusive environment. Our policies make it clear
that we do not tolerate unlawful discrimination, bullying or
harassment on any grounds.
To align our approach to inclusion best practices, we participate in
global diversity benchmarks that help us to identify improvement
opportunities. We also track a large number of diversity and inclusion
metrics, including those included in the Group executive scorecards,
which enable us to pinpoint inclusion barriers and enable us to take
action where required. Our approach to diversity and inclusion is set
out on page 74 alongside our goals and progress.
Further details of our diversity and inclusion activity, alongside our
Gender and Ethnicity Pay Gap Reports 2022, can be found at
www.hsbc.com/diversitycommitments.
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.
Employee development
We aim to build a dynamic, inclusive culture where the best want to
develop the skills and experiences that help them fulfil their potential.
This determines how we develop our people and recruit, identify and
nurture talent. A range of resources bring this to life including:
•HSBC University, our platform for learning and development with
specific business and technical academies;
•our My HSBC Career portal, which offers career development
information and resources; and
•HSBC Talent Marketplace, our new online platform that uses AI to
provide opportunities to learn as we work.
Everyone at HSBC annually completes global mandatory training. It
plays a critical role in shaping our culture by ensuring everyone is
focused on issues that are fundamental to working at HSBC, from
sustainability, to financial crime risk, to our intolerance of bullying and
harassment.
As the opportunities we face change, we provide development to key
groups of colleagues through business and technical academies. This
includes our risk academy, which helps us to develop broad
capabilities in traditional areas of risk like financial crime but also in
emerging risk issues like climate risk and the ethics of AI and data.
Our approach to learning is skills based. Our academies work with our
businesses to identify the key skills and capabilities we need in the
future. Alongside this, we help colleagues identify, assess and
develop the skills that match their ambition and aspirations.
Our platform for learning content is Degreed. This helps colleagues
identify, assess and develop key skills through internal and external
training materials in a way that suits them. Content can range from
quick videos, articles or podcasts to packaged programmes or
learning pathways.
In 2021, we launched the HSBC Talent MarketPlace, an AI-based
platform, which matches colleagues to projects and experiences
based on their aspirations. In 2022, we rolled the platform out to an
additional 83,000 colleagues and we will continue the global roll-out in
2023.
Effective people management and impactful leadership remain critical
to our ability to energise for growth. Following the success of our
refreshed executive development curriculum in 2021, we launched a
new programme for our Managing Director colleagues in 2022. This
combines internal programmes and business school activities with
targeted technical programmes on key topics and skills.
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
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308 | HSBC Holdings plc Annual Report and Accounts 2022

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 2022 to help us understand
and manage our health and safety risks:
•We continued to provide enhancements to our workplaces globally
to minimise the risks of Covid-19, including enhanced cleaning,
improved ventilation and social distancing measures, as well as
reviewing and adjusting our risk control measures as government
restrictions were lifted.
•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 to 240,000
of our employees and contractors globally, ensuring roles and
responsibilities were clear and understood.
•We completed the annual safety inspection on all of our buildings
globally, subject to local Covid-19 restrictions, to ensure we were
meeting our standards and continuously improving our safety
performance.
•We continued to focus on enhancing the safety culture in our
supply chain through our SAFER Together programme, covering
the five key elements of best practice safety culture, including
speaking up about safety, and recognising excellence. Our 2022
safety climate survey results showed that we continue to maintain
a positive safety culture that is significantly above the industry
average. A particular strength that the survey identified is our
encouragement of colleagues to make suggestions on how to
improve health and safety.
•We expanded our guidance and training programme for our
construction partners, focusing on our key markets globally, to
reduce the likelihood of accidents occurring by helping them
understand and deliver industry-leading health and safety
performance. More than 3,400 construction workers received
safety passporting training across 20 countries.
•Our Eat Well Live Well programme continued educating and
informing our colleagues on how to make healthy food and drink
choices. Launched in 2019, and now live in 12 markets across all
regions, the programme has helped to shift HSBC employee diets
towards more sustainable choices, with a more than 50% rise in
healthy food options being selected in our workplace catering
outlets since launch. Furthermore, with digital health tools and
over 50 healthy and plant-forward recipes created by chefs
available online, employees are supported to continue to make
healthy choices when away from the workplace.
•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
2022, there were 38 named storms that passed over 1,667 of our
buildings, resulting in no injuries or material business impact.

Employee health and safety
| 2022 | 2021 | 2020
Rate of workplace fatalities per 100,000 employees | — | — | —
Number of major injuries to employees 1 | 7 | 14 | 15
All injury rate per 100,000 employees | 70 | 64 | 88
Lost days due to work injury | 485 | 358 | 449

1 Fractures, dislocation, concussion, loss of consciousness, overnight
admission to hospital.
Remuneration
HSBC’s pay and performance strategy is designed to reward
competitively the achievement of long-term sustainable performance
and attract and motivate the very best people, regardless of gender,
ethnicity, age, disability or any other factor unrelated to performance
or experience with the Group, while performing their role in the long-
term interests of our stakeholders.
For further details of the Group’s approach to remuneration, see
page 292.
Employee share plans
Share options and discretionary awards of shares granted under
HSBC share plans align the interests of employees with the creation
of shareholder value. The following table sets out the particulars of
outstanding options, including those held by employees working
under employment contracts that are regarded as ‘continuous
contracts’ for the purposes of the Hong Kong Employment Ordinance.
The options were granted at nil consideration. No options have been
granted to substantial shareholders and suppliers of goods or
services, nor in excess of the individual limit for each share plan. No
options were cancelled by HSBC during the year.
A summary for each plan of the total number of the options that were
granted, exercised or lapsed during 2022 is shown in the following
table. Further details required to be disclosed pursuant to Chapter 17
of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited are available on our website at
www.hsbc.com/who-we-are/leadership-and-governance/remuneration
and on the website of The Stock Exchange of Hong Kong Limited at
www.hkex.com.hk, or can be obtained upon request from the Group
Company Secretary and Chief Governance Officer, 8 Canada Square,
London E14 5HQ.
Particulars of options held by Directors of HSBC Holdings are set out
on page 287.
Note 5 on the financial statements gives details of share-based
payments, including discretionary awards of shares granted under
HSBC share plans.
All-employee share plans
HSBC operates all-employee share option plans under which options
are granted over HSBC ordinary shares. Subject to leaver provisions,
options are normally exercisable after three or five years. During
2022, options were granted by reference to the average market value
of HSBC Holdings ordinary shares on the five business days
immediately preceding the invitation date, then applying a discount of
20%. The closing price for HSBC Holdings ordinary shares quoted on
the London Stock Exchange on 26 September 2022, the day before
the options were granted and as derived from the Daily Official List,
was £5.0160.
The HSBC Holdings Savings-Related Share Option Plan (UK) will
expire on 24 April 2030, by which time the plan may be extended with
approval from shareholders, unless the Directors resolve to terminate
the plan at an earlier date.
The HSBC International Employee Share Purchase Plan was
introduced in 2013 and now includes employees based in
31 jurisdictions, although no options are granted under this plan.
During 2022, approximately 189,000 employees were offered
participation in these plans.

