# HSBC Holdings plc Pillar 3 Disclosures at 31 December 2025

## Contents
| Page | Section |
|---|---|
| 3 | Disclosures and Governance |
| 4 | Highlights |
| 5 | Key metrics |
| 6 | Regulatory developments and Key changes |
| 8 | Linkage to the Annual Report and Accounts 2025 |
| 12 | Risk management |
| 14 | Treasury risk |
| 15 | Own funds |
| 17 | Capital buffers |
| 17 | Pillar 1 minimum capital requirements and RWA flow |
| 20 | Leverage |
| 22 | Liquidity |
| 27 | Asset encumbrance |
| 28 | Pillar 2 and ICAAP |
| 29 | Minimum requirement for own funds and eligible liabilities |
| 36 | Credit risk |
| 82 | Counterparty credit risk |
| 87 | Securitisation |
| 92 | Market risk |
| 97 | Non-financial risk |
| 98 | Other risks |
| 99 | Countercyclical capital buffer |
| 101 | Remuneration |
| 101 | Appendix I – Summary of disclosures withheld |
| 101 | Appendix II – Mapping- Internal ratings to external ratings |
| 102 | Compliance with CRR II Pillar 3 requirements |
| 117 | Other information |
| 117 | Abbreviations |
| 119 | Cautionary statement regarding forward-looking statements |
| 120 | Contacts |

Unless the context requires otherwise, ‘HSBC Holdings’ means HSBC Holdings plc and ‘HSBC’, the ‘Group’, ‘we’, ‘us’ and ‘our’ refer to HSBC Holdings together with its subsidiaries. Within this document the Hong Kong Special Administrative Region of the People’s Republic of China is referred to as ‘Hong Kong’. When used in the terms ‘shareholders’ equity’ and ‘total shareholders’ equity’, ‘shareholders’ means holders of HSBC Holdings ordinary shares and those preference shares and capital securities issued by HSBC Holdings classified as equity. The abbreviations ‘\$m’, ‘\$bn’ and ‘\$tn’ represent millions, billions (thousands of millions) and trillions (millions of millions) of US dollars respectively.

This document should be read in conjunction with the Annual Report and Accounts 2025, which has been published on our website at www.hsbc.com/investors.

## Tables
| Page | Table | Table heading |
|---|---|---|
| 5 | 1 | Key metrics (KM1/IFRS9-FL) |
| 8 | 2 | Reconciliation of regulatory own funds to balance sheet in the financial statements (UK CC2) |
| 9 | 3 | Principal entities with a different regulatory and accounting scope of consolidation (LI3) |
| 10 | 4 | Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories with regulatory risk categories (LI1) |
| 11 | 5 | Main sources of differences between regulatory exposure amounts and carrying values in financial statements (LI2) |
| 15 | 6 | Composition of Regulatory own funds (UK CC1) |
| 18 | 7 | Overview of risk-weighted exposure amounts (OV1) |
| 19 | 8 | RWA flow statements of credit risk exposures under the IRB approach (CR8) |
| 19 | 9 | RWA flow statements of CCR exposures under IMM (CCR7) |
| 19 | 10 | RWA flow statements of market risk exposures under IMA (MR2-B) |
| 20 | 11 | Leverage ratio common disclosure (UK LR2-LRCom) |
| 21 | 12 | Summary reconciliation of accounting assets and leverage ratio exposures (UK LR1- LRSum) |
| 21 | 13 | Leverage ratio – split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (UK LR3-LRSpl) |
| 23 | 14 | Quantitative information of LCR (UK LIQ1) |
| 24 | 15 | Net stable funding ratio (UK LIQ2) |
| 27 | 16 | Quantitative information on IRRBB (UK IRRBB1) |
| 27 | 17 | Encumbered and unencumbered assets (UK AE1) |
| 28 | 18 | Collateral received and own debt securities issued (UK AE2) |
| 28 | 19 | Sources of encumbrance (UK AE3) |
| 30 | 20.i | Key metrics of the European resolution group (KM2) |
| 31 | 20.ii | Key metrics of the Asian resolution group (KM2) |
| 31 | 20.iii | Key metrics of the US resolution group (KM2) |
| 32 | 21 | TLAC composition (TLAC1) |
| 33 | 22 | HSBC Holdings plc creditor ranking (TLAC3) |
| 33 | 23 | HSBC UK Bank plc creditor ranking (TLAC2) |
| 34 | 24 | HSBC Bank plc creditor ranking (TLAC2) |
| 34 | 25 | HSBC Asia Holdings Ltd creditor ranking (TLAC3) |
| 34 | 26 | The Hongkong and Shanghai Banking Corporation Limited creditor ranking (TLAC2) |
| 35 | 27 | Hang Seng Bank Ltd creditor ranking (TLAC2) |
| 35 | 28 | HSBC North America Holdings Inc. creditor ranking (TLAC3) |
| 37 | 29 | Performing and non-performing exposures and related provisions (CR1) |
| 38 | 30 | Maturity of exposure (CR1-A) |
| 38 | 31 | Changes in the stock of non-performing loans and advances (CR2) |
| 39 | 32 | Credit quality of forborne exposures (CQ1) |
| 40 | 33 | Credit quality of performing and non-performing exposures by past due days (CQ3) |
| 41 | 34 | Collateral obtained by taking possession and execution processes (CQ7) |
| 41 | 35 | Quality of non-performing exposures by geography (CQ4) |
| 42 | 36 | Credit quality of loans and advances to non-financial corporations by industry (CQ5) |
| 44 | 37 | Credit risk mitigation techniques – overview (CR3) |
| 45 | 38 | Standardised approach – credit conversion factor ('CCF') and credit risk mitigation ('CRM') effects (CR4) |
| 45 | 39 | IRB – Effect on the RWA of credit derivatives used as CRM techniques (CR7) |
| 46 | 40 | IRB approach – Disclosure of the extent of the use of CRM techniques (CR7-A) |
| 48 | 41 | Scope of the use of IRB and SA approaches (UK CR6-A) |
| 49 | 42 | CQS reference table |
| 50 | 43 | Standardised approach – exposures by asset classes and risk weights (CR5) |
| 52 | 44 | IRB – Credit risk exposures by portfolio and PD range (CR6) |
| 66 | 45 | Wholesale IRB credit risk models |
| 67 | 46 | Wholesale IRB models – estimated and actual values |
| 67 | 47 | Wholesale IRB exposure – back-testing of probability of default (PD) per portfolio (CR9) |
| 72 | 48 | Retail IRB risk rating systems |
| 75 | 49 | Retail IRB models – estimated and actual values |
| 77 | 50 | Retail IRB exposure – back-testing of probability of default (PD) per portfolio¹ (CR9) |
| 80 | 51 | Specialised lending and equity exposures under the simple risk-weighted approach (CR10) |
| 81 | 51.i | Equity exposures under simple risk-weighted approach (CR10) |
| 82 | 52 | Analysis of counterparty credit risk exposure by approach (excluding centrally cleared exposures) (CCR1) |
| 83 | 53 | Credit valuation adjustment capital charge (CCR2) |
| 83 | 54 | Standardised approach – CCR exposures by regulatory exposure class and risk weights (CCR3) |
| 84 | 55 | IRB – CCR exposures by portfolio and PD scale (CCR4) |
| 85 | 56 | Composition of collateral for CCR exposure (CCR5) |
| 86 | 57 | Credit derivatives exposures (CCR6) |
| 86 | 58 | Exposures to central counterparties (CCR8) |
| 89 | 59 | Securitisation exposures in the non-trading book (SEC1) |
| 90 | 60 | Securitisation exposures in the trading book (SEC2) |
| 90 | 61 | Securitisation exposures in the non-trading book and associated regulatory capital requirements – bank acting as originator or as sponsor (SEC3) |
| 91 | 62.i | Securitisation exposures in the non-trading book and associated capital requirements – bank acting as investor (SEC4) |
| 91 | 62.ii | Securitisation exposures in the trading book and associated capital requirements – bank acting as investor (SEC4) |
| 91 | 63 | Exposures securitised by the institution – Institution acts as originator or as sponsor (SEC5) |
| 92 | 64 | Market risk under standardised approach (MR1) |
| 92 | 65 | Market risk under IMA (MR2-A) |
| 94 | 66 | Comparison of VaR estimates with gains/losses (MR4) |
| 95 | 67 | IMA values for trading portfolios (MR3) |
| 96 | 68 | Prudential valuation adjustments (PV1) |
| 97 | 69 | Operational risk own funds requirements and risk-weighted exposure amounts (OR1) |
| 99 | 70 | Geographical distribution of credit exposures relevant for the calculation of the countercyclical buffer (UK CCyB1) |
| 100 | 71 | Amount of institution-specific countercyclical capital buffer (UK CCyB2) |

# Disclosures and Governance

## Regulatory framework for disclosure
Our Pillar 3 Disclosures at 31 December 2025 comprise both quantitative and qualitative information required under Pillar 3. These disclosures are made in accordance with the United Kingdom (‘UK’) Prudential Regulation Authority (‘PRA’) Rulebook Disclosure (Capital Requirements Regulation). They are supplemented by specific additional requirements of the PRA and discretionary disclosures on our part.

We are supervised on a consolidated basis in the UK by the PRA, which receives information on the capital and liquidity adequacy of, and sets capital and liquidity requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local banking supervisors, who set and monitor their local capital and liquidity adequacy requirements. In most jurisdictions, non-banking financial subsidiaries are also subject to the supervision and capital and liquidity requirements of local regulatory authorities.

The Basel Committee on Banking Supervision (‘Basel’) III framework is structured around three ‘pillars’, with the Pillar 1 minimum capital requirements and the Pillar 2 supervisory review process complemented by the Pillar 3 market discipline. The aim of Pillar 3 is to produce disclosures that allow market participants to assess the scope of application by banks of the Basel framework and the rules in their jurisdiction, their capital resources, risk exposures and risk management processes, and hence their capital adequacy.

At the consolidated Group level, capital is calculated for prudential regulatory purposes using the Basel III framework as implemented in the UK. Any references to European Union (‘EU’) regulations and directives (including technical standards) should, as applicable, be read as references to the UK’s version of such regulation and/or directive, as onshored into UK law under the European Union (Withdrawal) Act 2018 and as may be subsequently amended under UK law. We refer to the regulatory requirements of the Capital Requirements Regulation and Directive, the CRR II regulation and the PRA Rulebook as ‘CRR II’.

The regulators of the Group’s banking entities outside the UK are at varying stages of implementation of Basel’s framework, so local regulation may have been on the basis of Basel I, II, III or Basel 3.1. Further details on our implementations can be found on page 5 within the regulatory developments section.

While the frameworks may vary, the Group's disclosure requirements are unaffected by variations in local regulatory frameworks except where these impact distributions, non-controlling interests and minimum requirements for own funds and eligible liabilities ('MREL').

Information relating to the rationale for withholding certain disclosures is provided in Appendix I.

We publish our Pillar 3 Disclosures quarterly on our website www.hsbc.com/investors.

## Regulatory reporting processes and controls
We have been advancing our programme aimed at strengthening our global regulatory reporting processes and making them more sustainable, including enhancing data, consistency and controls. While this programme continues, there may be further impacts on some of our regulatory ratios as we implement recommended changes and continue to enhance our controls across the process.

## Comparatives and references
To give insight into movements during 2025, we provide comparative figures, commentary on variances and flow tables for capital requirements. In all tables where the term ‘capital requirements’ is used, this represents the minimum total capital charge set at 8% of risk-weighted assets (‘RWAs’) by Article 92(1) of CRR II. Narratives are included to explain quantitative disclosures where necessary.

Where disclosures have been enhanced, or are new, we do not generally restate or provide comparatives. Wherever specific rows and columns in the tables prescribed are not applicable or are immaterial to our activities, we omit them and follow the same approach for comparatives.

