Interim Report - 19 of 24 | RNS | Ticker

Interim Report - 19 of 24

RNS Announcement

RNS Number : 2052X

HSBC Holdings PLC

26 August 2015



Capital overview	87
Movements by major driver	88
Risk-weighted assets	88
Capital	94
Leverage ratio	97
Regulatory developments	97

Our objective in the management of Group capital is to maintain appropriate levels of capital to support our business strategy and meet our regulatory and stress testing related requirements.

Capital highlights

· Our end point CET1 ratio of 11.6% was up from 11.1% at the end of 2014 as a result of continued capital generation and RWA initiatives offset by business growth and regulatory changes.

· Our leverage ratio remained strong at 4.9%.

Capital overview

Capital ratios

	At
	30 June	30 June	31 December
	2015	2014	2014
	%	%	%

CRD IV end point
Common equity tier 1 ratio¹	11.6	11.3	11.1

CRD IV transitional
Common equity tier 1 ratio¹	11.6	11.2	10.9
Tier 1 ratio	13.4	12.3	12.5
Total capital ratio	16.3	15.4	15.6

Total regulatory capital and risk-weighted assets

	At
	30 June	30 June	31 December
	2015	2014	2014
	$m	$m	$m

CRD IV end point
Common equity tier 1 capital¹	138,080	141,557	135,953

CRD IV transitional
Common equity tier 1 capital¹	138,080	140,070	133,200
Additional tier 1 capital	21,346	13,813	19,539
Tier 2 capital	35,684	38,951	37,991

Total regulatory capital	195,110	192,834	190,730

Risk-weighted assets	1,193,154	1,248,572	1,219,765

For footnotes, see page 100.

Our approach to managing Group capital is designed to ensure that we exceed current regulatory requirements and that we respect the payment priority of our capital providers. Throughout the first half of 2015, we complied with the PRA's regulatory capital adequacy requirements, including those relating to stress testing. We are also well placed to meet our expected future capital requirements.

We continue to manage Group capital to meet a medium-term target for return on equity of more than 10% by 2017. This is modelled on a CET1 ratio on an end point basis in the range of 12% to 13%, which takes into account known and quantifiable end point CET1 requirements including a regulatory and management buffer of 1.5-2.5%, based on our estimate of the additional CET1 we will need to hold to cover the new time-varying buffers and other factors. It will be kept under review as clarity in respect of future regulatory developments continues to improve.

Capital and RWAs are calculated and presented on the Group's interpretation of final CRD IV legislation and the PRA's final rules as set out in the PRA Rulebook.

We continue to exceed the PRA's current requirements in relation to capital ratios for major UK banks and building societies.

Despite the rules published to date, there remains continued uncertainty around the amount of capital that UK banks will be required to hold. While there is emerging clarity around the interaction of the capital buffers and the PRA's Pillar 2 framework, uncertainty remains around the broader capital framework, including Basel revisions to the RWA framework, capital floors, global systemically important bank ('G-SIB') developments and total loss absorbing capacity ('TLAC') requirements. Furthermore, there remain a number of draft and unpublished European Banking Authority ('EBA') regulatory and implementing technical standards due in 2015.

A summary of our policies and practices regarding capital management, measurement and allocation is provided on page 257 of the Annual Report and Accounts 2014.

Movements by major driver

Capital and RWA movements by major driver - CRD IV end point basis

	Common equity
	tier 1 capital	RWAs
	$bn	$bn

CRD IV end point basis at 1 January 2015	136.0	1,219.8
Capital generation from profit	5.6
- consolidated profits attributable to shareholders of the parent company (including regulatory adjustments)
Of which $1.4bn gain on the partial sale of our shareholding in Industrial Bank including fair value gains reclassified to the income statement	8.2
- dividends net of scrip^2,3	(0.7)
- second interim dividend² net of planned scrip	(1.9)
Further impact on partial sale of shareholding in Industrial Bank including fair value gains reclassified to the income statement and lower allowable non-controlling interests	(3.6)
Regulatory changes		5.8
RWA initiatives		(50.3)
Business growth including associates		30.0
Foreign currency translation differences⁴	(1.8)	(14.2)
Other movements	1.9	2.1

CRD IV end point basis at 30 June 2015	138.1	1,193.2

For footnotes, see page 100.

Capital generation from profits contributed $5.6bn to CET1 capital, being profits attributable to shareholders of the parent company after regulatory adjustment for own credit spread, debit valuation adjustment and deconsolidation of insurance entities and net of dividends including the foreseeable second interim dividend after planned scrip. This also included the benefit of a higher fourth interim dividend scrip take-up and fair value gains reclassified to the income statement from the partial sale of our shareholding in Industrial Bank.

At our Investor Update we announced that we plan to significantly reduce Group RWAs by the end of 2017 and redeploy them to support higher returning areas. A number of internal programmes have been established to drive and manage these plans. RWAs reduced in the period, driven by RWA initiatives and foreign currency translation differences. The reduction was largely offset by business growth, principally in CMB and Global Banking across Asia, Europe and North America and business growth in our associate BoCom.

These initiatives included accelerated reduction of GB&M legacy assets of $14.1bn from both the disposal of securitisation positions and the unwinding of other securitisation transactions. In both GB&M and CMB, more detailed mapping within RWA calculations and improved recognition of collateral and netting, reduced RWAs by $12.6bn and $6.1bn, respectively. The partial sale of our shareholding in Industrial Bank reduced RWAs by $12.3bn. In addition, the continued reduction of RBWM's US CML run-off portfolio reduced RWAs by $5.2bn.

Risk-weighted assets

RWAs by risk type

	At
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

Credit risk	935.1	966.0	955.3
- standardised approach	348.5	350.9	356.9
- IRB foundation approach	23.3	15.5	16.8
- IRB advanced approach	563.3	599.6	581.6

Counterparty credit risk	83.7	101.4	90.7
- standardised approach	24.3	30.6	25.2
- advanced approach	59.4	70.8	65.5

Market risk	56.6	63.1	56.0
- internal model based	46.5	49.5	44.6
- standardised approach	10.1	13.6	11.4

Operational risk	117.8	118.1	117.8

	1,193.2	1,248.6	1,219.8

Of which:
Run-off portfolios	79.9	121.6	99.2
- legacy credit in GB&M	30.0	52.7	44.1
- US CML and Other	49.9	68.9	55.1

RWAs by global businesses

	At
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

Retail Banking and Wealth Management⁵	204.6	225.4	207.2
Commercial Banking⁵	439.6	422.5	430.3
Global Banking and Markets	491.0	537.3	516.1
Global Private Banking	21.1	22.1	20.8
Other	36.9	41.3	45.4
	1,193.2
	1,193.2	1,248.6	1,219.8

RWAs by geographical regions⁶

	At
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

Europe	369.5	393.6	375.4
Asia	487.4	481.1	499.8
Middle East and North Africa	63.1	62.7	63.0
North America	215.7	236.9	221.4
Latin America	82.3	96.8	88.8

	1,193.2	1,248.6	1,219.8

For footnotes, see page 100.