HSBC Holdings Savings-Related Share Option Plan (UK)
|  |  | HSBC Holdings ordinary shares
Dates of awards | Exercise price | Usually exercisable | At | Granted | Exercised | Lapsed | At
from | to | from | to | from | to | 1 Jan 2022 | during year 1 | during year 2 | during year | 31 Dec 2022
|  | (£) | (£) |  |  |  |  |  |  |
22 Sep 2015 | 27 Sep 2022 | 2.6270 | 5.9640 | 1 Nov 2020 | 28 Apr 2028 | 123,196,850 | 8,928,527 | 3,483,332 | 12,991,322 | 115,650,723

1 Options over HSBC ordinary shares granted in response to approximately 9,564 applications from HSBC employees in the UK on 27 September 2022.
2 The weighted average closing price of the shares immediately before the dates on which options were exercised was £5.0534.

HSBC Holdings plc Annual Report and Accounts 2022 | 309

Statement of compliance

The statement of corporate governance practices set out on pages
239 to 311 and the information referred to therein constitutes the
’Corporate governance report’ and ’Report of the Directors’ of HSBC
Holdings. The websites referred to do not form part of this report.

Relevant corporate governance codes, role profiles and policies
UK Corporate Governance Code | www.frc.org.uk
Hong Kong Corporate Governance Code (set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited ('HKEx')) | www.hkex.com.hk
Descriptions of the roles and responsibilities of the: – Group Chairman – Group Chief Executive – Senior Independent Director – Board | www.hsbc.com/who-we-are/ leadership-and-governance/board- responsibilities
Board and senior management | www.hsbc.com/who-we-are/ leadership-and-governance
Roles and responsibilities of the Board’s committees | www.hsbc.com/who-we-are/ leadership-and-governance/board- committees
Board’s policies on: – diversity and inclusion – shareholder communication – human rights – remuneration practices and governance | www.hsbc.com/who-we-are/ leadership-and-governance/board- responsibilities
Global Internal Audit Charter | www.hsbc.com/who-we-are/ leadership-and-governance/ corporate-governance-codes/ internal-control

HSBC is subject to corporate governance requirements in both the UK
and Hong Kong. During 2022, save to the extent referred to in the
next paragraph, HSBC complied with the provisions and requirements
of both the UK and Hong Kong Corporate Governance Codes.
Dame Carolyn Fairbairn was appointed as Chair to the Group
Remuneration Committee on 29 April 2022 and has been a member
of such committee since September 2021. In approving Dame
Carolyn Fairbairn's appointment, the Board considered the UK
Corporate Governance Code expectation that the Chair has served at
least 12 months as a member on the committee before assuming the
position of Chair. Before her appointment she had served on the
Group Remuneration Committee for eight months. However, given
her previous experience as both a member and chair of the
remuneration committees of other UK listed companies, the Board
approved the appointment of Dame Carolyn Fairbairn as Chair.
Under the Hong Kong Code, the audit committee should be
responsible for the oversight of all risk management and internal
control systems. HSBC’s Group Risk Committee is responsible for
oversight of internal control, other than internal control over financial
reporting, and risk management systems. This is permitted under the
UK Corporate Governance Code.
HSBC Holdings has codified obligations for transactions in Group
securities in accordance with the requirements of the UK Market
Abuse Regulation and the rules governing the listing of securities on
HKEx, save that the HKEx has granted waivers from strict compliance
with the rules that take into account accepted practices in the UK,
particularly in respect of employee share plans. During the year, all
Directors were reminded of their obligations in respect of transacting
in HSBC Group securities. Following specific enquiry all Directors
have confirmed that they have complied with their obligations.
On behalf of the Board
Mark E Tucker
Group Chairman
HSBC Holdings plc
Registered number 617987
21 February 2023
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310 | HSBC Holdings plc Annual Report and Accounts 2022

Directors’ responsibility statement

The Directors are responsible for preparing the Annual Report and
Accounts 2022, the Directors’ remuneration report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared
the parent company (‘Company’) and Group financial statements in
accordance with UK-adopted international accounting standards. The
company has also prepared financial statements in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) N0 1606/2002 as it applies in the European Union. In
preparing these financial statements, the Directors have also elected
to comply with International Financial Reporting Standards issued by
the International Accounting Standards Board (IFRSs as issued by
IASB). Under company law, the 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 Company and Group, and of the
profit or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
•select suitable accounting policies and then apply them
consistently;
•make judgements and accounting estimates that are reasonable
and prudent;
•state whether applicable UK-adopted international accounting
standards, international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and IFRSs issued by IASB have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
•prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the Company and Group will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions, and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors’ remuneration
report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are responsible for the maintenance and integrity of the
Annual Report and Accounts 2022 as they appear on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors consider that the Annual Report and Accounts 2022,
taken as a whole, is fair, balanced and understandable, and provides
the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
‘Report of the Directors: Corporate governance report’ on pages 240
to 243 of the Annual Report and Accounts 2022, confirms that, to the
best of their knowledge:
•the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards,
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and IFRSs issued by IASB, give a true and fair view of the assets,
liabilities, financial position, and profit or loss of the Group; and
•the management report represented by the Report of the
Directors includes a fair review of the development and
performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties
that it faces.
The Group Audit Committee has responsibility, delegated to it from
the Board, for overseeing all matters relating to external financial
reporting. The Group Audit Committee report on page 262 sets out
how the Group Audit Committee discharges its responsibilities.
Disclosure of information to auditors
In accordance with section 418 of the Companies Act 2006, the
Directors’ report includes a statement, in the case of each Director in
office as at the date the Report of the Directors is approved, that:
•so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
•they have taken all the steps they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
On behalf of the Board
Mark E Tucker
Group Chairman
HSBC Holdings plc
Registered number 617987
21 February 2023

HSBC Holdings plc Annual Report and Accounts 2022 | 311

Financial statements

The financial statements provide detailed information and notes on our income, balance sheet, cash flows and changes in equity, alongside a
report from our independent auditors.
Contents

313 | Report of Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of HSBC Holdings plc
324 | Financial statements
335 | Notes on the financial statements

Building on our international connections
We aim to collaborate internationally to make a difference for our customers. In May 2022, we supported a Hong Kong-based client with its
investment in one of London’s tallest skyscrapers. We helped C C Land Holdings Limited with a £605m refinancing of The Leadenhall Building in
the City of London financial district. The international property development and investment company bought the 225-metre tall tower in 2017
for £1.15bn, in what was the second biggest sale of a UK building at the time. The refinancing was co-ordinated by colleagues from our UK and
Hong Kong teams, and incorporated support from three other banks.

312 | HSBC Holdings plc Annual Report and Accounts 2022

Independent auditors’ report to the members of HSBC Holdings plc

Report on the audit of the financial statements
Opinion
In our opinion, HSBC Holdings plc’s group financial statements and company financial statements (the “financial statements”)
•give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2022 and of the group’s and company’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; and
•have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2022 (the “Annual Report”), which comprise: the
consolidated and company balance sheets as at 31 December 2022; the consolidated and company income statements and the consolidated and
company statements of comprehensive income for the year then ended, the consolidated and company statements of cash flows for the year
then ended, the consolidated and company statements of changes in equity for the year then ended; and the notes to the financial statements,
which include a description of the significant accounting policies 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 131 to 238 and
the Directors remuneration report disclosures on pages 276 to 301.
Our opinion is consistent with our reporting to the Group Audit Committee ('GAC').
Separate opinion in relation to international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international accounting
standards, have also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In our opinion, the group and company financial statements have been properly prepared in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1.1(a) to the financial statements, the group and company, in addition to applying UK-adopted international accounting
standards, have also applied international financial reporting standards (IFRSs) as issued by the International Accounting Standards Board (IASB).
In our opinion, the group and company financial statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), International Standards on Auditing issued by
the International Auditing and Assurance Standards Board (“ISAs”) and applicable law. Our responsibilities under ISAs (UK) and ISAs are further
described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and the International Code of Ethics for
Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by either the FRC’s Ethical Standard or Article 5(1) of
Regulation (EU) No 537/2014 were not provided to the company or its controlled undertakings.
Other than those disclosed in note 6, we have provided no non-audit services to the company or its controlled undertakings in the period under
audit.

