TIDMHSBA
RNS Number : 5036V
HSBC Holdings PLC
13 December 2021
13 December 2021
STATEMENT ON THE BANK OF ENGLAND
2021 STRESS TEST RESULTS
HSBC Holdings plc ('HSBC' or together with its subsidiaries, the
'Group') notes the publication today of the Bank of England's 2021
Solvency Stress Test ('SST') results.
The scenario used for the 2021 SST is not a forecast. It is a
severe path for the economy in 2021-25 on top of the economic shock
associated with the Covid-19 pandemic that occurred in 2020 and
represents an intensification of the macroeconomic shocks seen in
2020.
Under this stress scenario, the Bank of England's results
indicate that the Group's common equity tier 1 ('CET1') capital
ratio on an IFRS 9 transitional basis(b) would fall to a low point
of 10.4%, above the Group's CET1 reference rate of 7.7%. On an IFRS
9 non-transitional basis, the Group's CET1 capital ratio is
projected to reach a low point of 9.8%, which is above its IFRS 9
non-transitional CET1 reference rate of 7.2%.
The results incorporate strategic management actions, which have
been accepted by the Bank of England for the purposes of this
exercise. In practice, under such adverse economic circumstances,
the Group would consider a variety of management actions depending
on the prevailing circumstances at the time.
HSBC's intention, as evidenced by its past actions, is to
maintain a conservative and prudent approach to capital management.
Today's results demonstrate HSBC's continued capital strength under
this severe downside scenario.
The Bank of England's 2021 stress test results are available to
view in full at:
bankofengland.co.uk/stress-testing/2021/bank-of-england-stress-testing-results
HSBC's results under the solvency stress test scenario are shown
below.
Actual Minimum stressed Minimum stress Reference Actual
(end-2020)(i) ratio (before ratio (after rate (3Q21)(i)
strategic the impact
management of strategic
actions)(i) management
actions)(i)
----------------------------- -------------- ---------------- -------------- --------- ----------
IFRS9 Transitional
Common equity tier
1 ratio(a)(b) 15.9% 9.8%(g) 10.4% 7.7% 15.9%
Tier 1 capital ratio(c) 18.7% 12.1%(g) 12.7%(g) 18.7%
Total capital ratio(d) 21.5% 14.6%(g) 15.4%(g) 21.3%
Memo: risk weighted
assets (US$ bn) 858 1,065(g) 1,014(g) 839
Memo: CET1 (US$
bn) 136 105(g) 105 (g) 133
----------------------------- -------------- ---------------- -------------- --------- ----------
Tier 1 leverage ratio(a)(e) 6.2% 4.9%(h) 5.1% 3.9% 6.2%
Memo: leverage exposure
(US$ bn) 2,552 2,642(h) 2,592(h) 2,514
----------------------------- -------------- ---------------- -------------- --------- ----------
IFRS9 non-transitional
Common equity tier
1 ratio(f) 15.7% 9.2% 9.8% 7.2% 15.8%
Tier 1 leverage ratio(f) 6.2% 4.8% 5.0% 3.9% 6.2%
----------------------------- -------------- ---------------- -------------- --------- ----------
Source: HSBC accounts and STDF data submissions, Bank of England
analysis and calculations
Notes
a) The low points for the common equity Tier 1 (CET1) ratio and
leverage ratio shown in the table do not necessarily occur in the
same year of the stress scenario and correspond to the year where
the minimum stressed ratio is calculated after strategic management
actions. There is no conversion of banks' AT1 instruments in the
stress.
b) The CET1 capital ratio is defined as CET1 capital expressed
as a percentage of risk-weighted assets, where these are in line
with CRR and the UK implementation of CRD V via the PRA
Rulebook.
c) Tier 1 capital ratio is defined as Tier 1 capital expressed
as a percentage of RWAs where Tier 1 capital is defined as the sum
of CET1 capital and additional Tier 1 capital in line with the UK
implementation of CRD V.
d) Total capital ratio is defined as total capital expressed as
a percentage of RWAs where total capital is defined as the sum of
Tier 1 capital and Tier 2 capital in line with the UK
implementation of CRD V.
e) The Tier 1 leverage ratio is Tier 1 capital expressed as a
percentage of the leverage exposure measure excluding central bank
reserves, as defined in Rule 1.2 of the Leverage Ratio part of the
PRA Rulebook.
f) The low point year for the non-transitional IFRS 9 may differ
to the low point year on a transitional IFRS 9 basis.
g) Corresponds to the same year as the minimum CET1 ratio over
the stress scenario after strategic management actions.
h) Corresponds to the same year as the minimum leverage ratio
over the stress scenario after strategic management actions.
i) Treatment of software assets non-deduction: End-2020 capital
numbers include the benefit from software assets non-deduction, and
minimum stress numbers that occur in 2021 also include the benefit
from software assets non-deduction. Minimum stress numbers that
occur after 2021 exclude the benefit from software assets
non-deduction. This is in line with the PRA's Policy Statement
PS17/2.
Investor enquiries to:
Richard O'Connor (London) +44 (0) 207 991 6590 richard.j.oconnor@hsbc.com
Mark Phin (Hong Kong) +852 2822 4908 mark.j.phin@hsbc.com
Media enquiries to:
Ankit Patel +44 (0) 207 991 9813 ankit.patel@hsbc.com
Note to editors:
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered
in London. HSBC serves customers worldwide from offices in 64
countries and territories in its geographical regions: Europe,
Asia, North America, Latin America, and Middle East and North
Africa. With assets of US$2,969bn at 30 September 2021, HSBC is one
of the world's largest banking and financial services
organisations.
Forward-looking statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations,
capital position, strategy and business of HSBC and its
consolidated subsidiaries (together, the 'HSBC Group') which can be
identified by the use of forward-looking terminology such as 'may',
'plan', 'will', 'should', 'expect', 'anticipate', 'project',
'seek', 'intend' or 'estimate' (together, 'forward-looking
statements'). Any such forward-looking statements are not a
reliable indicator of future performance, as they may involve
significant stated or implied assumptions and subjective judgements
which may or may not prove to be correct. There can be no assurance
that any of the matters set out in forward-looking statements are
attainable, will actually occur or will be realised or are complete
or accurate. The assumptions and judgments may prove to be
incorrect and involve known and unknown risks, uncertainties,
contingencies and other important factors, many of which are
outside the control of the HSBC Group. Actual achievements,
results, performance or other future events or conditions may
differ materially from those stated or implied and/or reflected in
any forward-looking statements due to a variety of risks,
uncertainties and other factors (including without limitation those
which are referable to general market conditions, regulatory
changes or due to the impact of the Covid-19 pandemic). Any such
forward-looking statements are based on the beliefs, expectations
and opinions of the HSBC Group at the date the statements are made,
and the HSBC Group does not assume and disclaims, any obligation or
duty to update, revise or supplement them if circumstances or
management's beliefs, expectations or opinions should change. For
these reasons, recipients should not place reliance on, and are
cautioned about relying on, any forward-looking statements. No
representations or warranties, expressed or implied, are given by
or on behalf of the HSBC Group as to the achievement or
reasonableness of any projections, estimates or forecasts contained
herein.
Additional detailed information concerning important factors
that could cause actual results to differ materially from this
announcement is available in HSBC's Annual Report and Accounts for
the fiscal year ended 31 December 2020, filed with the Securities
and Exchange Commission (the 'SEC') on Form 20-F on 24 February
2021 (the '2020 Form 20-F'), and in other reports on Form 6-K
furnished to or filed with the SEC subsequent to the 2020 Form
20-F.
ends/all
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END
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