Credit risk RWAs

Credit risk exposure - RWAs by geographical region

	Europe	Asia	MENA	North America	Latin America	Total
	$bn	$bn	$bn	$bn	$bn	$bn

IRB approach	204.0	216.2	15.5	139.4	11.5	586.6
- IRB advanced approach	186.0	216.2	10.2	139.4	11.5	563.3
- IRB foundation approach	18.0	-	5.3	-	-	23.3

Standardised approach	50.7	177.7	38.6	32.5	49.0	348.5

RWAs at 30 June 2015	254.7	393.9	54.1	171.9	60.5	935.1

IRB approach	222.6	209.9	15.3	155.3	12.0	615.1
- IRB advanced approach	211.2	209.9	11.2	155.3	12.0	599.6
- IRB foundation approach	11.4	-	4.1	-	-	15.5

Standardised approach	46.9	174.3	39.0	30.7	60.0	350.9

RWAs at 30 June 2014	269.5	384.2	54.3	186.0	72.0	966.0

IRB approach	216.1	213.1	15.6	142.0	11.6	598.4
- IRB advanced approach	203.3	213.1	11.6	142.0	11.6	581.6
- IRB foundation approach	12.8	-	4.0	-	-	16.8

Standardised approach	47.1	186.0	39.0	29.6	55.2	356.9

RWAs at 31 December 2014	263.2	399.1	54.6	171.6	66.8	955.3

Credit risk exposure - RWAs by global businesses

	Principal⁵ RBWM	US run-off portfolio	Total RBWM	CMB⁵	GB&M	GPB	Other	Total
	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn

IRB approach	60.1	42.6	102.7	225.6	234.8	9.5	14.0	586.6
- IRB advanced approach	60.1	42.6	102.7	210.6	227.8	9.4	12.8	563.3
- IRB foundation approach	-	-	-	15.0	7.0	0.1	1.2	23.3

Standardised approach	59.8	4.3	64.1	181.9	72.0	7.7	22.8	348.5

RWAs at 30 June 2015	119.9	46.9	166.8	407.5	306.8	17.2	36.8	935.1

IRB approach	60.5	60.6	121.1	213.2	256.4	11.2	13.2	615.1
- IRB advanced approach	60.5	60.6	121.1	206.0	249.5	11.1	11.9	599.6
- IRB foundation approach	-	-	-	7.2	6.9	0.1	1.3	15.5

Standardised approach	60.0	5.5	65.5	177.5	73.6	6.5	27.8	350.9

RWAs at 30 June 2014	120.5	66.1	186.6	390.7	330.0	17.7	41.0	966.0

Credit risk exposure - RWAs by global businesses (continued)

	Principal⁵ RBWM	US run-off portfolio	Total RBWM	CMB⁵	GB&M	GPB	Other	Total
	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn

IRB approach	56.1	47.3	103.4	217.2	255.6	10.2	12.0	598.4
- IRB advanced approach	56.1	47.3	103.4	209.2	248.1	10.0	10.9	581.6
- IRB foundation approach	-	-	-	8.0	7.5	0.2	1.1	16.8

Standardised approach	61.2	4.8	66.0	181.0	70.1	6.6	33.2	356.9

RWAs at 31 December 2014	117.3	52.1	169.4	398.2	325.7	16.8	45.2	955.3

Credit risk RWAs are calculated using three approaches as permitted by the PRA. For consolidated Group reporting we have adopted the advanced IRB approach for the
majority of our business, with a small proportion being on the foundation IRB approach and the remaining portfolios on the standardised approach.

RWA movement by geographical regions by key driver - credit risk - IRB only⁷

	Europe	Asia	MENA	North America	Latin America	Total
	$bn	$bn	$bn	$bn	$bn	$bn

RWAs at 1 January 2015	216.1	213.1	15.6	142.0	11.6	598.4
Foreign currency movement	(0.8)	(2.2)	(0.4)	(1.8)	(1.0)	(6.2)
Acquisitions and disposals	(12.1)	-	-	-	-	(12.1)
Book size	3.6	8.8	(0.6)	1.3	(0.8)	12.3
Book quality	(5.0)	(3.1)	(0.2)	(0.6)	1.7	(7.2)
Model updates	1.6	(1.7)	-	-	-	(0.1)
Methodology and policy	0.6	1.3	1.1	(1.5)	-	1.5
- internal updates	(2.0)	(0.7)	1.0	(1.5)	-	(3.2)
- external updates - regulatory	2.6	2.0	0.1	-	-	4.7


Total RWA movement	(12.1)	3.1	(0.1)	(2.6)	(0.1)	(11.8)

RWAs at 30 June 2015	204.0	216.2	15.5	139.4	11.5	586.6

RWAs at 1 January 2014	166.9	182.9	15.0	161.5	8.5	534.8
Foreign currency movement	4.9	0.8	(0.2)	(0.1)	(0.4)	5.0
Acquisitions and disposals	(2.3)	-	(0.5)	(2.6)	(0.1)	(5.5)
Book size	3.0	13.0	(0.2)	(0.5)	1.9	17.2
Book quality	(1.7)	0.7	0.7	(2.3)	0.4	(2.2)
Model updates	14.9	0.3	-	(5.1)	-	10.1
Methodology and policy	36.9	12.2	0.5	4.4	1.7	55.7
- internal updates	(9.8)	(5.6)	(0.2)	(2.6)	(0.1)	(18.3)
- external updates - regulatory	2.2	6.7	(0.2)	0.7	0.1	9.5
- CRD IV impact	37.0	5.7	0.4	4.9	0.2	48.2
- NCOA moving from STD to IRB	7.5	5.4	0.5	1.4	1.5	16.3