HSBC Holdings plc Annual Report and Accounts 2022 | 313

Our audit approach
Overview
Audit scope
•This was the fourth year that it has been my responsibility to form this opinion on behalf of PricewaterhouseCoopers LLP, who you first
appointed on 31 March 2015 in relation to that year's audit. In addition to forming this opinion, in this report we have also provided
information on how we approached the audit, how it changed from the previous year and details of the significant discussions that we had
with the GAC.
Key audit matters
•Expected credit losses - Impairment of loans and advances (group)
•Impairment of investment in associate - Bank of Communications Co., Ltd ('BoCom') (group)
•Investments in subsidiaries (company)
•Valuation of defined benefit pension obligations (group)
•Held for sale accounting (group)
Materiality
•Overall group materiality: US$1bn (2021: US$970m) based on 5% of adjusted profit before tax.
•Overall company materiality: US$950m (2021: US$920) based on 0.75% of total assets. This would result in an overall materiality of US$2bn
and was therefore reduced below the group materiality.
•Performance materiality: US$750m (2021: US$725m) (group) and US$712m (2021: US$690m) (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) is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.
Report of Independent Registered Public Accounting Firm to the Board of Directors and
Shareholders of HSBC Holdings plc

314 | HSBC Holdings plc Annual Report and Accounts 2022

Expected credit losses – Impairment of loans and advances (group)
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 management judgemental adjustments and significant discounted cash flows for material credit impaired exposures in relation to the China offshore unsecured commercial real estate portfolio. The level of estimation uncertainty and judgement has remained high during 2022 as a result of the uncertain macroeconomic and geopolitical environment, high levels of inflation and a rising global interest rate environment, as well as developments in China’s commercial real estate sector. Macroeconomic conditions vary between territories and industries, leading 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. The modelling methodologies used to estimate ECL are developed using historical experience. The impact of the prevailing macroeconomic conditions has also resulted in certain limitations in the reliability of these methodologies to forecast the extent and timing of future customer defaults and therefore estimate ECL. In addition, modelling methodologies do not incorporate all factors that are relevant to estimating ECL, such as differentiating the impact on industry sectors and economic conditions. These limitations are addressed with management judgemental adjustments, the measurement of which is inherently judgemental and subject to a high level of estimation uncertainty, in particular in relation to the China commercial real estate offshore portfolio. Management makes other assumptions which are less judgemental or for which variations have a less significant impact on ECL. These assumptions include: •the methodologies used in quantitative scorecards for determining customer risk ratings (‘CRRs’); •estimating expected cash flows and collateral valuations for credit impaired corporate exposures, other than in relation to the China commercial real estate offshore portfolio; •model methodologies themselves; and •quantitative and qualitative criteria used to assess significant increases in credit risk.
Matters discussed with the Group Audit Committee
We held discussions with the GAC covering governance and controls over ECL, with a significant focus on the uncertain prevailing macroeconomic conditions and developments in China’s commercial real estate sector. We discussed a number of areas, including: •the severity of macroeconomic scenarios, and their related probability weightings, across territories; •management judgemental adjustments and the nature and extent of analysis used to support those adjustments; •significant assumptions used to estimate the discounted cash inflow projections for defaulted exposures in relation to unsecured offshore China commercial real estate; •management’s policies, governance and controls over model validation and monitoring; and •the disclosures made in relation to ECL, in particular, the impact of adjustments on determining ECL.
How our audit addressed the Key Audit Matter
We assessed the design and effectiveness of governance and controls over the estimation of ECL. We observed management’s review and challenge in governance forums for (1) the determination of macroeconomic scenarios and their probability weightings, and (2) the assessment of ECL for Retail and Wholesale portfolios, including the assessment of model limitations and any resulting management judgemental adjustments. We also tested controls over: •model validation and monitoring; •credit reviews that determine customer risk ratings for wholesale customers; •the identification of credit impaired triggers; •the input of critical data into source systems and the flow and transformation of critical data from source systems to impairment models and management judgemental adjustments; •the calculation and approval of management judgemental adjustments to modelled outcomes; and •approval of significant individual impairments. We involved our economic experts in assessing the significant assumptions made in determining the severity and probability weighting of macroeconomic variables (“MEV”) forecasts. These assessments considered the sensitivity of ECL to variations in the severity and probability weighting of MEV forecasts. We involved our modelling experts in assessing the appropriateness of the significant assumptions and methodologies used for models and certain management judgemental adjustments. We independently re-performed the calculations for a sample of those models and certain management judgemental adjustments. In respect of unsecured offshore China commercial real estate, we involved our business recovery experts in assessing certain significant management judgemental adjustments and discounted cash flows for a sample of credit impaired exposures. We further considered whether the judgements made in selecting the significant assumptions would give rise to indicators of possible management bias. In addition, we performed substantive testing over: •the compliance of ECL methodologies and assumptions with the requirements of IFRS 9; •the appropriateness and application of the quantitative and qualitative criteria used to assess significant increases in credit risk; •a sample of critical data used in ECL models and to estimate management judgemental adjustments; •assumptions and critical data for a sample of credit impaired wholesale exposures; and •a sample of CRRs applied to the wholesale exposures. We evaluated and tested the Credit Risk disclosures made in the Annual Report.
Relevant references in the Annual Report and Accounts 2022
•Credit risk disclosures, page 145. •Group Audit Committee Report, page 262. •Note 1.2(d):Financial instruments measured at amortised cost, page 340. •Note 1.2(i) Impairment of amortised cost and FVOCI financial assets, page 341.

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Impairment of investment in associate – Bank of Communications Co., Ltd (‘BoCom’) (group)
Nature of the key audit matter
At 31 December 2022, the fair value of the investment in BoCom, based on the share price, was US$15.2bn lower than the carrying value (‘CV’) of US$23.3bn. This is an indicator of potential impairment. An impairment test was performed by management, with supporting sensitivity analysis, using the higher of fair value and value in use (‘VIU’). The VIU was $0.2bn in excess of the CV. On this basis, management concluded no impairment was required. The methodology in the VIU model is dependent on various assumptions, both short term and long term in nature. These assumptions, which are subject to estimation uncertainty, are derived from a combination of management’s judgement, analysts’ forecasts and market data. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which variations had the most significant impact on the VIU. Specifically, these included: •the discount rate; •short term assumptions for operating income growth rate, cost-income ratio, and expected credit losses; •long term assumptions for profit and asset growth rates, expected credit losses, and effective tax rates; and •capital related assumptions (risk-weighted assets as a percentage of total assets, capital adequacy ratio and tier 1 capital adequacy ratio).
Matters discussed with the Group Audit Committee
We discussed the appropriateness of the VIU methodology and significant assumptions with the GAC, giving consideration to the macroeconomic environment, the outlook for the Chinese banking market and the fair value, which has been lower than the carrying value for approximately 11 years. We also discussed the disclosures made in relation to BoCom, including reasonably possible alternatives for the significant assumptions, the use of sensitivity analysis to explain estimation uncertainty and the changes in certain assumptions that would result in the VIU being equal to the CV.
How our audit addressed the Key Audit Matter
We tested controls in place over the significant assumptions and the model used to determine the VIU. We assessed the appropriateness of the methodology used, and the mathematical accuracy of the calculations, to estimate the VIU. In respect of the significant assumptions, our testing included the following: •challenging the appropriateness of the significant assumptions and, where relevant, their interrelationships; •obtaining evidence for data supporting significant assumptions including historic experience, external market information, third-party sources including analysts reports, information from BoCom management and historically available BoCom public information; •assessing the impact on the VIU of reasonable variations in certain significant assumptions, both individually and in aggregate; •determining a reasonable range for the discount rate used within the model, with the assistance of our valuation experts, and comparing it to the discount rate used by management; and •assessing whether the judgements made in deriving the significant assumptions give rise to indicators of possible management bias. We observed the meetings between management and BoCom management, held specifically to identify facts and circumstances impacting assumptions relevant to the determination of the VIU. Representations were obtained from management that assumptions used were consistent with information currently available to the group. We evaluated and tested the disclosures made in the Annual Report in relation to BoCom.
Relevant references in the Annual Report and Accounts 2022
•Group Audit Committee Report, page 262. •Note 1.2(a): Critical accounting estimates and judgements, page 338. •Note 18 Interests in associates and joint ventures, page 379.