In alignment with the PRA Rulebook table requirements, we have shaded cells where no information is required to be disclosed.

Pillar 3 requirements may be met by inclusion in other disclosure media. Where we adopt this approach, references are provided to the relevant pages of the Annual Report and Accounts 2025 of HSBC Holdings plc or to other documents.

The table below references where disclosures have been enhanced.

| Page ref | Table Reference | Activity |
|---|---|---|
| 5, 8, 15, 30 and 32 | Table 1 - KM1/IFRS9-FL | Effective 30 June 2025, inclusion of accrued interest in tier 2 and MREL instruments. |
| | Table 2 - UK CC2 | |
| | Table 6 - UK CC1 | |
| | Table 20i - KM2 ERG | |
| | Table 21 - TLAC1 | |
| 45, 50 and 83 | Table 38 - CR4 | Moved a portfolio from the internal-ratings based approach to the standardised approach. |
| | Table 43 - CR5 | |
| | Table 54 - CCR3 | Enhanced counterparty credit calculation process for posted securities collateral. |
| 83 | Table 54 - CCR3 | |
| 67 | Table 46 - Wholesale IRB models | Enhancement for better representation of the underlying portfolio. |
| | Table 47- CR9 Wholesale IRB exposures | |
| 72 | Table 48- Retail IRB risk rating system | Enhancement for better representation of the underlying portfolio and change in average calculation methodology for annual historical default rate. |
| | Table 49- Retail IRB models | |
| | Table 50-CR9 Retail IRB exposures | |

## Governance
The HSBC Holdings Board of Directors (‘Board’) continued to oversee the governance, operation and oversight of the Group and its principal and material subsidiaries. This Pillar 3 disclosure report was approved by the HSBC Board on 25 February 2026.

The HSBC Pillar 3 disclosures at 31 December 2025 comply with the PRA Rulebook and are governed by the Group’s regulatory reporting policy and associated internal controls framework.

**Pam Kaur**
Group Chief Financial Officer

**Richard Blackburn**
Group Risk and Compliance Officer

u For further details of our Corporate Governance, see page 186 of the Annual Report and Accounts 2025.

# Minimum capital requirements
The Group is subject to the basic minimum capital requirements set out in Article 92 (1) of CRR II, namely that it maintain:

– CET1 capital at 4.5% of RWAs;
– Tier 1 (‘T1’) capital (CET1 capital plus additional tier 1 (‘AT1’) capital) at 6% of RWAs; and
– Total capital (T1 capital plus tier 2 (‘T2’) capital) at 8% of RWAs.

Rows UK-7a to UK-7c in the table above show how the Group’s Pillar 2A additional capital requirement (set by the PRA at 2.5% of RWAs) is allocated to each of these tiers of capital. Row UK-7d adds the total of these additional requirements to the CRR II minimum requirements to give a total capital supervisory review and evaluation process requirement of 10.5%.

Rows 8 to 10 set out buffer requirements to which the Group is also subject, and which must be satisfied by CET1. The Group’s overall capital requirement in Row UK-11a, 15.7%, is the sum of these buffer requirements and the minimum capital requirements calculated above (in Row UK-7d). Pillar 2B requirements are excluded.

u For further details of Pillar 2, see page 28 of the Pillar 3 Disclosures at 31 December 2025.

## Regulatory developments
### Basel 3.1
In January 2026, the PRA published its final rules to transpose the Basel Committee’s changes to its prudential framework (‘Basel 3.1’ or ‘Basel III reforms’) into UK regulation. The PRA has confirmed that the rules for credit risk, operational risk, credit valuation adjustment, and non-modelled market risk will take effect on 1 January 2027. Implementation of the internal models approach for market risk is scheduled for 1 January 2028.

The PRA also released its final rules setting out requirements for the capitalisation of structural foreign exchange positions. The requirements will be implemented in 2027 alongside the Basel 3.1 standards.

We continue to assess the impact of the final Basel 3.1 standards on our capital and the associated implementation challenges (including data provision). We expect that the impact on our CET1 ratio at 1 January 2027 will be a modest benefit.

HSBC Continental Europe is regulated on a consolidated basis by the European Central Bank ('ECB') which sets and monitors capital adequacy requirements. From 1 January 2025 it has calculated capital on a consolidated basis for prudential regulatory reporting purposes using the EU Basel III reforms, as set out in the amended Capital Requirements Regulation and Directive, resulting in a small increase in RWAs.

The Hongkong and Shanghai Banking Corporation Limited implemented the Basel III final reform package rules on 1 January 2025, as issued by the Hong Kong Monetary Authority (‘HKMA’). For the first half of 2025, there was a net reduction in the RWAs from several changes in underlying rules, including the removal of the scaling factor, the reversion to foundation internal ratings-based approach ('IRB') for some portfolios and a revised operational risk approach.

### UK capital framework review
In December 2025, the Bank of England’s Financial Policy Committee (‘FPC’) published its latest assessment of the UK capital framework. The FPC reduced its recommended system-wide tier 1 capital benchmark for UK banks from 14% to 13% of RWAs, which is equivalent to 11% of CET1, reflecting enhanced risk measurement, a lower systemic risk profile of UK banks, robust balance sheets, and the anticipated Basel 3.1 changes.

The FPC’s report outlines the key reform priorities, including improving the usability of non-releasable capital buffers, reviewing how capital requirements that apply to domestic exposures interact, and reviewing the leverage ratio framework, particularly its calibration against RWAs. In addition, the FPC is collaborating with the PRA to evaluate the output floor for ring-fenced banks as part of the broader ring-fencing regime review. The FPC and PRA are expected to consult firms on these areas during the first half of 2026.

## Environmental, social and governance (‘ESG’) risk
In 2025, regulators and standard setters continued to advance the sustainability agenda with a focus on enhancing existing frameworks and improving global consistency.

In December 2025, the International Sustainability Standards Board (‘ISSB’) finalised targeted amendments to the IFRS S2 climate-related disclosure standard, providing clarification in relation to greenhouse gas emissions disclosures.

Also in December 2025, the PRA published Policy Statement 25/25 and Supervisory Statement 5/25 strengthening supervisory expectations for banks’ management of climate-related financial risks, including enhanced expectations on the quality, consistency and governance of climate-related disclosures, with reference to internationally consistent standards.

In June 2025, the UK Government published a package of consultations on sustainability reporting aligned to the ISSB sustainability disclosure standards, assurance of sustainability reporting and transition planning. Against this backdrop, the FCA published in January 2026 Consultation Paper 26/5 on UK listed issuers’ sustainability disclosure rules, in which it is proposed to transition from the existing TCFD-based disclosures (aligned to the Task Force on Climate related Financial Disclosures (TCFD)) to an ISSB-aligned sustainability reporting framework, designed to operate ahead of, and transition to, the UK Sustainability Reporting Standards (‘UK SRS’) once endorsed. The FCA aims to publish a policy statement in autumn of 2026, taking into account developments relating to UK SRS.

Additional consultations by the UK Government are expected on the scope and timing of mandatory adoption of the UK SRS and on related transition plan disclosure requirements.

## Key changes
In 2025, we announced the below events which have impacted our capital and liquidity adequacy.

### Privatisation of Hang Seng Bank
The CET1 capital impact of the privatisation of Hang Seng Bank was a net 110 bps upon taking effect in January 2026 (based on the CET1 capital ratio as at 31 December 2025). This included a day one impact on CET1 capital of around 120bps, partly offset by the release of structural foreign exchange RWAs, which related to hedging in the run up to the transaction. These had an adverse impact on CET1 capital of around 10bps at 31 December 2025, which unwound upon the privatisation taking effect.

### Disposals
#### Retained portfolio for home and other loans in France
On 31 October 2025, HSBC Continental Europe completed the sale of the retained portfolio of home and certain other loans in France. The completion of the transaction resulted in the recycling of cumulative fair value losses of \$1.5bn to the income statement that were previously recognised through other comprehensive income.

Our CET1 capital ratio decreased by 0.2 percentage points and a marginal positive impact on our leverage ratio.

### Other disposals
We continued to make progress in reshaping the Group. We announced a further 11 exits in 2025. These included our business in Malta, Sri Lanka retail banking, our UK life insurance business, our Germany custody and fund administration businesses, our stake in Grupo Financiero Galicia, our French retained portfolio of home and certain other loans, our Uruguay business, our Bangladesh retail banking business, equity capital markets (‘ECM’) and mergers and acquisitions (‘M&A’) in the US, UK and Europe, and our Bahrain retail banking unit, which had an immaterial impact on the CET1 and Leverage ratios.

### Other key changes
– On 24 June 2025, the High Court of Justice in England and Wales confirmed the cancellation of \$14.8bn standing to the credit of the HSBC Holdings’ share premium account and \$1.8bn standing to the credit of its capital redemption reserve, following approval at HSBC Holdings’ Annual General Meeting held on 2 May 2025 (the ‘Capital Reduction’). The Court Order confirming the Capital Reduction was registered by the Registrar of Companies on 10 July 2025, resulting in a combined total of \$16.6bn being reclassified to retained earnings with no impact on total equity.
– During 2025 the PRA granted waivers for the exclusion of operational risk RWAs which decreased our RWAs by \$2.0bn. These waivers are associated with the sale of our retail banking operations in France and the disposal of our business in Argentina.
– Additionally, we sold the ADRs in Grupo Financiero Galicia that we received as purchase consideration from the sale of our business in Argentina which resulted in a reduction of our RWAs of \$1bn.
– Following BoCom’s share issuance in 2025, the Group’s interest in BoCom reduced from 19.03% to 16.00% resulting in a dilution loss of \$1.1bn, and a \$1.0bn impairment loss was recognised following our value-in-use assessment made in 2025.

u For further details of assets held for sale, liabilities of disposal groups held for sale and business acquisitions, see page 3 and Note 23 on page 329 of the Annual Report and Accounts 2025.
u For further details on our value-in-use assessment, see Note 18: Interests in associates and joint ventures on page 319 of the Annual Report and Accounts 2025.

# Linkage to the Annual Report and Accounts 2025

This section demonstrates the links between the Group’s financial balance sheet and its regulatory counterpart.

## Structure of the regulatory group
The regulatory consolidation is consistent with the accounting consolidation, with the following exceptions:
– subsidiaries engaged in insurance activities are equity accounted in the regulatory consolidation and then deducted from CET1 capital, subject to thresholds;
– special purpose entities (‘SPEs’) are excluded where significant risk has been transferred to third parties. Exposures to these SPEs are risk weighted as securitisation positions for regulatory purposes;
– participating interests in banking associates are proportionally consolidated for regulatory purposes by including our share of assets, liabilities, profits and losses, and RWAs in accordance with the PRA’s regulatory requirements; and
– non-participating significant investments are deducted from capital, subject to thresholds.

u For further details of the differences between the accounting and regulatory scope of consolidation and their definition of exposure, see pages 8 to 11.

The table below presents the reconciliation between the Group's financial balance sheet and the regulatory scope of consolidation. The regulatory balance sheet value cannot be directly reconciled to other tables showing exposure under the regulatory scope of consolidation as the basis of measurement used in the calculation of RWAs differs.