Total RWA movement	55.7	27.0	0.3	(6.2)	3.5	80.3

RWAs at 30 June 2014	222.6	209.9	15.3	155.3	12.0	615.1

RWAs at 1 July 2014	222.6	209.9	15.3	155.3	12.0	615.1
Foreign currency movement	(16.5)	(4.8)	-	(2.3)	(1.5)	(25.1)
Acquisitions and disposals	(1.2)	-	(0.2)	(1.6)	-	(3.0)
Book size	8.4	6.5	2.0	3.4	0.1	20.4
Book quality	0.2	(0.7)	(1.5)	(8.0)	1.0	(9.0)
Model updates	4.5	-	-	(1.0)	-	3.5
Methodology and policy	(1.9)	2.2	-	(3.8)	-	(3.5)
- internal updates	(1.9)	0.4	-	(3.8)	-	(5.3)
- external updates - regulatory	-	1.8	-	-	-	1.8
- CRD IV impact	-	-	-	-	-	-
- NCOA moving from STD to IRB	-	-	-	-	-	-


Total RWA movement	(6.5)	3.2	0.3	(13.3)	(0.4)	(16.7)

RWAs at 31 December 2014	216.1	213.1	15.6	142.0	11.6	598.4

RWA movement by global businesses by key driver - credit risk - IRB only⁷

	Principal⁵ RBWM	US run-off portfolio	Total RBWM	CMB⁵	GB&M	GPB	Other	Total
	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn

RWAs at 1 January 2015	56.1	47.3	103.4	217.2	255.6	10.2	12.0	598.4
Foreign currency movement	(0.5)	-	(0.5)	(2.7)	(2.8)	-	(0.2)	(6.2)
Acquisitions and disposals	-	-	-	-	(12.1)	-	-	(12.1)
Book size	1.6	(2.7)	(1.1)	9.0	2.6	(0.2)	2.1	12.4
Book quality	(1.5)	(2.3)	(3.8)	2.0	(5.6)	-	0.1	(7.3)
Model updates	-	-	-	1.6	(1.7)	-	-	(0.1)
Methodology and policy	4.4	0.3	4.7	(1.5)	(1.2)	(0.5)	-	1.5
- internal updates	2.4	0.3	2.7	(1.5)	(3.9)	(0.5)	-	(3.2)
- external updates - regulatory	2.0	-	2.0	-	2.7	-	-	4.7


Total RWA movement	4.0	(4.7)	(0.7)	8.4	(20.8)	(0.7)	2.0	(11.8)

RWAs at 30 June 2015	60.1	42.6	102.7	225.6	234.8	9.5	14.0	586.6

RWAs at 1 January 2014	58.5	72.6	131.1	189.4	198.5	10.6	5.2	534.8
Foreign currency movement	0.5	-	0.5	2.2	2.1	0.2	-	5.0
Acquisitions and disposals	-	-	-	-	(5.5)	-	-	(5.5)
Book size	1.2	(3.4)	(2.2)	11.6	8.5	(0.4)	(0.3)	17.2
Book quality	(1.8)	(4.0)	(5.8)	2.8	0.7	(0.3)	0.4	(2.2)
Model updates	0.1	(4.9)	(4.8)	9.3	5.3	0.3	-	10.1
Methodology and policy	2.0	0.3	2.3	(2.1)	46.8	0.8	7.9	55.7
- internal updates	(2.6)	-	(2.6)	(5.5)	(9.9)	(0.3)	-	(18.3)
- external updates - regulatory	-	-	-	2.5	6.3	0.5	0.2	9.5
- CRD IV impact	-	-	-	(0.7)	48.6	0.2	0.1	48.2
- NCOA moving from STD to IRB	4.6	0.3	4.9	1.6	1.8	0.4	7.6	16.3


Total RWA movement	2.0	(12.0)	(10.0)	23.8	57.9	0.6	8.0	80.3

RWAs at 30 June 2014	60.5	60.6	121.1	213.2	256.4	11.2	13.2	615.1

RWAs at 1 July 2014	60.5	60.6	121.1	213.2	256.4	11.2	13.2	615.1
Foreign currency movement	(3.1)	-	(3.1)	(10.9)	(10.2)	(0.4)	(0.5)	(25.1)
Acquisitions and disposals	-	-	-	-	(2.7)	-	(0.3)	(3.0)
Book size	0.7	(3.5)	(2.8)	11.5	12.6	(0.1)	(0.8)	20.4
Book quality	(3.9)	(4.6)	(8.5)	-	(0.9)	-	0.4	(9.0)
Model updates	0.5	(1.3)	(0.8)	2.9	1.7	(0.3)	-	3.5
Methodology and policy	1.4	(3.9)	(2.5)	0.5	(1.3)	(0.2)	-	(3.5)
- internal updates	(0.4)	(3.9)	(4.3)	0.5	(1.3)	(0.2)	-	(5.3)
- external updates - regulatory	1.8	-	1.8	-	-	-	-	1.8
- CRD IV impact	-	-	-	-	-	-	-	-
- NCOA moving from STD to IRB	-	-	-	-	-	-	-	-


Total RWA movement	(4.4)	(13.3)	(17.7)	4.0	(0.8)	(1.0)	(1.2)	(16.7)

RWAs at 31 December 2014	56.1	47.3	103.4	217.2	255.6	10.2	12.0	598.4

Standardised approach

For portfolios treated under the standardised approach, credit risk RWAs decreased by $8.4bn of which $8.0bn was due to foreign currency movements. Credit risk RWAs decreased by $12.3bn due to the partial sale of our investment in Industrial Bank as recorded in 'Other'.

Business growth in North America, Europe, Middle East and Asia increased RWAs by $11.0bn.

RWA initiatives in CMB and GB&M resulted in an overall decrease in RWAs of $2.2bn across Middle East and Latin America.

Additionally, internal updates in CMB and GB&M relating to the reclassification of corporate exposures from the IRB to the standardised approach resulted in an increase in RWAs of $3.0bn on the standardised approach and a decline in the IRB approach of $2.6bn.

RWA increased by $0.8bn due to deferred tax assets.

Internal ratings-based approach

For portfolios treated under the IRB approach, credit risk RWAs decreased by $11.8bn of which $6.2bn was due to foreign currency movements driven by the deterioration of a range of currencies including euro against US dollar.

Acquisitions and disposals

The continued disposal of legacy securitisation positions and the unwinding of other securitisation transactions in GB&M resulted in a decrease in RWAs of $12.1bn in Europe.

Book size

Business growth from higher term lending to corporate customers and institutions in CMB and GB&M in Asia, North America and Europe increased RWAs by $16.6bn. This was partially offset by RWA initiatives in Europe including a reduction in net current account balances which decreased RWAs by $2.2bn, and the run-down of legacy securitisation positions lowering RWAs by $3.6bn.