Report of Independent Registered Public Accounting Firm to the Board of Directors and
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316 | HSBC Holdings plc Annual Report and Accounts 2022

Investments in subsidiaries (company)
Nature of the key audit matter
Management reviewed investments in subsidiaries for indicators of impairment and indicators that impairment charges recognised in prior periods may no longer exist or may have decreased in accordance with IAS 36 as at 31 December 2022. Where indicators have been identified management estimated the recoverable amount using the higher of value in use (‘VIU) or fair value less cost to sell. Management’s assessment resulted in a partial reversal of an impairment charge of US$2.5bn in relation to the investment in HSBC Overseas Holdings (UK) Limited (‘HOHU’), which is an immediate holding company of certain businesses in North America. This resulted in investment in subsidiaries of $US167.5bn at 31 December 2022. The methodology used to estimate the recoverable amount is dependent on various assumptions, both short term and long term in nature. These assumptions, which are subject to estimation uncertainty, are derived from a combination of management’s judgement, experts engaged by management and market data. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which variations had the most significant impact on the recoverable amount. Specifically, these included: •HSBC’s business plan for 2023 to 2027 focusing on revenue, cost and ECL forecasts including the impact of climate change risk; •regulatory capital requirements; •long term growth rates; and •discount rates.
Matters discussed with the Group Audit Committee
We discussed the partial reversal of the impairment charge for HOHU, the appropriateness of methodologies used and significant assumptions with the GAC, giving consideration to the macroeconomic outlook and HSBC’s strategy. We considered reasonable possible alternatives for significant assumptions.
How our audit addressed the Key Audit Matter
We tested controls in place over significant assumptions and the model used to determine the recoverable amounts. We assessed the appropriateness of the methodology used, and tested the mathematical accuracy of the calculations, to estimate the recoverable amounts. In respect of the significant assumptions, our testing included the following: •challenging the achievability of management’s business plan and the prospects for HSBC’s businesses, as well as considering the achievement of historic forecasts; •obtaining and evaluating evidence relating to significant assumptions, from a combination of historical experience and external market and other financial information; •assessing whether the cash flows included in the model were in accordance with the relevant accounting standard; •assessing the sensitivity of the VIU to reasonable variations in significant assumptions, both individually and in aggregate; and •determining a reasonable range for the discount rate used within the model, with the assistance of our valuation experts, and comparing it to the discount rate used by management. We evaluated and tested the disclosures made in the Annual Report in relation to investment in subsidiaries.
Relevant references in the Annual Report and Accounts 2022
•Note 19: Investments in subsidiaries, page 382.

Valuation of defined benefit pensions obligations (group)
Nature of the key audit matter
The group has a defined benefit obligation of US$25.7bn, of which US$18.8bn relates to HSBC Bank (UK) pension scheme. The valuation of the defined benefit obligation for HSBC Bank (UK) pension scheme is dependent on a number of actuarial assumptions. Management uses an actuarial expert to determine the valuation of the defined benefit obligations. The valuation methodology uses a number of market based inputs and other financial and demographic assumptions. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which variations had the most significant impact on the liability. Specifically, these included the discount rate, inflation rate and mortality rate.
Matters discussed with the Group Audit Committee
We discussed with the GAC the methodologies and significant assumptions used by management to determine the value of the defined benefit obligation.
How our audit addressed the Key Audit Matter
We tested governance and controls in place over the methodologies and the significant assumptions, including those in relation to the use of management’s experts. We also evaluated the objectivity and competence of management’s expert involved in the valuation of the defined benefit obligation. We assessed the appropriateness of the methodology used, and tested the accuracy of the calculation, to estimate the liability. In respect of the significant assumptions, we used our actuarial experts to understand the judgements made by management and their actuarial expert in determining the significant assumptions and compared these assumptions to our independently compiled expected ranges based on market observable indices and the knowledge and opinions of our actuarial experts. We evaluated and tested the disclosures made in the Annual Report in relation to the defined benefit pension obligation.
Relevant references in the Annual Report and Accounts 2022
•Group Audit Committee Report, page 262. •Note 1.2(k): Critical accounting estimates and judgements, page 345. •Note 5: Employee compensation and benefits, page 351.