**Table 2: Reconciliation of regulatory own funds to balance sheet in the financial statements (UK CC2)**

| Ref † | Accounting balance sheet \$m | Deconsolidation of insurance/ other entities \$m | Consolidation of banking associates \$m | Equity accounting of insurance subsidiaries \$m | Regulatory balance sheet \$m |
|---|---|---|---|---|---|
| **Assets** | | | | | |
| Cash and balances at central banks | 242,859 | (8) | 414 | — | 243,265 |
| Hong Kong Government certificates of indebtedness | 44,063 | — | — | — | 44,063 |
| Trading assets | 366,153 | — | — | — | 366,153 |
| Financial assets designated and otherwise mandatorily measured at fair value through profit or loss | 133,063 | (117,732) | 1,064 | — | 16,395 |
| – of which: debt securities eligible as tier 2 issued by Group Financial Sector Entities (‘FSEs’) that are outside the regulatory scope of consolidation | p | — | 139 | — | 139 |
| Derivatives | 237,740 | 68 | 171 | — | 237,979 |
| Loans and advances to banks | 108,462 | (536) | 1,704 | — | 109,630 |
| Loans and advances to customers | 988,399 | 527 | 24,220 | — | 1,013,146 |
| – of which: lending eligible as tier 2 to Group FSEs outside the regulatory scope of consolidation | p | — | 844 | — | 844 |
| – of which: expected credit losses on IRB portfolios | h | (7,950) | — | — | (7,950) |
| Reverse repurchase agreements – non-trading | 298,392 | 146 | 80 | — | 298,618 |
| Financial investments | 567,211 | (6,626) | 8,769 | — | 569,354 |
| – of which: lending eligible as tier 2 to Group FSEs outside the regulatory scope of consolidation | p | — | 93 | — | 93 |
| Assets held for sale | 11,115 | (6,623) | — | — | 4,492 |
| – of which: goodwill and intangible assets | e | 3 | — | — | 3 |
| – of which: expected credit losses on IRB portfolios | h | (8) | — | — | (8) |
| Capital invested in insurance and other entities | — | 3,199 | — | 3,394 | 6,593 |
| – of which -positive goodwill on acquisition | e | — | 240 | — | 240 |
| Prepayments, accrued income and other assets | p | 184,794 | (7,648) | 832 | — | 177,978 |
| – of which: retirement benefit assets | j | 8,246 | — | — | — | 8,246 |
| Current tax assets | 864 | (6) | 1 | — | 859 |
| Interests in associates and joint ventures | 29,577 | (464) | (6,624) | — | 22,489 |
| – of which: positive goodwill on acquisition | e | 482 | (11) | — | — | 471 |
| Goodwill and intangible assets | e | 13,107 | (503) | 929 | — | 13,533 |
| Deferred tax assets | f | 7,235 | (1,967) | 44 | — | 5,312 |
| **Total assets at 31 Dec 2025** | **3,233,034** | **(138,173)** | **31,604** | **3,394** | **3,129,859** |
| **Liabilities and equity** | | | | | |
| Hong Kong currency notes in circulation | 44,063 | — | — | — | 44,063 |
| Deposits by banks | 97,952 | — | 1,142 | — | 99,094 |
| Customer accounts | 1,786,828 | 5,944 | 26,040 | — | 1,818,812 |
| Repurchase agreements – non-trading | 204,974 | (558) | 1,013 | — | 205,429 |
| Trading liabilities | 72,122 | — | — | — | 72,122 |
| Financial liabilities designated at fair value | 158,456 | (5,288) | — | — | 153,168 |
| – of which: included in tier 2 | n, o, i | 9,175 | — | — | — | 9,175 |
| Derivatives | 237,854 | 96 | 162 | — | 238,112 |
| – of which: debit valuation adjustment | k | (22) | — | — | — | (22) |
| Debt securities in issue | 99,675 | (1,960) | 645 | — | 98,360 |
| Liabilities of disposals group held for sale | 23,382 | (6,386) | — | — | 16,996 |
| Accruals, deferred income and other liabilities | n,o | 142,123 | (3,697) | 2,370 | — | 140,796 |
| Current tax liabilities | 3,037 | (463) | 160 | — | 2,734 |
| Insurance contract liabilities | 122,955 | (122,955) | — | — | — |
| Provisions | 3,441 | (49) | 102 | — | 3,494 |
| – of which: credit-related contingent liabilities and contractual commitments on IRB portfolios | h | 358 | — | — | — | 358 |
| Deferred tax liabilities | 2,100 | (25) | — | — | 2,075 |
| Subordinated liabilities | 28,406 | — | — | — | 28,406 |
| – of which: included in tier 2 | n, o | 23,906 | — | — | — | 23,906 |
| **Total liabilities at 31 Dec 2025** | **3,027,368** | **(135,341)** | **31,634** | **—** | **2,923,661** |
| **Equity** | | | | | |
| Called up share capital | a | 8,588 | — | — | — | 8,588 |
| Share premium account | a | 111 | — | — | — | 111 |
| Other equity instruments | l | 20,716 | — | — | — | 20,716 |
| Other reserves | b,c,g | (795) | 2,157 | 40 | 5,153 | 6,555 |
| Retained earnings | b,c,i | 169,605 | (4,785) | (40) | (1,759) | 163,021 |
| **Total shareholders’ equity** | | **198,225** | **(2,628)** | **—** | **3,394** | **198,991** |
| Non-controlling interests | d,m,o | 7,441 | (204) | (30) | — | 7,207 |
| **Total equity at 31 Dec 2025** | | **205,666** | **(2,832)** | **(30)** | **3,394** | **206,198** |
| **Total liabilities and equity at 31 Dec 2025** | | **3,233,034** | **(138,173)** | **31,604** | **3,394** | **3,129,859** |

† The references (a)–(p) identify balance sheet components that are used in the calculation of regulatory capital in Table 6: Composition of Regulatory own funds¹ (UK CC1). This table shows such items at their accounting values, which may be subject to analysis or adjustment in the calculation of regulatory capital shown in Table 6.

The table below lists the principal entities to which different accounting methods are applied under the regulatory scope of consolidation and refer to the structure of the regulatory group above.

**Table 3: Principal entities with a different regulatory and accounting scope of consolidation (LI3)**

| Principal associates | Principal activities | Method of accounting consolidation | Method of regulatory consolidation | | | |
|---|---|---|---|---|---|---|
| | | | Proportional consolidation | Neither consolidated nor deducted | Equity method | Deducted from capital subject to thresholds |
| **Principal insurance entities** | | | | | | |
| HSBC Life (International) Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| Hang Seng Insurance Company Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Insurance (Singapore) Pte Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Life (UK) Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Life Assurance (Malta) Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Life Insurance Company Ltd | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Seguros S.A. (Mexico) | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Life (Singapore) Pte. Ltd. | Life insurance manufacturing | Fully consolidated | • | | | • |
| HSBC Insurance (Bermuda) Ltd | Reinsurance | Fully consolidated | • | | | • |
| **Principal SPEs** | | | | | | |
| Metrix Portfolio Distribution plc | Securitisation | Fully consolidated | • | | | • |
| Neon Portfolio Distribution DAC | Securitisation | Fully consolidated | • | | | • |
| Regency Assets DAC | Securitisation | Fully consolidated | • | | | • |

u For further details of HSBC holdings’ subsidiaries, funds, joint ventures and associates, see Note 38 on page 347 of the Financial Statements of the Annual Report and Accounts 2025.

## Measurement of regulatory exposures
This section sets out the main reasons why the measurement of regulatory exposures is not directly comparable with the financial information presented in the Annual Report and Accounts 2025.

The Pillar 3 Disclosures at 31 December 2025 are prepared in accordance with regulatory capital and liquidity adequacy concepts and rules, while the Annual Report and Accounts 2025 is prepared in accordance with IFRSs. The regulatory exposure value includes an estimation of risk, and is expressed as the amount expected to be outstanding were the counterparty to default.

Moreover, regulatory exposure classes are based on different criteria from accounting asset types and are therefore not comparable on a line by line basis.

The table below provides a breakdown of assets and liabilities under the accounting and regulatory scope of consolidation, by risk types that form the basis for regulatory capital requirements and the link to regulatory exposure value.

**Table 4: Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories with regulatory risk categories (LI1)**

| | Carrying values as reported in published financial statements \$bn | Carrying values under scope of regulatory consolidation¹ \$bn | Carrying value of items | | | | |
|---|---|---|---|---|---|---|---|
| | | | Subject to the credit risk framework \$bn | Subject to the counter party credit risk framework² \$bn | Subject to the securitisation framework³ \$bn | Subject to the market risk framework⁴ \$bn | Not subject to own funds requirements or subject to deduction from own funds \$bn |
| **Assets** | | | | | | | |
| Cash and balances at central banks | 242.8 | 243.3 | 243.3 | — | — | — | — |
| Hong Kong Government certificates of indebtedness | 44.1 | 44.1 | 44.1 | — | — | — | — |
| Trading assets | 366.1 | 366.1 | 2.3 | 33.4 | 0.1 | 363.8 | — |
| Financial assets designated and otherwise mandatorily measured at fair value | 133.1 | 16.4 | 9.4 | 6.7 | 0.1 | — | 0.2 |
| Derivatives | 237.7 | 238.0 | — | 238.0 | — | 238.0 | — |
| Loans and advances to banks | 108.5 | 109.6 | 109.4 | 0.2 | — | — | — |
| Loans and advances to customers | 988.4 | 1,013.1 | 968.5 | 0.3 | 43.4 | — | 0.9 |
| Reverse repurchase agreements – non-trading | 298.4 | 298.6 | — | 298.6 | — | — | — |
| Financial investments | 567.2 | 569.4 | 567.0 | — | 2.4 | — | — |
| Assets held for sale | 11.1 | 4.5 | 4.4 | — | — | 0.1 | — |
| Capital invested in insurance and other entities | — | 6.6 | 3.3 | — | — | — | 3.3 |
| Prepayments, accrued income and other assets | 184.8 | 178.0 | 60.7 | 62.1 | — | 30.9 | 36.6 |
| Current tax assets | 0.9 | 0.9 | 0.9 | — | — | — | — |
| Interests in associates and joint ventures⁵ | 29.6 | 22.5 | 11.3 | — | — | — | 11.2 |
| Goodwill and intangible assets | 13.1 | 13.5 | — | — | — | — | 12.9 |
| Deferred tax assets | 7.2 | 5.3 | 5.0 | — | — | — | 0.3 |
| **Total assets at 31 Dec 2025** | **3,233.0** | **3,129.9** | **2,029.6** | **639.3** | **46.0** | **632.8** | **65.4** |
| **Liabilities** | | | | | | | |
| Hong Kong currency notes in circulation | 44.1 | 44.1 | — | — | — | — | 44.1 |
| Deposits by banks | 98.0 | 99.1 | — | — | — | — | 99.1 |
| Customer accounts | 1,786.8 | 1,818.8 | — | — | — | — | 1,818.8 |
| Repurchase agreements – non-trading | 204.9 | 205.4 | — | 205.4 | — | — | — |
| Trading liabilities | 72.1 | 72.1 | — | 19.4 | — | 72.1 | — |
| Financial liabilities designated at FV | 158.5 | 153.2 | — | — | — | 71.7 | 81.5 |
| Derivatives | 237.9 | 238.1 | — | 238.1 | — | 238.1 | — |
| Debt securities in issue | 99.7 | 98.4 | — | — | — | — | 98.4 |
| Liabilities of disposal groups held for sale | 23.4 | 17.0 | — | — | — | — | 17.0 |
| Accruals, deferred income, and other liabilities | 142.1 | 140.8 | — | 60.8 | — | — | 80.0 |
| Current tax liabilities | 3.0 | 2.7 | — | — | — | — | 2.7 |
| Liabilities under insurance contract | 123.0 | — | — | — | — | — | — |
| Provisions | 3.4 | 3.5 | 0.7 | — | — | — | 2.8 |
| Deferred tax liabilities | 2.1 | 2.1 | 1.0 | — | — | — | 3.6 |
| Subordinated liabilities | 28.4 | 28.4 | — | — | — | — | 28.4 |
| **Total liabilities at 31 Dec 2025** | **3,027.4** | **2,923.7** | **1.7** | **523.7** | **—** | **381.9** | **2,276.4** |

1 The amounts shown do not equal the sum of the amounts shown in the remaining columns of this table for line items ‘Derivatives’, ’Trading assets’ and ‘Prepayments, accrued income and other assets’ as some of the assets in this column are subject to regulatory capital charges for credit risk, counterparty credit risk and market risk.
2 The amounts shown include both non-trading book and trading book.
3 The amounts shown are non-trading book positions. Trading book securitisation positions are included in the market risk column.
4 The amounts shown do not consider exposures subject to foreign exchange risk RWA calculations.
5 Our investment in BoCom is recognised as a significant investment in a financial sector entity. At 31 December 2025, \$11.2bn was deducted from CET1 and \$28.3bn RWAs were reported for this investment, with a related exposure of \$11.3bn.