In North America, in RBWM, continued run-off of the US CML retail mortgage portfolios resulted in an RWA reduction of $2.7bn in book size. This was partially offset by growth in retail lending in Asia and Europe of $1.6bn.

Book quality

In GB&M, there were favourable movements in average customer credit quality in the corporate portfolio in Asia and Europe which decreased RWAs by $5.7bn, offset by credit quality deterioration in North America which increased RWAs by $1.6bn. In addition, improving economic stability in Asia resulted in an upgrade to the internal credit risk rating of sovereigns which decreased RWAs by $0.6bn, offset by internal sovereign downgrades in Latin America which increased RWAs by $1.1bn. RWA initiatives relating to the execution of a netting agreement reduced RWAs by $1.3bn in Europe.

In CMB, change in the average credit quality of the portfolio and model recalibrations resulted in an RWA increase of $3.2bn across Europe, North America, Middle East and Latin America, offset by credit quality improvements in Asia which reduced RWAs by $1.1bn.

RWAs reduced by $2.3bn in the US run-off portfolio in book quality as a result of exposures moving to default combined with continued improvements in the credit quality of the residual performing book.

Credit quality improvements in Principal RBWM related primarily to favourable shifts in portfolio quality in mortgages and revolving credit which reduced RWAs in Europe by $1.5bn.

Model updates

In CMB, selected portfolios in Europe were migrated from the advanced IRB approach to the foundation IRB approach, as a result of a change in permission, increasing RWAs by $1.6bn.

In GB&M, the update of the Sovereign PD model decreased RWAs by $1.8bn in Asia.

Methodology and policy changes

RWA initiatives in GB&M and CMB, consisting of improvements in asset classification and recognition of guarantees, resulted in a decrease in RWAs by $3.1bn across Europe, Asia and North America.

Internal updates in CMB and GB&M relating to the reclassification of corporate exposures to the standardised methodology resulted in a decrease in IRB RWAs of $2.6bn and a net increase of $0.4bn in overall RWAs.

This was partly offset by the application of a scaling factor to the securitisation positions risk-weighted at 1,250%, increasing RWAs by $2.1bn.

In Principal RBWM, the further application of a regulator mandated risk-weight floor on residential mortgages in Hong Kong resulted in an increase in RWAs of $2.0bn. Additionally a change in the methodology in the calculation of defaulted mortgage exposures resulted in an increase in RWAs of $2.0bn in Europe which was offset by a reduction in the capital deduction for expected loss in the calculation of regulatory capital.

Counterparty credit risk and market risk RWAs

Counterparty credit risk RWAs

	At
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

Advanced approach	59.4	70.8	65.5
- CCR IRB approach	55.9	65.2	62.0
- credit valuation adjustment	3.5	5.6	3.5

Standardised approach	24.3	30.6	25.2
- CCR standardised approach	5.2	3.9	4.4
- credit valuation adjustment	16.6	22.2	18.0
- central counterparty	2.5	4.5	2.8


	83.7	101.4	90.7

RWA movement by key driver - counterparty credit risk - advanced approach

	Half-year to
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

RWAs at beginning of period	65.5	42.2	70.8

Book size	(3.0)	3.2	(1.6)
Book quality	(0.6)	(0.3)	(0.3)
Model updates	-	2.2	(2.1)
Methodology and policy	(2.5)	23.5	(1.3)
- internal regulatory updates	(2.5)	(1.0)	(2.8)
- external regulatory updates	-	7.5	1.5
- CRD IV impact	-	17.0	-
	-

Total RWA movement	(6.1)	28.6	(5.3)

RWAs at end of period	59.4	70.8	65.5

Counterparty credit risk RWAs decreased by $7.0bn, of which $6.1bn related to the advanced approach.

Standardised approach

RWA under the standardised approach reduced by $0.9bn. The main driver was a RWA initiative consisting of increased level of detail in counterparty mappings leading to additional CVA exemptions.

Advanced approach

Book size

The decrease was driven mainly by a combination of reduced portfolio size following trade maturities, RWA
initiatives, mainly trade compressions, and reducing mark to markets of over-the-counter derivatives, most notably in Asian and North American portfolios.

Methodology and policy changes

The decrease in RWAs from internal methodology updates was mainly driven by RWA initiatives consisting of more efficient allocation of collateral, mostly in North America, and refinement of transaction and counterparty static data used to calculate exposures and risk weights in the derivative portfolios globally.

Market risk RWAs

	At
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

Internal model based	46.5	49.5	44.6
- VaR	7.2	5.6	7.3
- stressed VaR	10.4	7.8	10.4
- incremental risk charge	21.0	24.9	20.1
- comprehensive risk measure	-	2.0	-
- other VaR and stressed VaR	7.9	9.2	6.8

Standardised approach	10.1	13.6	11.4

	56.6	63.1	56.0

RWA movement by key driver - market risk - internal model based

	Half-year to
	30 June	30 June	31 December
	2015	2014	2014
	$bn	$bn	$bn

RWAs at beginning of period	44.6	52.2	49.5

Acquisitions and disposals	-	-	(2.2)
Movement in risk levels	2.7	0.9	(5.1)
Model updates	-	-	-
Methodology and policy	(0.8)	(3.6)	2.4
- internal updates	(0.8)	0.5	(4.3)
- external updates - regulatory	-	(4.1)	6.7

	-
Total RWA movement	1.9	(2.7)	(4.9)

RWAs at end of period	46.5	49.5	44.6

Total market risk RWAs remained relatively stable during the first half of the year, increasing marginally by $0.6bn.

Standardised approach

Market risk RWA movements in portfolios not within the scope of modelled approaches reflected a decrease of $1.3bn, mainly related to the reduction in securitisation positions held within the trading book.

Internal Model based

Movement in Risk Levels

Movements relating to changes in risk levels reflected an increase in capital requirements arising from internal models due to the net effect of position management and increased market volatility mainly in European markets.

Methodology and policy changes

The movements in 'Methodology and policy' relate to an internal scenario refinement within the risk not in VaR ('RNIV') equity correlation risk model.