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Held for sale accounting (group)
Nature of the key audit matter
The group has agreements to sell a number of businesses as part of executing its strategy. This has resulted in US$115.9bn of assets and US$114.6bn of liabilities being classified as held for sale as at 31 December 2022, in relation to businesses in France, Canada, Russia and Greece. In addition to the assets and liabilities classified as held for sale, a loss of US$2.4bn has also been recognised in 2022 in relation to the sale of the business in France. For the assets and liabilities to be classified as held for sale, the sale needs to be considered highly probable and expected to complete within 12 months of the date of classification. We focused our audit on the areas with greater levels of management judgement relating to the highly probable threshold being met including the expected timing of completion, the appropriateness of disclosures relating to the highly probable assessment and the loss recognised in relation to the sale of the business in France.
Matters discussed with the Group Audit Committee
We discussed with the GAC the judgements made by management in determining if the highly probable thresholds were met as at 31 December 2022. We also discussed the appropriateness of the disclosure made in the Annual Report which explained how management had concluded that transactions met the highly probable threshold as at 31 December 2022.
How our audit addressed the Key Audit Matter
We tested governance and controls in place over the management process to determine if the highly probable threshold had been met on assets and liabilities classified as held for sale. We assessed the key judgments made by management to determine whether the highly probable thresholds were met as at 31 December 2022, including their assessment of remaining actions to complete the transactions, any regulatory requirements that need to be met, and the likelihood and expected timing of the transactions being approved by relevant regulators and shareholders. We also tested the completeness and accuracy of the assets and liabilities that were classified as held for sale and the loss on sale recognised in relation to the French business. We evaluated and tested the disclosures made in the Annual Report in relation to assets and liabilities classified as held for sale.
Relevant references in the Annual Report and Accounts 2022
•Group Audit Committee Report, page 262. •Note 1.2(o): Critical accounting estimates and judgements, page 347. •Note 23: Assets held for sale and liabilities of disposal groups held for sale, page 389.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they
operate.
The risks that HSBC faces are diverse, with the interdependencies between them being numerous and complex. In performing our risk
assessment we engaged with a number of stakeholders to ensure we appropriately understood and considered these risks and their
interrelationships. This includes stakeholders within HSBC and our own experts within PwC. This engagement covered external factors across
the geopolitical, macroeconomic and regulatory and accounting landscape, the impact of climate change risk as well as the internal environment
at HSBC, driven by strategy and transformation.
We evaluated and challenged management's assessment of the impact of climate change risk, which is set out on page 46, 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 cashflows 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, goodwill and intangible assets;
•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’s progress on their ESG targets is not included within the scope of this audit. We were engaged separately to provide independent limited
assurance to the Directors over the following ESG data:
•the 2019 and 2020 on-balance sheet financed emissions for 6 sectors in total (page 50);
•the cumulative progress made by HSBC on providing and facilitating sustainable financing and investments (page 57); and
•HSBC’s own operations’ scope 1, 2 and 3 (limited to business travel) greenhouse gas emissions data for 2022 (page 62); and supply chain
greenhouse gas emissions for purchased goods and services, and capital goods for 2021 and 2022 (page 64).
The independent limited assurance reports, which explain the scope of our work and the procedures undertaken can be found on:
www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre. The work performed for a limited assurance report is
substantially less than the work performed for our financial audit, which provides reasonable assurance.
Through our risk assessment, we tailored our determination as to which entities and balances we needed to perform testing over to support our
Group opinion, taking into consideration the complex and disaggregated group structure, the accounting processes and controls as well as 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. 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.
Our risk assessment and scoping identified certain entities (collectively the Significant Subsidiaries) for which we obtained audit opinions. We
obtained full scope audit opinions for the consolidated financial position and performance of The Hongkong and Shanghai Banking Corporation
Limited, HSBC Bank plc, and HSBC North America Holdings Inc. We also obtained full scope audit opinions for the company financial position
and performance of HSBC UK Bank plc, HSBC Bank Canada and HSBC Mexico S.A. Banco. We obtained audit opinions over specific balances for
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318 | HSBC Holdings plc Annual Report and Accounts 2022

HSBC Bank Middle East Limited - UAE Operations. The audits for HSBC Bank plc and HSBC UK Bank plc were performed by other PwC teams in
the UK. All other audits were performed by other PwC network firms.
We continued to incorporate elements of unpredictability into our audit scoping, extending the scope of work performed for both
The Hongkong and Shanghai Banking Corporation India Branch, and HSBC Bank (China) Limited. These entities are also in scope for The
Hongkong and Shanghai Banking Corporation Limited. This was undertaken with consideration of both the relative profitability of these entities in
the region and the Group’s strategy.
Group-wide audit approach
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 the Significant Subsidiaries. Financial reporting processes and controls are also performed centrally in HSBC's Group Finance
function and finance operation centres (‘Finance Operations’), including the impairment assessment of goodwill and intangible assets, the
consolidation of the group's results, the preparation of financial statements, and management's oversight controls relevant to the group's
financial reporting.
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 and consolidation as well as payroll. For these areas, we
either performed audit work ourselves, or directed and provided oversight of the audit work performed by PwC teams in the UK, Poland, China,
Sri Lanka, Malaysia, India, Mexico and the Philippines. Some of this work was relied upon by the PwC teams auditing the Significant
Subsidiaries. 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 part of a Significant Subsidiary.
Significant Subsidiaries audit approach
In March 2022, we held a meeting in Dubai with the partners and senior staff from the Group audit team and the PwC teams who undertake
audits of the Significant Subsidiaries and the Operations Centres. The meeting focused primarily on reconnecting as a team after virtual
interactions throughout the Covid-19 pandemic, reassessing our approach to auditing HSBC’s businesses, changes at HSBC 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 asked the partners and teams reporting to us on the Significant Subsidiaries to work to assigned materiality levels reflecting the size of the
operations they audited. The performance materiality levels ranged from US$712m to US$50m. Certain Significant Subsidiaries were audited to a
local statutory audit materiality that was a lower level than our allocated group materiality.
We designed global audit approaches for the products and services that substantially make up HSBC's global businesses, such as lending,
deposits and derivatives. These approaches were provided to the partners and teams performing audit testing for the Significant Subsidiaries.
We were in active dialogue throughout the year with the partners and teams responsible for the audits of the Significant Subsidiaries, 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. We attended Audit Committee meetings for some of the Significant Subsidiaries. We also
attended meetings with management for each of these Significant Subsidiaries at the year-end.
The audit of The Hongkong and Shanghai Banking Corporation Limited in Hong Kong relied upon work performed by other teams in Hong Kong
and the PwC network firms in India, mainland China and Singapore. Similarly, the audit of HSBC Bank plc in the UK relied upon work performed
by other teams in the UK and the PwC network firms in France and Germany. We considered how the audit partners and teams for the
Significant Subsidiaries instructed and provided oversight to the work performed in these locations. Collectively, Significant Subsidiaries covered
84% of total assets and 69% of total operating income.
Using the work of others
We have increased our use of evidence provided by others through our reliance on management assurance testing of controls across the group.
This included testing of controls performed by management themselves in certain low risk areas including reconciliations, footnote disclosure
controls and certain automated controls. We re-performed a portion of the testing to ensure appropriate quality of testing, as well as assessing
the competence and objectivity of those performing the testing.
We also used the work of PwC experts, for example economic experts for our work around the severity and probability weighting of
macroeconomics variables as part of the expected credit loss allowance and actuaries on the estimates used in determining pension liabilities.
An increasing number of controls are operated on behalf of HSBC by third parties. We obtained audit evidence from work that is scoped and
provided by other auditors that are engaged by those third parties. For example, we obtained a report evidencing the testing of external systems
and controls supporting HSBC's payroll and HR processes.

HSBC Holdings plc Annual Report and Accounts 2022 | 319

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 | US$1bn (2021: US$970m). | US$950m (2021: US$920).
How we determined it | 5% of adjusted profit before tax. | 0.75% of total assets. This would result in an overall materiality of US$2bn and was therefore reduced below the group materiality.
Rationale for benchmark applied | We believe a standard benchmark of 5% of adjusted profit before tax is an appropriate qualitative indicator of materiality, although certain items could also be material for qualitative reasons. This benchmark is standard for listed entities and consistent with the wider industry. We selected adjusted profit because, as discussed on page 29, management believes it best reflects the performance of HSBC and how the group is run. We excluded the adjustments made by management on page 29 for certain customer redress programmes and fair value movements of financial instruments, as in our opinion they are recurring items that form part of ongoing business performance. | A benchmark of total assets has been used, as the company's primary purpose is to act as a holding company with investments in the group's subsidiaries, not to generate operating profits and therefore a profit based measure is not relevant.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2021: 75%) of overall materiality, amounting to US$750m (2021: US$725m) for the group financial statements and
US$712m (2021: US$690m) 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 GAC that we would report to them misstatements identified during our audit above US$50m (group audit) (2021: US$48m)
and US$50m (company audit) (2021: US$48m) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern basis of accounting
included:
•performing a risk assessment to identify factors that could impact the going concern basis of accounting, including both internal risks (i.e.
strategy execution) and external risks (i.e. macroeconomic conditions);
•understanding and evaluating the group's financial forecasts and the group's stress testing of liquidity and regulatory capital, including the
severity of the stress scenarios that were used;
•understanding and evaluating 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.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
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.
Report of Independent Registered Public Accounting Firm to the Board of Directors and
Shareholders of HSBC Holdings plc

320 | HSBC Holdings plc Annual Report and Accounts 2022

With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Report of the Directors
for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Report of the Directors.
Directors’ Remuneration
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to
add or draw attention to in relation to:
•the directors’ confirmation that they have carried out an appropriate assessment of the emerging and principal risks;
•the disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
•the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the group’s and company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements;
•the directors’ explanation as to their assessment of the group's and company’s prospects, the period this assessment covers and why the
period is appropriate; and
•the directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of the group and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
•the directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s and company's position, performance, business model and strategy;
•the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
•the section of the Annual Report describing the work of the GAC.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' responsibility statement, 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.