The table below shows the main differences between the accounting balances and the regulatory exposure amounts by risk type and the on and off-balance sheet treatment of the exposures. Row 1 and 2 excludes amounts subject to deduction from capital or not subject to regulatory capital requirements. Row 12 ‘exposure amounts considered for regulatory purposes’ is a more meaningful measure for credit risk, counterparty credit risk and securitisation frameworks, however not for the market risk framework, as there are no exposures reported.

**Table 5: Main sources of differences between regulatory exposure amounts and carrying values in financial statements (LI2)**

| | Total \$bn | Credit risk framework \$bn | Securitisation framework \$bn | CCR framework \$bn | Market risk framework \$bn |
|---|---|---|---|---|---|
| 1 | Assets carrying value amount under the scope of regulatory consolidation (as per template LI1) | 3,064.5 | 2,029.6 | 46.0 | 639.3 | 632.8 |
| 2 | Liabilities carrying value amount under the regulatory scope of consolidation (as per template LI1) | 647.3 | 1.7 | — | 523.7 | 381.9 |
| 3 | Total net amount under the regulatory scope of consolidation | 2,417.2 | 2,027.9 | 46.0 | 115.6 | 250.9 |
| 4 | Off-balance-sheet amounts | 1,030.6 | 972.9 | 28.0 | 29.7 | |
| 6 | Differences due to different netting rules, other than those already included in row 2 | 36.7 | 14.3 | — | 22.4 | |
| 7 | Differences due to consideration of provisions | 8.3 | 8.3 | — | — | |
| 8 | Differences due to the use of credit risk mitigation techniques (CRMs) | (74.0) | (22.8) | (2.4) | (48.8) | |
| 9 | Differences due to credit conversion factors | (685.0) | (685.0) | — | — | |
| 10 | Differences due to Securitisation with risk transfer | (12.8) | — | (12.8) | — | |
| 11 | Other differences | 59.8 | 0.7 | — | 59.1 | |
| 12 | Exposure amounts considered for regulatory purposes at 31 Dec 2025 | 2,780.8 | 2,316.3 | 58.8 | 178.0 | — |

## Explanations of differences between carrying values in financial statements and regulatory exposure amounts

### Differences in netting rules
The increase from carrying value due to differences in netting rules is the reversal of amounts deducted from gross loans and advances to customers in the published financial statements in accordance with the offsetting criteria of IAS 32 ‘Financial instruments: presentation’. This also includes the differences between accounting carrying values versus regulatory exposures considered for counterparty credit risk reporting purposes.

### Differences due to consideration of provisions
The carrying value of assets is net of credit risk adjustments. The regulatory exposure value under IRB approaches is before deducting credit risk adjustments.

### Differences due to the use of credit risk mitigation techniques
Exposure value under the standardised approach (‘SA/STD’) is calculated after deducting credit risk mitigation whereas accounting value is before such deductions.

### Differences due to credit conversion factors
Exposure value of off-balance sheet items are calculated after the application of the relevant conversion factors as defined in the CRR II.

### Differences due to securitisation with risk transfer
Securitisation exposure is based on risk transfer of exposure at default (‘EAD’) of underlying loans instead of accounting value.

### Other differences
Other differences primarily relate to exposures at default (‘EAD’) modelling impacts, potential future exposures (‘PFE’) and adjustments relating to funded settlement risk (‘FSR’) for counterparty credit risk.

## Explanation of differences between accounting fair value and regulatory prudent valuation
Fair value is defined as the best estimate of the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Some fair value adjustments already reflect valuation uncertainty to some degree. These are market data uncertainty and model uncertainty. However, it is recognised that a variety of valuation techniques using stressed assumptions, and combined with the range of plausible market parameters at a given point in time, may still generate unexpected uncertainty beyond fair value.

A series of additional valuation adjustments (‘AVAs’) are therefore required to reach a specified degree of confidence (the ‘prudent value’) set by regulators that differs both in terms of scope and measurement from HSBC’s own quantification for disclosure purposes.

AVAs should consider at the minimum: market price uncertainty, bid offer (close-out) uncertainty, model risk, concentration, administrative costs, unearned credit spreads and investing and funding costs.

AVAs are not limited to level 3 exposures, for which a 95% uncertainty range is already computed and disclosed, but must also be calculated for any exposure for which the exit price cannot be determined with a high degree of certainty. Table 68 presents further information on the prudent valuation adjustment.

u For further details of level 3 exposures, see Note 12 on page 306 of the Financial Statements of the Annual Report and Accounts 2025.

# Risk management

## Our risk management framework
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 (‘RMF’), including the key principles and practices that we deploy in managing material risks, both financial and non-financial.

The framework fosters continuous monitoring, promotes risk awareness and drives a positive risk culture. It encourages sound operational and strategic decision-making and escalation. It also supports a consistent approach to identifying, assessing, managing and reporting the risks we incur in our activities, with clear accountabilities.

u For further details of our RMF, see page 98 of the Annual Report and Accounts 2025.
u For details of the management and mitigation of principal risks facing the Group, see page 100 of the Annual Report and Accounts 2025.
u For details on our management of treasury risk, see page 14.

## Material risks
Pillar 3 requires that all material risks be disclosed to provide a comprehensive view of a bank’s risk profile. In addition to the disclosures in this document, other information on material risks can be found on page 105 of the Annual Report and Accounts 2025. References to the specific risk sections within the Annual Report and Accounts are provided below:
– Credit risk (refer to page 107)
– Treasury risk (refer to page 156)
– Market risk (refer to page 167)
– Climate risk (refer to page 170)
– Resilience risk (refer to page 180)
– Regulatory compliance risk (refer to page 180)
– Financial crime risk (refer to page 181)
– Model risk (refer to page 181)
– Insurance manufacturing operations risk (refer to page 182)

u For further details on our risk management see page 98 of the Annual Report and Accounts 2025.

## Culture
HSBC understands the importance of a strong culture. Our culture refers to our shared attitudes, beliefs, values and standards that shape behaviours including those related to risk awareness, risk taking and risk management. It is instrumental in aligning the behaviours of individuals with our attitude to assuming and managing risk, which helps to ensure that our risk profile remains in line with our risk appetite. The fostering of a strong culture is a key responsibility of our senior executives.

Our culture is also reinforced by our approach to remuneration. Individual awards, including those for senior executives, are based on compliance with our values and the achievement of financial and non financial objectives that are aligned to our risk appetite and global strategy.

u For further details of risk and remuneration, see page 216 of the Annual Report and Accounts 2025.

## Risk governance
The Board has ultimate responsibility for the effective management of risk and approves our risk appetite. It is advised on risk-related matters by the Group Risk Committee (‘GRC’).

u For further details of the activities of the GRC, see page 209 of the Annual Report and Accounts 2025.

Executive accountability for the ongoing monitoring, assessment and management of the enterprise-wide risk environment, and the effectiveness of the RMF resides with the Group Chief Risk and Compliance Officer (‘GCRCO’). The GCRCO is supported by the Group Risk Management Meeting (‘GRMM’) of the Group Operating Committee (‘GOC’).

u For further details of risk governance, see page 98 of the Annual Report and Accounts 2025.

Day-to-day responsibility for risk management is delegated to senior managers with individual accountability for decision making. These senior managers are supported by global functions. 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.

We use a defined executive risk governance structure to help enable appropriate oversight and accountability for risk, which facilitates the reporting and escalation to the Risk Management Meetings.

u For further details of the Group’s three lines of defence model and executive risk governance structures, see page 99 of the Annual Report and Accounts 2025.

## Risk appetite
Risk appetite is a key component of our management of risk. It defines our desired forward-looking risk profile, and informs the strategic and financial planning process. At HSBC, risk appetite is managed through a global risk appetite framework and articulated in a risk appetite statement, which is reviewed and approved by the Board on the advice of the GRC, to make sure it remains fit for purpose.

Our risk appetite 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. It is also integrated within other risk management tools, such as stress testing, to help ensure consistency in risk management.

u For further details of our risk management tools and risk appetite, see page 98 of the Annual Report and Accounts 2025.

## Global Risk and Compliance
We have a dedicated Global Risk and Compliance function, headed by the GCRCO, which is responsible for the Group‘s risk management framework. This includes establishing global policy, monitoring risk profiles, and identifying and managing forward-looking risks.

Global Risk and Compliance is made up of sub-functions covering all risks to our business. It is independent from the business segments to provide challenge, appropriate oversight and balance in risk versus return decisions. The Global Risk and Compliance function operates in line with the three lines of defence model and plays an important role in reinforcing our culture and values. It focuses on creating an environment that encourages our people to speak up and do the right thing.

u For further details of Global Risk and Compliance, see page 98 of the Annual Report and Accounts 2025.

## Stress testing
Our stress testing programme assesses potential financial risks to our business model, and forms part of our risk management and capital and liquidity planning. As well as undertaking regulatory-driven stress tests, we conduct our own internally defined stress tests to understand the nature of our potential vulnerabilities, quantify their impact and develop plausible mitigating actions. The outcome of a stress test provides management with key insights into the impact of severely adverse events on the Group and provides an indication to regulators of the Group’s resilience to shocks and any consequences for financial stability.

The Group stress testing programme is overseen by the GRC, and results are reported, where appropriate to the Group Finance Management Meeting (‘GFMM’), which governs various matters including risk management and controls, financial reporting and disclosures.

u For further details of stress testing and the Group’s regulatory stress tests, see pages 99 and 157 of the Annual Report and Accounts 2025.

## Risk management and internal control systems
The Directors are responsible for maintaining and reviewing the effectiveness of the risk management and internal control systems, and for determining the aggregate level of risk and the risk types they are willing to accept in achieving the Group’s business objectives. On behalf of the Board, the Group Audit Committee (‘GAC’) has responsibility for the oversight of the effectiveness of all internal controls.

The Directors, through the GAC, receive regular updates and confirmation that management has taken, or is taking, the necessary actions to remediate any failings or weaknesses identified through the operation of our framework of internal controls.

u For further details of HSBC’s key risk management and internal control procedures, see page 209 of the Annual Report and Accounts 2025, where the Report of the Directors on the effectiveness of internal controls can also be found.

## Risk measurement and reporting systems
Our risk measurement and reporting systems are designed to help ensure that risks are comprehensively captured with all the attributes necessary to support well-founded decisions, that those attributes are accurately assessed, and that information is delivered in a timely manner for those risks to be managed and mitigated.

Risk measurement and reporting systems are also subject to a governance framework designed to help ensure that their build and implementation are fit for purpose and functioning appropriately. Risk information system development is a key responsibility of the Global Risk and Compliance function.

We have been advancing our programme aimed at strengthening our global regulatory reporting processes and making them more sustainable, including enhancing data, consistency and controls.

We remain committed to investing in the reliability and resilience of our technology systems and critical services, which support all parts of our business. We assess our third parties to help ensure they deliver the standard of services we require to provide resilient services to our customers. We do so to help protect our customers, affiliates and counterparties, and to help ensure that we minimise any disruption to services. In our approach to defending against these threats, we invest in business and technical controls to help us prevent, detect, respond to and recover from issues in a timely manner within our risk appetite.