Capital

Source and application of total regulatory capital

	Half-year to
	30 June 2015 $m	30 June 2014 $m	31 December 2014 $m
Movement in total regulatory capital
Opening common equity tier 1 capital on a transitional basis⁸	133,200	131,233	140,070
Transitional adjustments	2,753
- Unrealised gains arising from revaluation of property	1,375
- Unrealised gains in available-for-sale debt and equities	1,378
Opening common equity tier 1 capital on an end point basis^1,⁸	135,953
Contribution to common equity tier 1 capital from profit for the period	8,151	9,432	3,246
- consolidated profits attributable to shareholders of the parent company	9,618	9,746	3,942
- removal of own credit spread net of tax	(568)	202	(530)
- debit valuation adjustment	(121)	97	157
- deconsolidation of insurance entities and SPE entities	(778)	(613)	(323)

Net dividends including foreseeable net dividends²	(2,562)	(2,329)	(5,212)
- update for actual dividends and scrip take-up	1,255	1,108	(15)
- first interim dividend net of scrip	(1,875)	(1,766)
- second foreseeable interim dividend net of planned scrip	(1,942)	(1,671)
- third interim dividend net of scrip			(1,835)
- fourth foreseeable interim dividend net of planned scrip			(3,362)

Decrease in goodwill and intangible assets deducted⁴	(81)	237	159
Ordinary shares issued	9	14	253
Foreign currency translation differences⁴	(1,838)	444	(6,634)
Unrealised gains arising from revaluation of property		(65)	(29)
Unrealised gains in available-for-sale debt and equities		(141)	(1,237)
Other, including regulatory adjustments	(1,552)	1,245	2,584

Closing common equity tier 1 capital	138,080	140,070	133,200

Opening additional tier 1 capital on a transitional basis⁸	19,539	14,408	13,813
Movement in additional tier 1 securities	1,190	(500)	5,461
- new issuance	2,459	-	5,681
- grandfathering adjustments	(1,269)	(500)	(220)
Other, including regulatory adjustments	617	(95)	265

Closing tier 1 capital on a transitional basis	159,426	153,883	152,739

Opening tier 2 capital on a transitional basis⁸	37,991	35,538	38,951
Movement in tier 2 securities	(2,198)	3,450	(1,036)
- new issuance	1,680	3,500	-
- grandfathering adjustments	(2,997)	-	-
- foreign currency translation differences	(410)	105	(1,171)
- other movements	(471)	(155)	135
Other, including regulatory adjustments	(109)	(37)	76

Closing total regulatory capital on a transitional basis	195,110	192,834	190,730

For footnotes, see page 100.

Composition of regulatory capital

	At
	30 June 2015 $m	30 June 2014 $m	31 December 2014 $m

Common equity tier 1 capital
Shareholders' equity	167,374	173,453	166,617
- shareholders' equity per balance sheet⁹	192,427	190,281	190,447
- foreseeable interim dividend²	(1,942)	(1,671)	(3,362)
- preference share premium	(1,405)	(1,405)	(1,405)
- other equity instruments	(13,991)	(5,851)	(11,532)
- deconsolidation of special purpose entities¹⁰	(243)	(686)	(323)
- deconsolidation of insurance entities	(7,472)	(7,215)	(7,208)

Non-controlling interests	3,579	3,792	4,640
- non-controlling interests per balance sheet	8,955	8,441	9,531
- preference share non-controlling interests	(2,106)	(2,153)	(2,127)
- non-controlling interests transferred to tier 2 capital	-	(487)	(473)
- non-controlling interests in deconsolidated subsidiaries	(911)	(824)	(851)
- surplus non-controlling interest disallowed in CET1	(2,359)	(1,185)	(1,440)

Regulatory adjustments to the accounting basis	(2,660)	(1,072)	(3,556)
- own credit spread¹¹	184	1,314	767
- debit valuation adjustment	(318)	(354)	(197)
- defined benefit pension fund adjustment	(2,583)	(2,301)	(4,069)
- cash flow hedging reserve	57	269	(57)

Deductions	(30,213)	(34,616)	(31,748)
- goodwill and intangible assets	(21,397)	(24,752)	(22,475)
- deferred tax assets that rely on future profitability (excludes those arising from temporary differences)	(859)	(945)	(1,036)
- additional valuation adjustment (referred to as PVA)	(1,177)	(1,688)	(1,341)
- investments in own shares through the holding of composite products of which HSBC is a component (exchange traded funds, derivatives and index stock)	(990)	(904)	(1,083)
- negative amounts resulting from the calculation of expected loss amounts	(5,790)	(6,327)	(5,813)


Common equity tier 1 capital on an end point basis	138,080	141,557	135,953

Tier 1 and tier 2 capital on a transitional basis
Common equity tier 1 capital on an end point basis	138,080	141,557	135,953
Transitional adjustments	-	(1,487)	(2,753)
- unrealised gains arising from revaluation of property	-	(1,346)	(1,375)
- unrealised gains in available-for-sale debt and equities	-	(141)	(1,378)


Common equity tier 1 capital on a transitional basis	138,080	140,070	133,200

Other tier 1 capital before deductions	21,449	13,977	19,687
- preference share premium	1,015	1,160	1,160
- preference share non-controlling interests	1,711	1,955	1,955
- allowable non-controlling interest in AT1	1,456	635	884
- hybrid capital securities	17,267	10,227	15,688

Deductions	(103)	(164)	(148)
- unconsolidated investments¹²	(103)	(164)	(148)


Tier 1 capital on a transitional basis	159,426	153,883	152,739

Tier 2 capital on a transitional basis
Total qualifying tier 2 capital before deductions	35,924	39,197	38,213
- allowable non-controlling interest in tier 2	8	47	99
- perpetual subordinated debt	1,941	2,218	2,218
- term subordinated debt	33,975	36,692	35,656
- non-controlling interests in tier 2 capital	-	240	240

Total deductions other than from tier 1 capital	(240)	(246)	(222)
- unconsolidated investments¹²	(240)	(246)	(222)


Total regulatory capital on a transitional basis	195,110	192,834	190,730

For footnotes, see page 100.

Reconciliation of regulatory capital from transitional basis to an estimated CRD IV end point basis

	At
	30 June	30 June	31 December
	2015	2014	2014
	$m	$m	$m

Common equity tier 1 capital on a transitional basis	138,080	140,070	133,200
Unrealised gains arising from revaluation of property	-	1,346	1,375
Unrealised gains in available-for-sale debt and equities	-	141	1,378

Common equity tier 1 capital on an end point basis	138,080	141,557	135,953

Additional tier 1 capital on a transitional basis	21,346	13,813	19,539
Grandfathered instruments:
Preference share premium	(1,015)	(1,160)	(1,160)
Preference share non-controlling interests	(1,711)	(1,955)	(1,955)
Hybrid capital securities	(9,127)	(10,227)	(10,007)
Transitional provisions:
Allowable non-controlling interest in AT1	(1,282)	(231)	(487)
Unconsolidated investments	103	164	148

Additional tier 1 capital on an end point basis	8,314	404	6,078

Tier 1 capital on an end point basis	146,394	141,961	142,031
Tier 2 capital on a transitional basis	35,684	38,951	37,991
Grandfathered instruments:
Perpetual subordinated debt	(1,941)	(2,218)	(2,218)
Term subordinated debt	(19,033)	(21,513)	(21,513)
Transitional provisions:
Non-controlling interest in tier 2 capital	-	(240)	(240)
Allowable non-controlling interest in tier 2	14	190	396
Unconsolidated investments	(103)	(164)	(148)

Tier 2 capital on an end point basis	14,621	15,006	14,268

Total regulatory capital on an end point basis	161,015	156,967	156,299

The capital position presented on a CRD IV transitional basis follows the CRD IV legislation as implemented in the PRA Rulebook.