HSBC Holdings plc Annual Report and Accounts 2022 | 321

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 breaches of financial crime laws and regulations and regulatory compliance, including regulatory reporting requirements and conduct of
business, 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. 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 in relation to cost targets, 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 from regulators, including the Prudential Regulation Authority ('PRA') and Financial Conduct
Authority ('FCA');
•reviewed reporting to the GAC and GRC in respect of compliance and legal matters;
•enquiries of management and review of internal audit reports, insofar as they related to the financial statements;
•obtain 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 its significant accounting estimates, in particular in relation to the
determination of expected credit losses, the impairment assessment of the investment in BoCom, valuation of defined benefit pensions
obligations, investment in subsidiaries and valuation of financial instruments;
•obtaining confirmations from third parties to confirm the existence of a sample of transactions and balances; and
•identifying and testing journal entries, 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 controls 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 controls;
•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
Report of Independent Registered Public Accounting Firm to the Board of Directors and
Shareholders of HSBC Holdings plc

322 | HSBC Holdings plc Annual Report and Accounts 2022

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.
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 and the part of the Directors' Remuneration Report to be audited 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 Group Audit Committee ('GAC'), we were appointed by the members on 31 March 2015 to audit the
financial statements for the year ended 31 December 2015 and subsequent financial periods. The period of total uninterrupted engagement is
eight years, covering the years ended 31 December 2015 to 31 December 2022.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
Scott Berryman (Senior Statutory Auditor)
for and on behal f of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
21 February 2023

HSBC Holdings plc Annual Report and Accounts 2022 | 323

Financial statements

Contents
324 | Consolidated income statement
325 | Consolidated statement of comprehensive income
326 | Consolidated balance sheet
327 | Consolidated statement of cash flows
328 | Consolidated statement of changes in equity
331 | HSBC Holdings income statement
331 | HSBC Holdings statement of comprehensive income
332 | HSBC Holdings balance sheet
333 | HSBC Holdings statement of cash flows
334 | HSBC Holdings statement of changes in equity

Consolidated income statement
for the year ended 31 December
|  | 2022 | 2021 | 2020
| Notes* | $m | $m | $m
Net interest income |  | 32,610 | 26,489 | 27,578
– interest income 1,2 |  | 55,059 | 36,188 | 41,756
– interest expense 3 |  | (22,449) | (9,699) | (14,178)
Net fee income | 2 | 11,451 | 13,097 | 11,874
– fee income |  | 15,213 | 16,788 | 15,051
– fee expense |  | (3,762) | (3,691) | (3,177)
Net income from financial instruments held for trading or managed on a fair value basis | 3 | 10,469 | 7,744 | 9,582
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through profit or loss | 3 | (3,394) | 4,053 | 2,081
Changes in fair value of designated debt and related derivatives 4 | 3 | (77) | (182) | 231
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss | 3 | 226 | 798 | 455
Gains less losses from financial investments |  | (3) | 569 | 653
Net insurance premium income | 4 | 12,825 | 10,870 | 10,093
Impairment loss relating to the planned sale of our retail banking operations in France 5 |  | (2,378) | — | —
Other operating income/(loss)6 |  | (133) | 502 | 527
Total operating income |  | 61,596 | 63,940 | 63,074
Net insurance claims and benefits paid and movement in liabilities to policyholders | 4 | (9,869) | (14,388) | (12,645)
Net operating income before change in expected credit losses and other credit impairment charges |  | 51,727 | 49,552 | 50,429
Change in expected credit losses and other credit impairment charges |  | (3,592) | 928 | (8,817)
Net operating income |  | 48,135 | 50,480 | 41,612
Employee compensation and benefits | 5 | (18,366) | (18,742) | (18,076)
General and administrative expenses |  | (11,091) | (11,592) | (11,115)
Depreciation and impairment of property, plant and equipment and right-of-use assets 7 |  | (2,157) | (2,261) | (2,681)
Amortisation and impairment of intangible assets |  | (1,716) | (1,438) | (2,519)
Goodwill impairment | 21 | — | (587) | (41)
Total operating expenses |  | (33,330) | (34,620) | (34,432)
Operating profit |  | 14,805 | 15,860 | 7,180
Share of profit in associates and joint ventures | 18 | 2,723 | 3,046 | 1,597
Profit before tax |  | 17,528 | 18,906 | 8,777
Tax expense | 7 | (858) | (4,213) | (2,678)
Profit for the year |  | 16,670 | 14,693 | 6,099
Attributable to: |  |  |  |
– ordinary shareholders of the parent company |  | 14,822 | 12,607 | 3,898
– preference shareholders of the parent company |  | — | 7 | 90
– other equity holders |  | 1,213 | 1,303 | 1,241
– non-controlling interests |  | 635 | 776 | 870
Profit for the year |  | 16,670 | 14,693 | 6,099
|  | $ | $ | $
Basic earnings per ordinary share | 9 | 0.75 | 0.62 | 0.19
Diluted earnings per ordinary share | 9 | 0.74 | 0.62 | 0.19

*For Notes on the financial statements, see page 335.
1 Interest income includes $48,134m (2021: $30,916m; 2020: $35,293m) of interest recognised on financial assets measured at amortised cost and
$6,386m (2021: $4,337m; 2020: $5,614m) of interest recognised on financial assets measured at fair value through other comprehensive income.
2 Interest income is calculated using the effective interest method and comprises interest recognised on financial assets measured at either amortised
cost or fair value through other comprehensive income.
3 Interest expense includes $20,798m (2021: $8,227m; 2020: $12,426m) of interest on financial instruments, excluding interest on financial liabilities
held for trading or designated or otherwise mandatorily measured at fair value.
4 The debt instruments, issued for funding purposes, are designated under the fair value option to reduce an accounting mismatch.
5 Includes impairment of goodwill of $425m.
6 Other operating income includes a loss on net monetary positions of $678 m (2021: $224 m, 2020: $128 m) as a result of applying IAS 29 ‘Financial
Reporting in Hyperinflationary Economies’.
7 Includes depreciation of the right-of-use assets of $723m (2021: $878m; 2020: $1,029m).
Financial statements