Risk measurement and reporting structures deployed at Group level are applied throughout business segments and major operating entities through a common operating model for integrated risk management and control. This model sets out the respective responsibilities of Group, business segments, region and country level risk and compliance functions in respect of risk governance and oversight, approval authorities and lending guidelines, global and local scorecards, management information and reporting, and relations with third parties such as regulators, rating agencies and auditors.

## Global Risk analytics and model governance
The Global Risk function manages a number of analytics disciplines supporting the development and management of models, including those for risk rating, behavioural scoring, economic capital, climate and stress testing, covering different risk types and business segments.

The analytics functions support technical responses to industry developments and regulatory policy in the field of risk analytics. They develop HSBC’s global risk models, and oversee local model development and use across the Group as we work towards our implementation targets for IRB approaches. The Global Model Risk Committee (‘GMRC’) is the primary committee responsible for the oversight of model risk globally. It serves an important role in providing strategic direction on the management of models and their associated risks to HSBC's business segments and functions. It is also an essential element of the governance structure for model risk management (‘MRM’).

The GMRC meets regularly and reports to the GRMM. The GMRC is chaired by the GCRCO and its membership includes the chief executive officers (‘CEOs’) of the business segments, and senior executives from the risk and finance functions. The GMRC is responsible for providing advice and making recommendations relating to the oversight of model risk globally. The governance structure is implemented consistently for each business segment. The GMRC along with the business segments model risk committees form the formal governance level. The business segments model risk committees have discretion to create business specific or geographic sub-fora.

The GMRC is supported by the Global Functional Model Oversight Forums (‘GMOFs’) through which issues are escalated. The purpose of the GMOFs is to oversee and monitor the implementation of elements of the model risk framework and provide subject matter expertise. Their scope is a subset of the overall model landscape related to model categories including those for risk rating, behavioural scoring, economic capital, climate, and stress testing.

MRM undertakes four key activities including, model risk governance, model risk stewardship, independent model validation and infrastructure. Global model risk policy and procedures govern the development, validation, independent review, approval, implementation, performance monitoring of credit risk rating models and any model changes. The development and use of data and models to meet local requirements are the responsibility of the business segments or functions, as well as regional and/or local entities under the governance of their own management, subject to overall Group policy and oversight.MRM works closely with business segments and functions to help ensure that models in development meet risk management, pricing and capital management needs.

Models are subject to an independent validation process and governance oversight by the MRM and independent model review team within Global Risk. The team helps to challenge the modelling approaches used across the Group. It also helps to ensure that the performance of those models is transparent and that any limitations are visible to key stakeholders. The MRM function is separate from the risk analytics functions that are responsible for the development of models. All new or materially changed IRB capital models require pre-approval from the PRA.

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 the PRA’s supervisory statement SS1/23 Model risk management principles for banks coming into effect. This provided detailed principles-based guidance on how model risk should be managed, and further developments in policy are also expected from other regulators.

Regulatory and other expectations continue to evolve with regards to our capability and practice of MRM. In the ‘Risk review, Our Responsibilities’ section of the Annual Report and Accounts 2025 on page 99 we outline how roles are defined using the three lines of defence model, which considers our business segments and functional structures.

u For further details of model risk management, see page 181 of the Annual Report and Accounts 2025.

## Treasury Risk
Treasury risk is the risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements. This includes the risk of an adverse impact on earnings or capital due to structural and transactional foreign exchange exposures, as well as changes in market interest rates, together with pension risk and insurance risk.

The Group Treasurer owns all treasury risks, except pension and insurance risks. Pension risk is jointly owned with the Group Head of Performance and Reward, while insurance risk is owned by the Chief Executive Officer for Global Insurance. The Global Head of Traded and Treasury Risk Management and Risk Analytics is the risk steward for all treasury risks.

Treasury risks excluding pension and insurance risks are the responsibility of the GFMM and the GRC. These risks are actively managed by Global Treasury with support from the Holdings Asset and Liability Management Committee (‘ALCO’) and local ALCOs, overseen by Treasury Risk Management and Risk Management Meetings.

Pension risk is monitored through local and regional pension risk management meetings, with global oversight provided by the Global Pension Financial Risk Management Meeting, chaired by the accountable risk steward. Insurance risk is overseen by the Global Insurance Risk Management Meeting, chaired by the Chief Risk and Compliance Officer for Global Insurance.

HSBC employs stress testing to guide management of capital and liquidity required to withstand both internal and external shocks, such as a systems failure or economic downturn.

u For further details of our approach to treasury risk management including capital risk, liquidity risk, interest rate in the banking book, non-trading foreign exchange exposure and pension risk, see page 156 of the Annual Report and Accounts 2025.

## Capital Risk
Our approach to capital management is shaped by our organisational needs and the regulatory, economic and commercial environment. We aim to maintain a strong capital base to manage inherent business risks and invest in accordance with our strategy, seeking to adhere to both consolidated and local regulatory capital requirements at all times.

This was demonstrated by our strong CET1 performance in the Bank Capital Stress Test published by the Bank of England as part of the Financial Stability Report on 2 December 2025.

As at 31 December 2025, capital securities included in the capital base of HSBC have been issued in accordance with the Capital Requirements Regulation. Capital securities are regularly reviewed for compliance with guidelines. A list of the main features of our capital instruments and eligible liabilities, in accordance with Articles 437 and 437a of CRR II, is published on our website at www.hsbc.com with reference to our balance sheet on 31 December 2025. The full terms and conditions of our securities are also available at www.hsbc.com.

HSBC has no current or foreseen practical or legal impediment envisaged with regard to planned dividends or payments from material subsidiaries to the parent. However, the ability of subsidiaries to pay dividends or advance monies to HSBC Holdings depends on, among other things, their respective local regulatory capital and banking requirements, exchange controls, statutory reserves, and financial and operating performance. None of our subsidiaries that are excluded from the regulatory consolidation had capital resources below their minimum regulatory requirement as at 31 December 2025.

Transactional foreign exchange risk stems from day-to-day transactions in the banking book generating profit and loss or fair value through other comprehensive income reserves in a currency different from the entity’s reporting currency.

Transactional foreign exchange exposure generated through profit and loss is periodically transferred to Markets and Securities Services (‘MSS’) 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 other comprehensive income reserves is managed by Global Treasury within the approved appetite.

u For commentary on hedging strategies, see pages 87 and 92.

## Own funds
The table below provides a detailed breakdown of the key components of our CET1, T1 and T2 capital, and the regulatory adjustments impacting our capital base. Effective 1 January 2025, the IFRS 9 transitional arrangements came to an end, followed by the end of the CRR II grandfathering provisions on 28 June 2025. Additional value adjustments are calculated on assets measured at fair value. The minimum deductions for holdings of own CET1, AT1 and T2 capital instruments are set by the PRA. The threshold deduction for significant investments relates to balances recorded on numerous lines on the balance sheet and includes: investments in insurance subsidiaries and non-consolidated associates; other CET1 equity held in financial institutions; connected funding of a capital nature; and other balance sheet lines.

**Table 6: Composition of Regulatory own funds¹ (UK CC1)**

| Ref † | Common equity tier 1 (‘CET1’) capital: instruments and reserves \$m | At 31 Dec 2025 \$m | At 31 Dec 2024 \$m |
|---|---|---|---|
| 1 | Capital instruments and the related share premium accounts | 8,699 | 22,378 |
| | – ordinary shares | a | 8,699 | 22,378 |
| 2 | Retained earnings | b | 152,936 | 138,959 |
| 3 | Accumulated other comprehensive income (and other reserves) | c | (27) | (8,410) |
| 5 | Minority interests (amount allowed in consolidated CET1) | d | 3,303 | 3,960 |
| UK-5a | Independently reviewed interim net profits net of any foreseeable charge or dividend | b | 8,076 | 7,184 |
| 6 | Common equity tier 1 capital before regulatory adjustments | | 172,987 | 164,071 |
| | **Common equity tier 1 capital: regulatory adjustments** | | | |
| 7 | Additional value adjustments (negative amount) | | (1,348) | (1,141) |
| 8 | Intangible assets (net of related deferred tax liability) (negative amount) | e | (13,626) | (12,890) |
| 10 | Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability where the conditions in Article 38 (3) CRR II are met) (negative amount) | f | (3,076) | (3,513) |
| 11 | Fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not valued at fair value | g | | (450) | 1,057 |
| 12 | Negative amounts resulting from the calculation of expected loss amounts | h | (3,593) | (3,125) |
| 14 | Gains or losses on liabilities valued at fair value resulting from changes in own credit standing | i | 1,725 | 1,243 |
| 15 | Defined-benefit pension fund assets (negative amount) | j | (6,167) | (5,651) |
| 16 | Direct and indirect holdings of own CET1 instruments (negative amount) | | (40) | (40) |
| 19 | Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) | | (13,779) | (15,076) |
| 27a | Other regulatory adjustments to CET1 capital (including IFRS 9 transitional adjustments when relevant) | k | (40) | (24) |
| 28 | Total regulatory adjustments to common equity tier 1 capital | | (40,394) | (39,160) |
| 29 | **Common equity tier 1 (‘CET1’) capital** | | **132,593** | **124,911** |
| | **Additional tier 1 (‘AT1’) capital: instruments** | | | |
| 30 | Capital instruments and the related share premium accounts | | 20,716 | 19,070 |
| 31 | – classified as equity under IFRSs | l | 20,716 | 19,070 |
| 34 | Qualifying tier 1 capital included in consolidated AT1 capital (including minority interests not included in CET1) issued by subsidiaries and held by third parties | m | 158 | 216 |
| 36 | Additional tier 1 capital before regulatory adjustments | | 20,874 | 19,286 |
| | **Additional tier 1 capital: regulatory adjustments** | | | |
| 37 | Direct and indirect holdings of own AT1 instruments (negative amount) | | (70) | (70) |
| 43 | Total regulatory adjustments to additional Tier 1 capital | | (70) | (70) |
| 44 | **Additional tier 1 capital** | | **20,804** | **19,216** |
| 45 | **Tier 1 capital (T1 = CET1 + AT1)** | | **153,397** | **144,127** |
| | **Tier 2 capital: instruments and provisions** | | | |
| 46 | Capital instruments and the related share premium accounts | n | 29,061 | 24,292 |
| UK-47b | Amount of qualifying items referred to in Article 494b (2) CRR II subject to phase out from T2 | | — | 3,858 |
| 48 | Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in CET1 or AT1) issued by subsidiaries and held by third parties | o | 1,106 | 1,184 |
| 51 | Tier 2 capital before regulatory adjustments | | 30,167 | 29,334 |
| | **Tier 2 capital: regulatory adjustments** | | | |
| 52 | Direct, indirect and synthetic holdings by an institution of own T2 instruments and subordinated loans (negative amount) | | (110) | (80) |
| 55 | Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) | p | (1,083) | (995) |
| 57 | Total regulatory adjustments to tier 2 capital | | (1,193) | (1,075) |
| 58 | **Tier 2 capital** | | **28,974** | **28,259** |
| 59 | **Total capital (TC = T1 + T2)** | | **182,371** | **172,386** |
| 60 | **Total Risk exposure amount** | | **888,647** | **838,254** |

† The references (a)–(q) identify balance sheet components in ‘Table 2: Reconciliation of regulatory own funds to balance sheet in the audited financial statements (UK CC2)’, which are used in the calculation of regulatory capital. This table shows how they contribute to the regulatory capital calculation. Their contribution may differ from their accounting value in Table 2 as a result of adjustment or analysis to apply regulatory definitions of capital.