The effects of draft EBA technical standards are not generally captured in our numbers. These could have additional effects on our capital position and RWAs.

While CRD IV allows for the majority of regulatory adjustments and deductions from CET1 to be implemented on a gradual basis from 1 January 2014 to 1 January 2018, the PRA has largely decided not to make use of these transitional provisions. From 1 January 2015, unrealised gains on investment property and available-for-sale securities are to be recognised in CET1 capital. As a result, our end point and transitional CET1 capital and ratios are now aligned. Transitional provisions, however, continue to apply for additional tier 1 and tier 2 capital.

For additional tier 1 and tier 2 capital, the PRA followed the transitional provisions timing as set out in CRD IV to apply the necessary regulatory adjustments and deductions, the effect of which is being phased in at 20% per annum from 1 January 2014 to 1 January 2018.

Non-CRD IV compliant additional tier 1 and tier 2 instruments also benefit from a grandfathering period. This progressively reduces the eligible amount by 10% annually following an initial reduction of 20% on 1 January 2014 until they are fully phased out by 1 January 2022.
Under CRD IV, as implemented in the UK, banks are required to meet a minimum CET1 ratio of 4.5% of RWAs and a minimum tier 1 ratio of 6% of RWAs (from 1 January 2015), and a total capital ratio of 8% of RWAs. In addition to the Pillar 1 minimum ratios, the PRA sets Pillar 2A capital requirements which together are considered the minimum level of regulatory capital to be maintained at all times. Pillar 2A is to be met at least with 56% CET1 capital and the remaining with non-common equity capital.

Alongside CRD IV requirements, from 1 July 2014, the PRA expects major UK banks and building societies to meet a 7% CET1 ratio using the CRD IV end point definition. Going forward, as the grandfathering provisions fall away, we intend to meet these regulatory minima in an economically efficient manner by issuing non-common equity capital as necessary. At 30 June 2015, we had issued $23.1bn of CRD IV compliant non-common equity capital instruments, of which $1.7bn of tier 2 and $2.5bn of additional tier 1 were issued during the first half of 2015. At 30 June 2015, we also had $32.8bn of non-common equity capital instruments qualifying as eligible capital under CRD IV by virtue of the application of the grandfathering provisions, after applying a 30% reduction as outlined above.

Leverage ratio

Estimated leverage ratio

	EU Delegated Act basis at		Basel III 2014 basis at
	30 June 2015	31 December 2014	30 June 2014
	$bn	$bn	$bn

Total assets per accounting balance sheet	2,572	2,634	2,754
Deconsolidation of insurance/other entities	(103)	(102)	(107)
Consolidation of banking associates	206	194	186

Total assets per regulatory/accounting balance sheet	2,675	2,726	2,833
Adjustment to reverse netting of loans and deposits allowable under IFRS	37	38	98
Reversal of accounting values:	(476)	(525)	(498)
- derivatives	(298)	(345)	(270)
- repurchase agreement and securities finance	(178)	(180)	(228)

Replaced with regulatory values:
Derivatives:	168	166	199
- mark-to-market value	70	81	60
- deductions of receivables assets for cash variation margin	(67)	(82)	(55)
- add-on amounts for potential future exposure	143	148	166
- exposure amount resulting from the additional treatment for written credit derivatives	22	19	28

Repurchase agreement and securities finance:	187	188	237
- gross securities financing transactions assets	246	269	314
- netted amounts of cash payables and cash receivables of gross securities financing transactions assets	(68)	(89)	(86)
- measurement of counterparty risk	9	8	9

Addition of off balance sheet commitments and guarantees:	399	396	445
- guarantees and contingent liabilities	68	67	80
- commitments	322	321	356
- other	9	8	9

Exclusion of items already deducted from the capital measure	(33)	(36)	(37)

Exposure measure after regulatory adjustments	2,957	2,953	3,277

Tier 1 capital under CRD IV (end point)	146	142	142
Estimated leverage ratio (end point)	4.9%	4.8%	4.3%

In January 2015, the PRA issued a letter setting out the approach to be taken for calculating the leverage ratio for 2014 year end disclosures. While the numerator continues to be calculated using the final CRD IV end point tier 1 capital definition, the exposure measure is calculated based on the EU delegated act (rather than the Basel 2014 definition disclosed in the Interim Report 2014).

The basis of preparation for the leverage ratio can be found on page 261 of the Annual Report and Accounts 2014. The basis of preparation for the June 2014 comparative can be found on page 198 in the Interim Report 2014.

Regulatory developments

Regulatory capital buffers

CRD IV establishes a number of capital buffers, to be met with CET1 capital, broadly aligned with the Basel III framework. CRD IV suggests that these will be phased in from 1 January 2016, subject to national discretion.

Automatic restrictions on capital distributions apply if a bank's CET1 capital falls below the level of its CRD IV combined buffer. The CRD IV combined buffer is defined as the total of the capital conservation buffer ('CCB'), the countercyclical capital buffer ('CCyB'), the global systemically important institutions ('G-SII's) buffer and the systemic risk buffer ('SRB') as these become applicable.

Under the revised Pillar 2 framework, the PRA has introduced a PRA buffer, the use of which will not result in automatic restrictions on capital distributions. However, the PRA expects firms not to meet the CRD IV buffers with any CET1 capital maintained to meet its individual capital guidance ('ICG').

In June 2015, the Financial Policy Committee ('FPC') maintained a 0% CCyB rate for UK exposures and recognised the 1.5% CCyB rates introduced by Norway and Sweden, which are to become effective from June 2016. The FPC had also previously recognised the 1% CCyB rates introduced by both these countries to become effective from October 2015. In March 2015, the FPC further stated that the PRA would reciprocate the HKMA CCyB rate of 0.625% to be applied to Hong Kong exposures from January 2016. In accordance with UK legislation and the PRA's supervisory statement PS 3/14, this rate will directly apply to the calculation of our institution-specific CCyB rate from 1 January 2016.