324 | HSBC Holdings plc Annual Report and Accounts 2022

Consolidated statement of comprehensive income
for the year ended 31 December
| 2022 | 2021 | 2020
| $m | $m | $m
Profit for the year | 16,670 | 14,693 | 6,099
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 | (5,468) | (2,139) | 1,750
– fair value gains/(losses) | (7,261) | (2,270) | 2,947
– fair value gains transferred to the income statement on disposal | (20) | (464) | (668)
– expected credit (recoveries)/losses recognised in the income statement | 67 | (49) | 48
– income taxes | 1,746 | 644 | (577)
Cash flow hedges | (3,655) | (664) | 471
– fair value gains/(losses) | (4,207) | 595 | (157)
– fair value (gains)/losses reclassified to the income statement | (758) | (1,514) | 769
– income taxes | 1,310 | 255 | (141)
Share of other comprehensive income/(expense) of associates and joint ventures | (367) | 103 | (73)
– share for the year | (367) | 103 | (73)
Exchange differences | (9,931) | (2,393) | 4,855
Items that will not be reclassified subsequently to profit or loss: |  |  |
Fair value gains on property revaluation | 280 | — | —
Remeasurement of defined benefit asset/liability | (1,031) | (274) | 834
– before income taxes | (1,723) | (107) | 1,223
– income taxes | 692 | (167) | (389)
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk | 1,922 | 531 | 167
– before income taxes | 2,573 | 512 | 190
– income taxes | (651) | 19 | (23)
Equity instruments designated at fair value through other comprehensive income | 107 | (446) | 212
– fair value gains/(losses) | 107 | (443) | 212
– income taxes | — | (3) | —
Effects of hyperinflation | 842 | 315 | 193
Other comprehensive income/(expense) for the year, net of tax | (17,301) | (4,967) | 8,409
Total comprehensive income/(expense) for the year | (631) | 9,726 | 14,508
Attributable to: |  |  |
– ordinary shareholders of the parent company | (2,393) | 7,765 | 12,146
– preference shareholders of the parent company | — | 7 | 90
– other equity holders | 1,213 | 1,303 | 1,241
– non-controlling interests | 549 | 651 | 1,031
Total comprehensive income/(expense) for the year | (631) | 9,726 | 14,508

HSBC Holdings plc Annual Report and Accounts 2022 | 325

Consolidated balance sheet
|  | At
|  | 31 Dec | 31 Dec
|  | 2022 | 2021
| Notes* | $m | $m
Assets |  |  |
Cash and balances at central banks |  | 327,002 | 403,018
Items in the course of collection from other banks |  | 7,297 | 4,136
Hong Kong Government certificates of indebtedness |  | 43,787 | 42,578
Trading assets | 11 | 218,093 | 248,842
Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 14 | 45,063 | 49,804
Derivatives | 15 | 284,146 | 196,882
Loans and advances to banks |  | 104,882 | 83,136
Loans and advances to customers |  | 924,854 | 1,045,814
Reverse repurchase agreements – non-trading |  | 253,754 | 241,648
Financial investments | 16 | 425,564 | 446,274
Assets held for sale 1 | 23 | 115,919 | 3,411
Prepayments, accrued income and other assets | 22 | 156,866 | 136,571
Current tax assets |  | 1,230 | 970
Interests in associates and joint ventures | 18 | 29,254 | 29,609
Goodwill and intangible assets | 21 | 21,321 | 20,622
Deferred tax assets | 7 | 7,498 | 4,624
Total assets |  | 2,966,530 | 2,957,939
Liabilities and equity |  |  |
Liabilities |  |  |
Hong Kong currency notes in circulation |  | 43,787 | 42,578
Deposits by banks |  | 66,722 | 101,152
Customer accounts |  | 1,570,303 | 1,710,574
Repurchase agreements – non-trading |  | 127,747 | 126,670
Items in the course of transmission to other banks |  | 7,864 | 5,214
Trading liabilities | 24 | 72,353 | 84,904
Financial liabilities designated at fair value | 25 | 127,327 | 145,502
Derivatives | 15 | 285,764 | 191,064
Debt securities in issue | 26 | 78,149 | 78,557
Liabilities of disposal groups held for sale 1 | 23 | 114,597 | 9,005
Accruals, deferred income and other liabilities | 27 | 133,240 | 114,773
Current tax liabilities |  | 1,135 | 698
Liabilities under insurance contracts | 4 | 114,844 | 112,745
Provisions | 28 | 1,958 | 2,566
Deferred tax liabilities | 7 | 2,422 | 4,673
Subordinated liabilities | 29 | 22,290 | 20,487
Total liabilities |  | 2,770,502 | 2,751,162
Equity |  |  |
Called up share capital | 32 | 10,147 | 10,316
Share premium account | 32 | 14,664 | 14,602
Other equity instruments |  | 19,746 | 22,414
Other reserves |  | (9,141) | 6,460
Retained earnings |  | 152,068 | 144,458
Total shareholders’ equity |  | 187,484 | 198,250
Non-controlling interests | 19 | 8,544 | 8,527
Total equity |  | 196,028 | 206,777
Total liabilities and equity |  | 2,966,530 | 2,957,939

1‘Assets held for sale’ in 2021, including $2.4b n of loans and advances to customers in relation to our exit of mass market retail banking business in the
US, were reported within ‘Prepayments, accrued income and other assets’ in the Annual Report and Accounts 2021. Similarly, $8.8 bn of customer
accounts classified as ‘Liabilities of disposal groups’ were previously presented within ‘Accruals, deferred income and other liabilities’.
*For Notes on the financial statements, see page 335.
The accompanying notes on pages 335 to 417 and the audited sections in the Risk review on pages 131 to 238 (including ‘Measurement
uncertainty and sensitivity analysis of ECL estimates’ on pages 153 to 162, and ‘Directors’ remuneration report’ on pages 276 to 301 form an
integral part of these financial statements.
These financial statements were approved by the Board of Directors on 21 February 2023 and signed on its behalf by:

Mark E Tucker |  | Georges Elhedery
Group Chairman |  | Group Chief Financial Officer