At 31 December 2025, our CET1 capital ratio remained at 14.9%, unchanged from 31 December 2024. The increase in CET1 capital of \$7.7bn was offset by an increase in RWAs of \$50.3bn. The key drivers of the movements within the CET1 ratio during the year were:
– a 0.5 percentage point increase from capital generation, mainly through regulatory profits net of dividends and share buy-backs. Share buy-backs were paused following the announcement of the privatisation of Hang Seng Bank;
– a 0.1 percentage point increase in the fair value of hold-to-collect and-sell debt instruments, following a decrease in yields, and the net impact from foreign exchange fluctuations, partly offset by regulatory deductions;
– a 0.2 percentage point decrease due to the loss on our portfolio of home and certain other loans in France under hold-to-collect-and sell, measured at FVOCI in 1Q25, which was partly offset by PRA waivers granted for the exclusion of operational risk RWAs in 2Q25; and
– a 0.4 percentage point decrease due to an increase in RWAs, mainly driven by organic balance sheet growth.

Our Pillar 2A requirement at 31 December 2025, as per the PRA’s Individual Capital Requirement based on a point-in-time assessment, was equivalent to 2.5% of RWAs, of which 1.4% must be met by CET1. Throughout 2025 we complied with the PRA’s regulatory capital adequacy requirement.

**Table 6: Composition of Regulatory own funds¹ (UK CC1) (continued)**

| Ref † | At 31 Dec 2025 \$m | At 31 Dec 2024 \$m |
|---|---|---|
| 61 | Common equity tier 1 (as a percentage of total risk exposure amount) | 14.9 | 14.9 |
| 62 | Tier 1 (as a percentage of total risk exposure amount) | 17.3 | 17.2 |
| 63 | Total capital (as a percentage of total risk exposure amount) | 20.5 | 20.6 |
| 64 | Institution CET1 overall capital requirement (per Article 92 (1) CRR II, plus additional requirement in accordance with point (a) of Article 104(1) CRR II, and combined buffer requirement in accordance with Article 128(6) CRR II as a percentage of risk exposure amount) | 11.1 | 11.1 |
| 65 | – capital conservation buffer requirement | 2.5 | 2.5 |
| 66 | – countercyclical buffer requirement | 0.7 | 0.7 |
| 67a | – Global systemically important institution (‘G-SII’) buffer | 2.0 | 2.0 |
| 68 | Common equity tier 1 available to meet buffers | 9.0 | 8.9 |
| | **Amounts below the threshold for deduction (before risk weighting)** | | |
| 72 | Direct and indirect holdings of own funds and eligible liabilities of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions) | 5,756 | 3,497 |
| 73 | Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 17.65% thresholds and net of eligible short positions) | 14,637 | 13,997 |
| 75 | Deferred tax assets arising from temporary differences (amount below 17.65% threshold, net of related tax liability where the conditions in Article 38 (3) CRR II are met) | 4,028 | 4,364 |
| | **Applicable caps on the inclusion of provisions in tier 2** | | |
| 77 | Cap on inclusion of credit risk adjustments in T2 under standardised approach | 2,555 | 2,251 |
| 79 | Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach | 3,067 | 3,015 |

† From 30 June 2025, the regulatory valuation of tier 2 capital includes the associated accrued interest. Prior periods have not been restated.

# Capital buffers
Our geographical breakdown and institution-specific countercyclical capital buffer (‘CCyB’) disclosure is provided on page 100 of this document. The global systemically important bank (‘G-SIB’) indicators disclosure is published annually on our website, www.hsbc.com/investors.

## Pillar 1 minimum capital requirements and RWA flow
Pillar 1 covers the minimum capital resource requirements for credit risk, counterparty credit risk (‘CCR’), equity, securitisation, market risk and operational risk. These requirements are expressed in terms of RWAs.

| Risk category | Scope of permissible approaches | Our approach |
|---|---|---|
| Credit risk | The Basel committee’s framework applies three approaches of increasing sophistication to the calculation of Pillar 1 credit risk capital requirements. The most basic level, the standardised approach, requires banks to use external credit ratings to determine the risk weightings applied to rated counterparties. Other counterparties are grouped into broad categories, and standardised risk weightings are applied to these categories. The next level, the Foundation IRB (‘FIRB’) approach, allows banks to calculate their credit risk capital requirements on the basis of their internal assessment of a counterparty’s probability of default (‘PD’), but subjects their quantified estimates of exposure at default (‘EAD’) and loss given default (‘LGD’) to standard supervisory parameters. Finally, the advanced IRB (‘AIRB’) approach allows banks to use their own internal assessment in both determining PD and quantifying EAD and LGD. | For consolidated Group reporting, we have adopted the AIRB approach for the majority of our business. Some portfolios utilise the standardised or FIRB approaches: pending the IRB model roll-out; following supervisory prescription of a non-advanced approach or under exemption from IRB treatment. |
| Counterparty credit risk | CCR covers the risk of counterparty default and potential mark-to-market losses in derivatives and securities financing transactions (‘SFTs’). The potential for mark-to-market losses is known as credit valuation adjustment (‘CVA’) risk. The exposure value, for a given netting set, is determined either by the credit risk mitigation (‘CRM’) approach, Standardised Approach for Counterparty Credit Risk (‘SA-CCR’), or by IMM. For SFTs either the simple or comprehensive approach is applied to recognition of collateral with SFTs or the Value at Risk (‘VaR’) approach. For CVA, permissible approaches are the Standardised Approach (‘SA-CVA’) and Advanced Approach (‘AA-CVA’). | We primarily use the SA-CCR and internal model method (‘IMM’) approaches for CCR. For CVA, we apply an approach consistent with our permissions. Details of the IMM permission we have received from the PRA can be found in the Financial Services Register on the PRA’s website. |
| Equity | Capital requirements for non-trading book holdings of equity can be assessed under the standardised or IRB approaches. Underlying equity positions within collective investment undertakings (‘CIU’) must be treated using the IRB equity simple risk-weight approach. | We calculate capital requirements for: – non-trading book equity holdings using the standardised approach; and – underlying equity positions within collective investments undertakings using the IRB equity simple risk-weight approach. |
| Securitisation | The framework prescribes the following approaches: – internal ratings-based approach (‘SEC-IRBA’); – standardised approach (‘SEC-SA’); – external ratings-based approach (‘SEC-ERBA’); and – internal assessment approach (‘IAA’). | Under the framework: – our originated positions are reported under SEC-IRBA; – our investment in third-party positions are reported under SEC-SA and SEC ERBA; and – our sponsored positions in Regency are reported under IAA. Our IAA approach is audited annually by internal model review and is subject to review by the PRA. For the definition of Regency securities, see page 87. |
| Market risk | Market risk capital requirements can be determined under either the standardised rules or the internal models approach (‘IMA’). The latter involves the use of internal value at risk (‘VaR’) models to measure market risks and determine the appropriate capital requirement. In addition to the VaR models, other internal models permitted under IMA include stressed value at risk (‘SVaR’), incremental risk charge (‘IRC’) and comprehensive risk measure. | The market risk capital requirement is measured using internal market risk models, where approved by the PRA, or under the standardised rules. Our internal market risk models comprise VaR, SVaR and IRC. Non-proprietary details of the scope of our IMA permissions are available in the Financial Services Register on the PRA’s website. |
| Operational risk | The PRA allows firms to calculate their operational risk capital requirement under the basic indicator approach, the standardised approach or the advanced measurement approach. | We use the standardised approach to determine our operational risk capital requirement. We have in place an economic capital model to assess operational risk capital requirements under Pillar 2. |

# Risk-weighted assets
The table below shows total RWAs including free deliveries, and the corresponding total own funds requirement split by risk type. Equities under the simple risk-weighted approach include off-balance sheet collective investment undertakings ('CIU') equity exposures, calculated as per the PRA Rulebook Article 132(c), and ‘Other counterparty credit risk’ includes securities financing transactions RWAs. Amounts below the thresholds for deduction are included in rows 2 and 5 of the table and include thresholds for the recognition of significant investments and deferred tax assets.

**Table 7: Overview of risk-weighted exposure amounts (OV1)**

| | **At 31 Dec 2025** | **At 30 Sep 2025** | **At 31 Dec 2024** |
|---|---|---|---|
| **RWAs \$m** | **Total own funds requirements \$m** | **RWAs \$m** | **Total own funds requirements \$m** | **RWAs \$m** | **Total own funds requirements \$m** |
| **1 Credit risk (excluding counterparty credit risk)** | **675,976** | **54,079** | **688,591** | **55,088** | **648,230** | **51,859** |
| 2 – standardised approach | 198,810 | 15,905 | 199,821 | 15,986 | 177,202 | 14,176 |
| 3 – foundation IRB approach | 87,373 | 6,989 | 93,494 | 7,480 | 84,195 | 6,736 |
| 4 – slotting approach | 21,883 | 1,751 | 21,994 | 1,760 | 22,269 | 1,782 |
| UK-4a – equities under the simple risk-weighted approach | 4,895 | 392 | 5,417 | 433 | 4,700 | 376 |
| 5 – advanced IRB approach | 363,015 | 29,042 | 367,865 | 29,429 | 359,864 | 28,789 |
| **6 Counterparty credit risk** | **42,380** | **3,390** | **42,270** | **3,381** | **37,642** | **3,012** |
| 7 – standardised approach | 9,641 | 771 | 10,052 | 804 | 9,225 | 738 |
| 8 – internal model method | 15,011 | 1,201 | 14,381 | 1,150 | 13,771 | 1,102 |
| UK-8a – exposures to a central counterparty | 2,293 | 183 | 2,589 | 207 | 1,808 | 145 |
| UK-8b – credit valuation adjustment | 1,294 | 104 | 1,709 | 137 | 2,235 | 179 |
| 9 – other counterparty credit risk | 14,141 | 1,131 | 13,539 | 1,083 | 10,603 | 848 |
| 15 Settlement risk | 54 | 4 | 88 | 7 | 40 | 3 |
| **16 Securitisation exposures in the non-trading book (after the cap)** | **11,031** | **882** | **9,910** | **793** | **9,665** | **774** |
| 17 – internal ratings-based approach (‘SEC-IRBA’) | 3,836 | 307 | 2,547 | 204 | 2,832 | 227 |
| 18 – external ratings-based approach (‘SEC-ERBA’) (including internal assessment approach (‘IAA’)) | 1,436 | 115 | 1,411 | 113 | 2,063 | 165 |
| 19 – standardised approach (‘SEC-SA’) | 5,541 | 443 | 5,775 | 462 | 4,488 | 359 |
| UK-19a – 1250%/deduction | 218 | 17 | 177 | 14 | 282 | 23 |
| **20 Position, foreign exchange and commodities risks (market risk)** | **38,490** | **3,079** | **28,903** | **2,312** | **36,205** | **2,897** |
| 21 – standardised approach | 16,182 | 1,294 | 10,086 | 807 | 9,334 | 747 |
| 22 – internal models approach | 22,308 | 1,785 | 18,817 | 1,505 | 26,871 | 2,150 |
| **Operational risk** | **120,716** | **9,657** | **109,031** | **8,722** | **106,472** | **8,518** |
| UK-23b – standardised approach | 120,716 | 9,657 | 109,031 | 8,722 | 106,472 | 8,518 |
| **29 Total** | **888,647** | **71,091** | **878,793** | **70,303** | **838,254** | **67,062** |
| **24 – of which: Amounts below the thresholds for deduction (subject to 250% risk weight)** | **46,665** | **3,733** | **46,278** | **3,702** | **45,784** | **3,663** |

The quarter-on-quarter RWA movements in the table above are explained by risk type in the following comments.