The institution-specific CCyB rate for the Group is based on the weighted average of the CCyB rates that apply in the jurisdictions where relevant credit exposures are located. Currently the Group's institution-specific CCyB is zero.

Further details of the aforementioned CRD IV buffers are set out on page 252 of the Annual Report and Accounts 2014.

Pillar 2 and the 'PRA buffer'

Under the Pillar 2 framework, banks are already required to hold capital in respect of the internal capital adequacy assessment and supervisory review which leads to a final determination by the PRA of ICG under Pillar 2A and Pillar 2B. Pillar 2A was previously met by total capital but, since 1 January 2015, in accordance with the PRA supervisory statement SS5/13, is expected to be met with at least 56% CET1.

The Pillar 2A requirement is a point in time assessment of the amount of capital the PRA considers that a bank should hold to meet the overall financial adequacy rule. It is therefore subject to change pending annual assessment and the supervisory review process. During 2014, our Pillar 2A requirement amounted to 1.5% of RWAs. In February 2015, this was revised to 2.0% of RWAs, of which 1.1% is expected to be met by CET1 with immediate effect.

In July 2015, the PRA published a final policy statement PS17/15, setting out revisions to the Pillar 2 Framework. The revised framework is to become effective from 1 January 2016. The PRA statement of policy sets out the methodologies that the PRA will use to inform its setting of firms' Pillar 2 capital requirements, including new approaches for determining Pillar 2 requirements for credit risk, operational risk, credit concentration risk and pension obligation risk.

As is set out in the revised PRA supervisory statement SS31/15, the PRA will also introduce a PRA buffer which is to replace the capital planning buffer ('CPB'), under Pillar 2B. This is to be met in the form of CET1 capital. The PRA buffer will avoid duplication with CRD IV buffers and will be set for a particular firm depending on its vulnerability in a stress scenario. In order to address significant weaknesses in risk management and governance, a scalar may be applied to firms' CET1 Pillar 1 and Pillar 2A capital requirements, and will also form part of the PRA Buffer. Where the PRA considers there is overlap between the CRD IV buffers and the PRA buffer assessment, the PRA buffer will be set as the excess capital required over and above the CCB and relevant systemic buffers. The PRA buffer will also be in addition to the CCyB and sectoral capital requirements.

Overall capital requirements

Elements of the capital requirements that are known or quantified to date are set out in the diagram below.

Capital requirements framework (end point)

There remains residual uncertainty as to what HSBC's precise end point CET1 capital requirement will be. Time-varying elements such as the macro-prudential tools, the Pillar 2A and 2B requirements and systemic buffers are subject to change. This uncertainty is reflected in the 1.5-2.5% regulatory and management buffer we have included in the 12-13% CET1 range that is used to model our medium-term target for return on equity, of more than 10%, by 2017.

In addition, we will need to consider the effect of the FSB proposals in relation to TLAC requirements, and the UK implementation of the EU minimum requirement for own funds and eligible liabilities ('MREL'). For further details, see page 100.

Regulatory stress testing

The Group is subject to supervisory stress testing in many jurisdictions. These supervisory requirements are increasing in frequency and in the granularity with which results are required. As such, stress testing represents a key focus for the Group. The results of the 2014 UK stress testing exercise were published in December 2014.

In March 2015, the Bank of England published key elements of the 2015 stress test and accompanying guidance. Unlike the 2014 stress test, which was based on the 2014 EBA stress testing exercise, the 2015 UK exercise is wholly designed by the Bank of England. This aims to assess the resilience of the UK banking system to a deterioration in global economic conditions. The results of the 2015 UK stress test are expected to be published at the end of 2015.

The EBA is not undertaking a stress testing exercise in 2015, and will instead carry out a transparency exercise towards the end of the year. This exercise will involve publishing detailed data on bank balance sheets, covering their composition of capital, leverage ratio and RWAs. In July 2015, the EBA published draft templates on the data to be disclosed and a tentative list of banks expected to be included in this exercise, which includes HSBC. The EBA also disclosed a timeline for the 2016 EU wide stress test exercise, which is expected to be aligned with banks' annual supervisory review and evaluation process. The EBA expects to publish the 2016 stress test scenario and methodology in the first quarter of 2016, with results published in the third quarter of 2016.

In 2015, Group entities also participated in regional stress testing exercises. For further details on stress testing exercises, see page 59.

RWA developments

Throughout 2014 and in the first half of 2015, UK, EU and international regulators issued a series of consultations designed to revise the various components of the RWA regime and increase related reporting and disclosures. In particular, the Basel Committee published proposals across all Pillar 1 risk types to update standardised, non-modelled approaches for calculating capital requirements and to provide the basis for the application of a capital floor. There have also been various consultations on proposed modelled approaches for market risk requirements. Quantitative impact studies ('QIS') in relation to the Basel Committee proposals for the revised standardised approach to credit risk and capital floors were published in February 2015. The QIS results will inform final requirements which are expected by the end of 2015. These will need to be transposed into EU law before coming into effect.

Further details of Basel RWA developments during 2014 may be found on page 254 of the Annual Report and Accounts 2014.

In March 2015, the EBA published a discussion paper on the future of the IRB approach. This set out further work in three key areas: a review of the IRB regulatory framework; supervisory consistency, which will include annual benchmarking exercises; and increased transparency based on comparable templates. In particular, it proposed a phased EBA work-plan to deliver final amendments by the end of 2017 with implementation thereafter.

In May 2015, the EBA consulted on regulatory technical standards ('RTS') for specialised lending exposures. This aims to specify how certain factors (e.g. financial strength and the political and legal environment) should be taken into account when assigning risk weights to specialised lending exposures. This also proposes to include more consistency in categorisation and definitions for specialised lending.

In June 2015, the Basel Committee published a consultation paper on the treatment of interest rate risk in the banking book ('IRRBB'). IRRBB is currently included in the scope of Pillar 2 requirements. The consultation proposes two possible alternatives, either to include IRRBB within Pillar 1 requirements, or introduce a strengthened approach to Pillar 2 which would also include additional disclosures under Pillar 3. The consultation closes in September 2015 and is expected to include a QIS to inform final requirements.