Financial statements

326 | HSBC Holdings plc Annual Report and Accounts 2022

Consolidated statement of cash flows
for the year ended 31 December
| 2022 | 2021 | 2020
| $m | $m | $m
Profit before tax | 17,528 | 18,906 | 8,777
Adjustments for non-cash items: |  |  |
Depreciation, amortisation and impairment | 3,873 | 4,286 | 5,241
Net loss/(gain) from investing activities | 11 | (647) | (541)
Share of profits in associates and joint ventures | (2,723) | (3,046) | (1,597)
Loss on disposal of subsidiaries, businesses, associates and joint ventures | 2,639 | — | —
Change in expected credit losses gross of recoveries and other credit impairment charges | 3,907 | (519) | 9,096
Provisions including pensions | 635 | 1,063 | 1,164
Share-based payment expense | 400 | 467 | 433
Other non-cash items included in profit before tax | (1,084) | 510 | (906)
Elimination of exchange differences 1 | 49,127 | 18,937 | (25,749)
Changes in operating assets and liabilities |  |  |
Change in net trading securities and derivatives | 20,181 | (9,226) | 13,150
Change in loans and advances to banks and customers | 31,799 | (11,014) | (14,131)
Change in reverse repurchase agreements – non-trading | (23,405) | 552 | 9,950
Change in financial assets designated and otherwise mandatorily measured at fair value | 8,344 | (4,254) | (1,962)
Change in other assets | (10,771) | 19,899 | (19,610)
Change in deposits by banks and customer accounts | (91,194) | 95,703 | 226,723
Change in repurchase agreements – non-trading | 4,344 | 14,769 | (28,443)
Change in debt securities in issue | 12,518 | (16,936) | (9,075)
Change in financial liabilities designated at fair value | (13,647) | (11,425) | (6,630)
Change in other liabilities | 15,978 | (10,935) | 20,323
Dividends received from associates | 944 | 808 | 761
Contributions paid to defined benefit plans | (194) | (509) | (495)
Tax paid | (2,776) | (3,077) | (4,259)
Net cash from operating activities | 26,434 | 104,312 | 182,220
Purchase of financial investments | (520,600) | (493,042) | (496,669)
Proceeds from the sale and maturity of financial investments | 495,049 | 521,190 | 476,990
Net cash flows from the purchase and sale of property, plant and equipment | (1,285) | (1,086) | (1,446)
Net cash flows from purchase/(disposal) of customer and loan portfolios | (3,530) | 3,059 | 1,362
Net investment in intangible assets | (3,125) | (2,479) | (2,064)
Net cash flow from acquisition and disposal of subsidiaries, businesses, associates and joint ventures | (989) | (106) | (603)
Net cash from investing activities | (34,480) | 27,536 | (22,430)
Issue of ordinary share capital and other equity instruments | — | 1,996 | 1,497
Cancellation of shares | (2,285) | (707) | —
Net purchases of own shares for market-making and investment purposes | (91) | (1,386) | (181)
Net cash flow from change in stake of subsidiaries | (197) | — | —
Redemption of preference shares and other equity instruments | (2,266) | (3,450) | (398)
Subordinated loan capital issued | 7,300 | — | —
Subordinated loan capital repaid 2 | (1,777) | (864) | (3,538)
Dividends paid to shareholders of the parent company and non-controlling interests | (6,970) | (6,383) | (2,023)
Net cash from financing activities | (6,286) | (10,794) | (4,643)
Net increase/(decrease) in cash and cash equivalents | (14,332) | 121,054 | 155,147
Cash and cash equivalents at 1 Jan | 574,032 | 468,323 | 293,742
Exchange differences in respect of cash and cash equivalents | (38,029) | (15,345) | 19,434
Cash and cash equivalents at 31 Dec 3 | 521,671 | 574,032 | 468,323
Cash and cash equivalents comprise: |  |  |
– cash and balances at central banks | 327,002 | 403,018 | 304,481
– items in the course of collection from other banks | 7,297 | 4,136 | 4,094
– loans and advances to banks of one month or less | 72,295 | 55,705 | 51,788
– reverse repurchase agreements with banks of one month or less | 68,682 | 76,658 | 65,086
– treasury bills, other bills and certificates of deposit less than three months | 26,727 | 28,488 | 30,023
– cash collateral and net settlement accounts | 19,445 | 11,241 | 17,194
– cash and cash equivalents held for sale 4 | 8,087 | — | —
– less: items in the course of transmission to other banks | (7,864) | (5,214) | (4,343)
Cash and cash equivalents at 31 Dec 3 | 521,671 | 574,032 | 468,323

Interest received was $55,664m (2021: $40,175m; 2020: $45,578m), interest paid was $22,856m (2021: $12,695m; 2020: $17,440m) and
dividends received (excluding dividends received from associates, which are presented separately above) were $1,638m (2021: $1,898m; 2020:
$1,158m).
1 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.
2 Subordinated liabilities changes during the year are attributable to repayments of $(1.8)b n (2021: $(0.9)b n; 2020: $(3.5)b n) of securities. Non-cash
changes during the year included foreign exchange gains/(losses) of $(1.1)b n (2021: $(0.3)b n; 2020: $0.5b n) and fair value gains/(losses) of $(3.1)b n
(2021: $(1.0)b n; 2020: $1.1b n).
3 At 31 December 2022, $59.3b n (2021: $33.6 bn; 2020: $41.9 bn) was not available for use by HSBC, due to a range of restrictions, including currency
exchange and other restrictions, of which $22.1b n (2021: $15.4 bn; 2020: $16.9 bn) related to mandatory deposits at central banks.
4 Includes $6.5b n of cash and balances at central banks (excluding the expected cash contribution as part of the planned sale of our retail banking
operations in France. For further details, see Note 23); $1.3b n of reverse repurchase agreements with banks of one month or less and $0.2b n of loans
and advances to banks of one month or less.

HSBC Holdings plc Annual Report and Accounts 2022 | 327

Consolidated statement of changes in equity
for the year ended 31 December
|  |  |  | Other reserves |  |  |
| Called up share capital and share premium | Other equity instru- ments | Retained earnings 3,4 | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Merger and other reserves 4,5 | Total share- holders’ equity | Non- controlling interests | Total equity
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2022 | 24,918 | 22,414 | 144,458 | (634) | (197) | (22,769) | 30,060 | 198,250 | 8,527 | 206,777
Profit for the year | — | — | 16,035 | — | — | — | — | 16,035 | 635 | 16,670
Other comprehensive income (net of tax) | — | — | 1,368 | (5,325) | (3,613) | (9,819) | 174 | (17,215) | (86) | (17,301)
– debt instruments at fair value through other comprehensive income | — | — | — | (5,417) | — | — | — | (5,417) | (51) | (5,468)
– equity instruments designated at fair value through other comprehensive income | — | — | — | 92 | — | — | — | 92 | 15 | 107
– cash flow hedges | — | — | — | — | (3,613) | — | — | (3,613) | (42) | (3,655)
– changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own credit risk | — | — | 1,922 | — | — | — | — | 1,922 | — | 1,922
– property revaluation | — | — | — | — | — | — | 174 | 174 | 106 | 280
– remeasurement of defined benefit asset/liability | — | — | (1,029) | — | — | — | — | (1,029) | (2) | (1,031)
– share of other comprehensive income of associates and joint ventures | — | — | (367) | — | — | — | — | (367) | — | (367)
– effects of hyperinflation | — | — | 842 | — | — | — | — | 842 | — | 842
– exchange differences | — | — | — | — | — | (9,819) | — | (9,819) | (112) | (9,931)
Total comprehensive income for the year | — | — | 17,403 | (5,325) | (3,613) | (9,819) | 174 | (1,180) | 549 | (631)
Shares issued under employee remuneration and share plans | 67 | — | (67) | — | — | — | — | — | — | —
Dividends to shareholders | — | — | (6,544) | — | — | — | — | (6,544) | (426) | (6,970)
Redemption of securities 2 | — | (2,668) | 402 | — | — | — | — | (2,266) | — | (2,266)
Transfers 6 | — | — | (2,499) | — | — | — | 2,499 | — | — | —
Cost of share-based payment arrangements | — | — | 400 | — | — | — | — | 400 | — | 400
Cancellation of shares 7 | (174) | — | (1,000) | — | — | — | 174 | (1,000) | — | (1,000)
Other movements | — | — | (485) | 3 | 2 | — | 304 | (176) | (106) | (282)
At 31 Dec 2022 | 24,811 | 19,746 | 152,068 | (5,956) | (3,808) | (32,588) | 33,211 | 187,484 | 8,544 | 196,028

Financial statements

328 | HSBC Holdings plc Annual Report and Accounts 2022

Consolidated statement of changes in equity (continued)
for the year ended 31 December
|  |  |  | Other reserves |  |  |
| Called up share capital and share premium | Other equity instru- ments | Retained earnings 3,4 | Financial assets at FVOCI reserve | Cash flow hedging reserve | Foreign exchange reserve | Merger and other reserves 4,5 | Total share- holders’ equity | Non- controlling interests | Total equity
| $m | $m | $m | $m | $m | $m | $m | $m | $m | $m
At 1 Jan 2021 | 24,624 | 22,414 | 140,572 | 1,816 | 457 | (20,375) | 26,935 | 196,443 | 8,552 | 204,995
Profit for the year | — | — | 13,917 | — | — | — | — | 13,917 | 776 | 14,693
Other comprehensive income (net of tax) | — | — | 661 | (2,455) | (654) | (2,394) | — |