### Credit risk, including securitisation
Credit risk RWAs at 31 December 2025, including securitisation, decreased by \$11.5bn compared with 30 September 2025. This included an \$0.8bn increase from foreign currency translation differences and a \$12.3bn fall mainly attributable to:
– a \$10.6bn decrease mainly from credit risk parameter refinements including methodology changes to our undrawn exposures within the UK and CIB businesses, and a UK transaction where certain credit risk was transferred to a third party;
– a \$3.2bn decrease from asset quality movements primarily due to credit risk mitigations and portfolio mix changes in our Hong Kong and CIB businesses;
– a \$1.5bn decrease mainly due to the sale of our French retained portfolio of home and certain other loans; and
– a \$3.1bn increase from asset size movements largely driven by corporate lending in our UK business and in SAB within Corporate Centre.

### Counterparty credit risk, including settlement risk
Counterparty credit risk RWAs increased by \$0.1bn, due to risk parameter refinements that were largely offset by a decrease in the derivatives portfolio within our CIB business.

### Market risk
Market risk RWAs increased by \$9.5bn, mainly due to the \$5.7bn higher structural foreign exchange exposures to hedge the anticipated impact of the Hang Seng Bank privatisation and the stressed market conditions of the fourth quarter of 2025, which resulted in a \$1.5bn higher stressed value at risk, due to the changes in interest rate and foreign exchange risk profile.

### Operational risk
Operational risk RWAs increased by \$11.6bn, driven by higher average income across our businesses.

## RWA flow statements
The table below shows the drivers of the quarterly movements of credit risk RWAs, excluding counterparty credit risk and including free deliveries under the IRB approach. The table also excludes securitisation positions, equity exposures and non-credit obligation assets. Foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional currencies, and other movements in the table are presented on a constant currency basis.

**Table 8: RWA flow statements of credit risk exposures under the IRB approach (CR8)**

| | **Quarter ended 31 Dec 2025 \$m** | **Quarter ended 30 Sep 2025 \$m** | **Quarter ended 30 Jun 2025 \$m** | **Quarter ended 31 Mar 2025 \$m** |
|---|---|---|---|---|
| 1 | RWAs at the opening period | 471,315 | 477,551 | 467,474 | 454,249 |
| 2 | Asset size | 2,389 | 727 | 7,171 | 4,744 |
| 3 | Asset quality | (3,387) | (460) | (1,418) | 4,779 |
| 4 | Model updates | (17) | (1,458) | — | 49 |
| 5 | Methodology and policy | (10,538) | (3,271) | (7,722) | (1,216) |
| 6 | Acquisitions and disposals | (36) | — | — | — |
| 7 | Foreign exchange movements | 379 | (1,774) | 12,046 | 4,869 |
| 9 | RWAs at the closing period | 460,105 | 471,315 | 477,551 | 467,474 |

Excluding the \$0.4bn foreign exchange movements, RWAs under the IRB approach decreased by \$11.6bn during 4Q25. This was primarily due to credit risk parameter refinements including methodology changes to our undrawn exposures within the UK and CIB businesses, and a UK transaction where certain credit risk was transferred to a third party. A further decrease was from asset quality movements mainly due to credit risk mitigations and portfolio mix changes in our Hong Kong and CIB businesses.

The table below shows the drivers of the quarterly movements of counterparty credit risk RWAs under the internal model method approach.

**Table 9:RWA flow statements of CCR exposures under IMM (CCR7)**

| | **Quarter ended 31 Dec 2025 \$m** | **Quarter ended 30 Sep 2025 \$m** | **Quarter ended 30 Jun 2025 \$m** | **Quarter ended 31 Mar 2025 \$m** |
|---|---|---|---|---|
| 1 | RWAs at the opening period | 14,381 | 15,199 | 12,429 | 13,771 |
| 2 | Asset size | 410 | (720) | 2,247 | (1,120) |
| 3 | Credit quality of counterparties | (28) | (35) | 45 | 30 |
| 5 | Methodology and policy (IMM only) | 248 | (63) | 478 | (252) |
| 9 | RWAs at the closing period | 15,011 | 14,381 | 15,199 | 12,429 |

RWAs under the internal model method ('IMM') increased by \$0.6bn in 4Q25, primarily due to organic movements on account of mark-to market volatility and risk parameter refinements in our CIB business.

The table below shows the drivers of the quarterly movements of market risk RWAs under IMA, split by VaR, SVaR, IRC and other models. Rows 1a/1b and 8a/8b represent differences between RWAs reported for the period and RWAs calculated on a spot basis at the end of the reporting period, except RWAs in ‘Other’, which includes components that are calculated on an average basis.

**Table 10: RWA flow statements of market risk exposures under IMA (MR2-B)**

| | **VaR \$m** | **Stressed VaR \$m** | **IRC \$m** | **Other \$m** | **Total RWAs \$m** | **Total own funds requirements \$m** |
|---|---|---|---|---|---|---|
| **1 RWAs at 1 Oct 2025** | **5,226** | **7,253** | **4,568** | **1,770** | **18,817** | **1,505** |
| 1a Regulatory adjustment | (3,236) | (4,442) | (150) | — | (7,828) | (626) |
| 1b RWAs at the previous quarter end (end of day) | 1,990 | 2,811 | 4,418 | 1,770 | 10,989 | 879 |
| 2 Movement in risk levels | (304) | 158 | (224) | 173 | (197) | (16) |
| 4 Methodology and policy | — | — | — | 51 | 51 | 4 |
| 8a RWAs at the end of the reporting period (end of day) | 1,686 | 2,969 | 4,194 | 1,994 | 10,843 | 867 |
| 8b Regulatory adjustment | 4,011 | 6,492 | 962 | — | 11,465 | 918 |
| **8 RWAs at 31 Dec 2025** | **5,697** | **9,461** | **5,156** | **1,994** | **22,308** | **1,785** |
| **1 RWAs at 1 Jul 2025** | **5,147** | **10,448** | **5,302** | **2,141** | **23,038** | **1,843** |
| 1a Regulatory adjustment | (3,598) | (8,164) | (879) | — | (12,641) | (1,011) |
| 1b RWAs at the previous quarter end (end of day) | 1,549 | 2,284 | 4,423 | 2,141 | 10,397 | 832 |
| 2 Movement in risk levels | 441 | 527 | (5) | (371) | 592 | 47 |
| 8a RWAs at the end of the reporting period (end of day) | 1,990 | 2,811 | 4,418 | 1,770 | 10,989 | 879 |
| 8b Regulatory adjustment | 3,236 | 4,442 | 150 | — | 7,828 | 626 |
| **8 RWAs at 30 Sep 2025** | **5,226** | **7,253** | **4,568** | **1,770** | **18,817** | **1,505** |

RWAs under IMA increased by \$3.5bn during 4Q25, mainly due to stressed market conditions resulting in higher SVaR due to the impact of changes to the interest rate and foreign exchange risk profile.

# Leverage
We manage our leverage ratio in order to maintain appropriate levels of leverage to support our business strategy, and meet our regulatory and stress testing-related requirements.

Management continuously monitors key regulatory metrics, including leverage exposures and the leverage ratio, as part of the Group’s capital and balance sheet management framework and risk appetite. Changes in the leverage ratio during the period also reflected internal strategic management actions. Where appropriate, actions are taken either directly to manage leverage exposures – such as balance sheet optimisation, funding and collateral management, and the use of netting or compression techniques – or indirectly through broader business and strategic decisions, including changes in business mix, client activity, and treasury positioning. While these actions are not always undertaken with the sole objective of managing the leverage ratio, they may nevertheless have a consequential impact on the Group’s leverage exposure measure and leverage ratio. Throughout the period, management actions were undertaken within the context of maintaining a prudent leverage position and ensuring continued compliance with regulatory requirements and internal risk appetite thresholds.

The risk of excessive leverage is managed as part of HSBC’s global risk appetite framework and monitored using the leverage ratio metric within the risk appetite statement (‘RAS’).

u For further details of our Treasury risk management framework see page 156 of the Annual Report and Accounts 2025.

The table below provides a detailed breakdown of the components of our leverage exposure, including the split of the on- and off-balance sheet exposures, leverage ratios, minimum requirements and buffers. Effective 1 January 2025, the IFRS 9 transitional arrangements came to an end. The components of the leverage ratio on an average basis are included below in accordance with the UK’s leverage ratio framework.

**Table 11: Leverage ratio common disclosure (UK LR2-LRCom)**

| | **At 31 Dec 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|
| **On-balance sheet exposures (excluding derivatives, SFTs, but including collateral)** | **2,531.7** | **2,342.9** |
| 2 Gross-up for derivatives collateral provided, where deducted from the balance sheet assets pursuant to the applicable accounting framework | 11.6 | 5.6 |
| 3 (Deductions of receivables assets for cash variation margin provided in derivatives transactions) | (56.0) | (54.3) |
| 6 (Asset amounts deducted in determining tier 1 capital (leverage)) | (40.4) | (40.4) |
| **7 Total on-balance sheet exposures (excluding derivatives and SFTs)** | **2,446.9** | **2,253.8** |
| **Derivative exposures** | | |
| 8 Replacement cost associated with SA-CCR derivatives transactions (i.e. net of eligible cash variation margin) | 42.4 | 60.3 |
| 9 Add-on amounts for potential future exposure associated with SA-CCR derivatives transactions | 132.1 | 114.9 |
| 10 (Exempted CCP leg of client-cleared trade exposures) (SA-CCR) | (30.1) | (33.9) |
| 11 Adjusted effective notional amount of written credit derivatives | 62.6 | 56.6 |
| 12 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) | (57.1) | (54.7) |
| **13 Total derivative exposures** | **149.9** | **143.2** |
| **SFT exposures** | | |
| 14 Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions | 641.5 | 486.8 |
| 15 (Netted amounts of cash payables and cash receivables of gross SFT assets) | (286.4) | (190.7) |
| 16 Counterparty credit risk exposure for SFT assets | 22.5 | 13.5 |
| **18 Total securities financing transaction exposures** | **377.6** | **309.6** |
| **Other off-balance sheet exposures** | | |
| 19 Off-balance sheet exposures at gross notional amount | 1,015.8 | 938.4 |
| 20 (Adjustments for conversion to credit equivalent amounts) | (752.0) | (707.2) |
| **22 Total off-balance sheet exposures** | **263.8** | **231.2** |
| **Capital and total exposures measure** | | |
| 23 Tier 1 capital (leverage) | 153.4 | 144.1 |
| 24 Total exposure measure including claims on central banks | 3,238.2 | 2,937.8 |
| UK-24a (-) Claims on central banks excluded | (361.1) | (366.7) |
| UK-24b Total exposure measure excluding claims on central banks | 2,877.1 | 2,571.1 |
| **Leverage ratios** | | |
| 25 Leverage ratio excluding claims on central banks (%) | 5.3 | 5.6 |
| UK-25a Fully loaded ECL accounting model leverage ratio excluding claims on central banks (%) | 5.3 | 5.6 |
| UK-25b Leverage ratio excluding central bank reserves as if the temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income had not been applied (%) | 5.3 | 5.6 |
| UK-25c Leverage ratio including claims on central banks (%) | 4.7 | 4.9 |
| 26 Regulatory minimum leverage ratio requirement (%) | 3.3 | 3.3 |
| **Additional leverage ratio disclosure requirements – leverage ratio buffers** | | |
| 27 Leverage ratio buffer (%) | 0.9 | 0.9 |
| UK-27a – of which: G-SII or O-SII additional leverage ratio buffer (%) | 0.7 | 0.7 |
| UK-27b – of which: countercyclical leverage ratio buffer (%) | 0.2 | 0.2 |
| **Additional leverage ratio disclosure requirements – disclosure of mean values** | | |
| 28 Mean of daily values of gross SFT assets, after adjustment for sale accounting transactions and netted of amounts of associated cash payables and cash receivable | 359.6 | 297.2 |
| 29 Quarter-end value of gross SFT assets, after adjustment for sale accounting transactions and netted of amounts of associated cash payables and cash receivables | 355.1 | 296.1 |
| UK-31 Average total exposure measure including claims on central banks | 3,220.7 | 2,972.8 |
| UK-32 Average total exposure measure excluding claims on central banks | 2,862.2 | 2,608.4 |
| UK-33 Average leverage ratio including claims on central banks (%) | 4.7 | 4.9 |
| UK-34 Average leverage ratio excluding claims on central banks (%) | 5.3 | 5.5 |

Our leverage ratio was 5.3% at 31 December 2025 down from 5.6% at 31 December 2024. The increase in the leverage exposures led to a 0.6 percentage points fall in the leverage ratio, which was partly offset by higher tier 1 capital of 0.3 percentage points.The change in leverage exposure was driven by 0.4 percentage points increase due to growth in the balance sheet and by a 0.2 percentage points increase from foreign currency translation differences.