In July 2015, the Basel Committee published a consultation paper proposing amendments to the methodology for calculating CVA. This was in response to calls to review the existing methodology, including from the EU. The Basel consultation will close in October 2015, and a QIS will be completed by September 2015 to inform final requirements. As part of this, the EU will review the exemptions to the CVA charge currently applied to corporates, sovereigns and intragroup exposures. Once finalised, changes would need to be transposed into CRD IV before coming into effect. A further QIS for the proposed revisions to the market risk framework and CVA requirements was also published in July 2015.

UK leverage ratio framework

Following consultations by the FPC and HM Treasury in 2014, secondary legislation came into force in April 2015 to provide the FPC with direction powers in relation to the UK leverage ratio framework. In July 2015, the FPC published its final policy statement setting out its intention to use its new powers of direction. As a result, in July 2015, the PRA issued a consultation paper to introduce requirements for the UK leverage ratio framework. This introduces a minimum leverage ratio of 3%, an additional leverage ratio buffer ('ALRB') for G-SIIs and a countercyclical leverage ratio buffer ('CCLB'). The ALRB and CCLB are to be set at 35% of the relevant buffers in the risk-weighted capital framework. The PRA also proposes to introduce new reporting and disclosure templates as part of this framework. The minimum leverage ratio requirement is aligned with existing PRA expectations (as set out in the PRA supervisory statement SS3/13), and the additional leverage ratio buffers, subject to finalisation, are to apply from 1 January 2016 in line with the corresponding risk-weighted capital buffers. Transitional arrangements are proposed for the new disclosure and reporting requirements.

Both the FPC and the PRA note that an internationally agreed minimum leverage ratio requirement will be applied from 2018 and, as a result, will consider the implications for the UK leverage ratio framework again in 2017.

Banking structural reform and recovery and resolution planning

In the EU, the Bank Recovery and Resolution Directive ('BRRD') came into effect from 1 January 2015, with the option to delay implementation of bail-in provisions until 1 January 2016. Despite this, the UK introduced bail-in powers from 1 January 2015. The UK transposition of the BRRD builds on the resolution framework already in place in the UK. In January 2015, the PRA published a policy statement containing updated requirements for recovery and resolution planning which revises PRA rules that have been in force since 1 January 2014. In addition, the EBA has produced a number of RTS and guidelines, some of which are yet to be finalised, that will further inform the BRRD requirements.

In July 2015, the EBA published final draft RTS for MREL which seeks to provide additional clarity on the criteria that resolution authorities should take into account when setting a firm specific minimum requirement for eligible liabilities. The EBA notes that it aims to implement the MREL in a way which is consistent with the developing international standard on total loss absorbing capacity. The Bank of England is expected to publish a consultation paper later in 2015 on the transposition of MREL into UK requirements.

In respect of UK ring-fencing requirements, in May 2015 the PRA published a policy statement containing near final rules on legal structure, corporate governance, and continuity of services and facilities. The PRA intends to undertake a further consultation in 2015 and publish final versions of PRA rules and supervisory statements during the first half of 2016, with implementation by 1 January 2019.

In the EU, discussions on the Banking Structural Reform Regulation continue to progress. In January 2014, the European Commission published legislative proposals on ring-fencing trading activities from deposit taking and prohibiting proprietary trading in financial instruments and commodities. In June 2015, the European Council published its negotiating position on the regulation, which will need to be agreed with the European Parliament before being finalised.

For further details of the Group's approach to structural reform, see page 12.

Total loss absorbing capacity proposals

In November 2014, as part of the 'too big to fail' agenda, the FSB published proposals on TLAC for G-SIBs. The FSB proposals include a minimum TLAC requirement in the range of 16-20% of RWAs and a TLAC leverage ratio of at least twice the Basel III tier 1 leverage ratio. The TLAC requirement is to be applied in accordance with individual resolution strategies, as determined by the G-SIB's crisis management group. A QIS was undertaken earlier this year, the results of which will inform final proposals. The conformance period for the TLAC requirement will also be influenced by the QIS, but will not be before 1 January 2019. Once finalised, it is expected that any new TLAC standard should be met alongside the Basel III minimum capital requirements.

The draft proposals require G-SIBs to be subject to a minimum TLAC requirement with the precise details to be informed by the QIS. There are a number of details relating to the types of liabilities which can be used to meet the TLAC requirement, the composition of TLAC and the location of liabilities within a banking group, in accordance with its resolution strategy. The TLAC proposals are expected to be finalised later in 2015 and will need to be implemented into national legislation before coming into effect.

Other regulatory updates

In January 2015, the Basel Committee published final standards on 'Revised Pillar 3 disclosure requirements'. They mandate extensive use of standardised templates to enhance comparability between banks' disclosures and require a considerable volume of disclosures to be produced semi-annually, rather than annually as hitherto. The revised framework calls for implementation concurrently with financial reports, at the latest for 2016 year-end reports, but is yet to be transposed into EU requirements.

In March 2015, the EBA also consulted on guidelines proposing criteria to set limits on exposures to shadow banking entities. Once finalised, implementation by national competent authorities is currently expected by the end of 2015.

Footnotes to Capital

1 From 1 January 2015 the CRD IV transitional CET1 and end point CET1 capital ratios became aligned for HSBC Holdings plc due to the recognition of unrealised gains on investment property and available-for-sale securities.

2 This includes dividends on ordinary shares, quarterly dividends on preference shares and coupons on capital securities, classified as equity.

3 Dividends net of scrip are in respect of the 2015 first interim dividend and an update for a higher 2014 fourth interim dividend scrip take-up in excess of plan.

4 The basis of presentation for foreign currency translation differences has changed to reflect the total amount in CET1 capital. Previously this only included foreign currency translation differences recognised in other comprehensive income. The comparative periods have also been updated to reflect the change.

5 In the first half of 2015, a portfolio of customers was transferred from CMB to RBWM in Latin America in order to better align the combined banking needs of the customers with our established global businesses. Comparative data have been re-presented accordingly.

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

7 For the basis of preparation, see page 260 of the Annual Report and Accounts 2014.

8 CRD IV opening balances as at December 2013 were estimated based on the Group's interpretation of final CRD IV legislation and final rules issued by the PRA, details of which can be found in the basis of preparation on page 324 of the Annual Report and Accounts 2013.

9 Includes externally verified profits for the half-year to 30 June 2015.

10 Mainly comprises unrealised gains/losses in available-for-sale debt securities related to SPEs.

11 Includes own credit spread on trading liabilities.

12 Mainly comprise investments in insurance entities.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR PKADDPBKDNFB

RNS metadata

Title: Interim Report - 19 of 24
Time: 17:33:02
Date: 26 Aug 2015
Category: Results
ID: 2052X