Balance sheet growth was mainly due to higher investments in debt securities and trading assets within our CIB and Hong Kong businesses, increased customer advances and commitments mainly across all business segments, and higher secured financing transactions in our CIB and UK businesses.

At 31 December 2025, our UK minimum leverage ratio requirement was 3.25%, with an additional buffer of 0.9% - comprising a 0.7% additional leverage ratio buffer and a 0.2% countercyclical leverage ratio buffer. These buffers translated into capital values of \$20.1bn and \$5.8bn, respectively. We exceeded these leverage requirements throughout 2025.

The average leverage ratio was 5.3% at 31 December 2025, down from 5.5% at 31 December 2024. The increase in the average leverage exposures led to a 0.5 percentage points fall in the average leverage ratio, mainly driven by growth in the average balance sheet. This was partly offset by 0.3 percentage points increase in average tier 1 capital.

The table below provides a reconciliation of the total assets in our published balance sheet under IFRS and the total leverage exposure.

**Table 12: Summary reconciliation of accounting assets and leverage ratio exposures (UK LR1- LRSum)**

| | **At 31 Dec 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|
| 1 | Total assets as per published financial statements | 3,233.0 | 3,017.0 |
| 2 | Adjustment for entities which are consolidated for accounting purposes but are outside the scope of prudential consolidation | (103.2) | (108.2) |
| 3 | (Adjustment for securitised exposures that meet the operational requirements for the recognition of risk transference) | (0.8) | (0.9) |
| 4 | (Adjustment for exemption of exposures to central banks) | (361.1) | (366.7) |
| 6 | Adjustment for regular-way purchases and sales of financial assets subject to trade date accounting | (24.3) | (12.5) |
| 7 | Adjustment for eligible cash pooling transactions | (7.1) | (6.8) |
| 8 | Adjustment for derivative financial instruments | (132.5) | (174.4) |
| 9 | Adjustment for securities financing transactions (‘SFTs’) | 41.6 | 30.6 |
| 10 | Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet exposures) | 263.8 | 231.2 |
| 11 | (Adjustment for prudent valuation adjustments and specific and general provisions which have reduced tier 1 capital (leverage)) | (40.4) | (40.4) |
| 12 | Other adjustments | 8.1 | 2.2 |
| **13** | **Total leverage ratio exposure** | **2,877.1** | **2,571.1** |

The table below provides a breakdown of on-balance sheet exposures excluding derivatives, SFTs and exempted exposures by asset class.

**Table 13: Leverage ratio – split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (UK LR3-LRSpl)**

| | **At 31 Dec 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|
| UK-1 | Total on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures), of which: | 2,114.6 | 1,921.9 |
| UK-2 | Trading book exposures | 342.6 | 285.6 |
| UK-3 | Banking book exposures, – of which: | 1,772.0 | 1,636.3 |
| UK-4 | – Covered bonds | 3.1 | 2.0 |
| UK-5 | – Exposures treated as sovereigns | 483.9 | 429.2 |
| UK-6 | – Exposures to regional governments, multilateral development banks, international organisations and public sector entities not treated as sovereigns | 2.0 | 2.6 |
| UK-7 | – Institutions | 73.4 | 69.1 |
| UK-8 | – Secured by mortgages of immovable properties | 389.4 | 362.9 |
| UK-9 | – Retail exposures | 71.3 | 71.3 |
| UK-10 | – Corporates | 515.3 | 492.8 |
| UK-11 | – Exposures in default | 17.3 | 16.1 |
| UK-12 | – Other exposures (e.g. equity, securitisations and other non-credit obligation assets) | 216.3 | 190.3 |

# Liquidity

## Management of liquidity and funding risk
We manage liquidity and funding risk at an operating entity level, in accordance with globally consistent policies, procedures and reporting standards.

### Liquidity coverage ratio
The LCR aims to ensure that a bank has sufficient unencumbered HQLA to meet its liquidity needs in a 30 calendar day liquidity stress scenario. For the disclosure of the LCR, we follow Article 451a of CRR II.

The average Group LCR for the 12 months to 31 December 2025 was 137% or \$190bn above the regulatory requirement and 138% or \$179bn for the 12 months to 31 December 2024. At 31 December 2025, our Group LCR and all of the material operating entities remained above their minimum required regulatory levels. The Group consolidation methodology includes a deduction to reflect the impact of limitations in the transferability of entity liquidity around the Group. The result was an adjustment of \$160bn to LCR HQLA and \$5bn to LCR inflows on an average basis.

The average Group LCR HQLA of \$702bn (31 December 2024: \$649bn) was held in a range of asset classes and currencies.

The Group and its entities actively manage liquidity and funding drivers within its balance sheet, including derivatives and collateral management.

### Cross-currency management
The Group’s internal liquidity and funding risk management framework requires all operating entities to monitor the material currency positions. Limits are set to ensure that outflows can be met, given assumptions on stressed capacity in the foreign exchange swap markets. This continuous monitoring helps with the overall management of currency exposures, in line with our internal framework.

## Net stable funding ratio
We use the NSFR or other appropriate metrics as a basis for ensuring operating entities maintain a stable funding profile to support their business activities. The NSFR is defined as the ratio between the amount of stable funding available and the amount of stable funding required. The average Group NSFR over the previous four quarters remained at 143% at 31 December 2025, unchanged from 31 December 2024.

## 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 funding risk management framework seeks to ensure operating entities maintain a diversified funding profile defined in their funding plans which are taken through regular governance, in line with globally consistent policies and standards. Diversification is achieved through a balanced mix of funding sources, tenors, currencies and geographies, seeking to mitigate concentration risks and to avoid extraordinary reliance on central banks or intra-group funding support. The framework requires entities to have policies, processes and controls for monitoring and managing funding by tenors and sources, supported by governance of limits. Entities also model cashflows from maturing short-term debts within the internal liquidity monitoring to help ensure sufficient liquidity is maintained to meet the maturing debt obligations.

u For further details of our approach to treasury risk management, see page 156 of the Annual Report and Accounts 2025.
u More details on the concentration of funding and liquidity sources may be found on page 161 of the Annual Report and Accounts 2025.

The table below sets out the granular split of cash outflows and cash inflows, as well as the available HQLA on both an unweighted and weighted basis, which are used to derive the LCR. All figures are based on the average over the preceding 12 months.

**Table 14: Quantitative information of LCR (UK LIQ1)**

| | **Quarter ended 31 Dec 2025** | **Quarter ended 30 Sep 2025** | **Quarter ended 30 Jun 2025** | **Quarter ended 31 Mar 2025** |
|---|---|---|---|---|
| | **Total unweighted value \$m** | **Total weighted value \$m** | **Total unweighted value \$m** | **Total weighted value \$m** | **Total unweighted value \$m** | **Total weighted value \$m** | **Total unweighted value \$m** | **Total weighted value \$m** |
| UK-1b | Number of data points used in the calculation of averages | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 |
| **High quality liquid assets** | | | | | | | | |
| 1 | Total high quality liquid assets (‘HQLA’) | 702,123 | 690,157 | 678,059 | 660,704 | | | | |
| **Cash outflows** | | | | | | | | |
| 2 | Retail deposits and small business funding | 880,824 | 95,013 | 869,479 | 93,823 | 858,824 | 92,919 | 841,474 | 91,377 |
| – of which: | | | | | | | | |
| 3 | stable deposits | 385,826 | 19,291 | 380,105 | 19,005 | 369,514 | 18,476 | 356,188 | 17,809 |
| 4 | less stable deposits | 494,998 | 75,722 | 489,374 | 74,818 | 489,310 | 74,443 | 485,286 | 73,568 |
| 5 | Unsecured wholesale funding | 836,769 | 384,384 | 822,617 | 377,597 | 811,908 | 370,670 | 797,686 | 363,636 |
| 6 | – operational deposits (all counterparties) and deposits in networks of cooperative banks | 256,413 | 62,495 | 252,512 | 61,565 | 251,183 | 61,280 | 247,716 | 60,465 |
| 7 | – non-operational deposits (all counterparties) | 568,558 | 310,091 | 558,161 | 304,088 | 549,061 | 297,726 | 538,213 | 291,414 |
| 8 | – unsecured debt | 11,798 | 11,798 | 11,944 | 11,944 | 11,664 | 11,664 | 11,757 | 11,757 |
| 9 | Secured wholesale funding | 37,536 | 35,283 | 34,283 | 33,373 | | | | |
| 10 | Additional requirements | 372,458 | 104,840 | 362,110 | 102,302 | 355,419 | 100,118 | 349,090 | 97,266 |
| 11 | – outflows related to derivative exposures and other collateral requirements | 52,608 | 44,140 | 52,655 | 43,828 | 52,198 | 43,038 | 50,502 | 41,311 |
| 13 | – credit and liquidity facilities | 319,850 | 60,700 | 309,455 | 58,474 | 303,221 | 57,080 | 298,588 | 55,955 |
| 14 | Other contractual funding obligations | 90,722 | 48,016 | 88,439 | 47,481 | 87,620 | 47,300 | 88,801 | 48,859 |
| 15 | Other contingent funding obligations | 664,016 | 27,232 | 657,033 | 25,713 | 650,477 | 24,138 | 642,402 | 22,796 |
| **16 Total cash outflows** | | **697,021** | | **682,199** | | **669,428** | | **657,307** |
| **Cash inflows** | | | | | | | | |
| 17 | Secured lending transactions (including reverse repos) | 447,356 | 57,670 | 424,841 | 55,385 | 409,611 | 53,108 | 389,140 | 50,119 |
| 18 | Inflows from fully performing exposures | 95,474 | 70,108 | 95,654 | 70,797 | 97,982 | 73,092 | 100,148 | 75,459 |
| 19 | Other cash inflows | 94,592 | 57,151 | 97,671 | 57,737 | 103,266 | 57,710 | 107,002 | 56,495 |
| **20 Total cash inflows** | | **637,422** | | **618,166** | | **610,859** | | **596,290** | |
| UK-20c | Inflows subject to 75% Cap | 637,422 | 184,929 | 618,166 | 183,919 | 610,859 | 183,910 | 596,290 | 182,073 |
| **Liquidity coverage ratio (Adjusted value)** | | | | | | | | |
| UK-21 | Liquidity Buffer | 702,123 | 690,157 | 678,059 | 660,704 |
| 22 | Total net cash outflows | 512,092 | 498,280 | 485,518 | 475,234 |
| 23 | Liquidity coverage ratio (%) | 137 | 139 | 140 | 139 |

## Net stable funding ratio
The table below shows the components of the NSFR for unweighted values by residual maturity and the resultant weighted amounts. The NSFR is the average of the preceding four quarters.

**Table 15: Net stable funding ratio (UK LIQ2)**

| | **31 Dec 2025** | | | | **31 Dec 2024** |
|---|---|---|---|---|---|
| | **No maturity \$m** | **< 6 months \$m** | **6 months to < 1yr \$m** | **≥ 1yr \$m** | **Weighted value \$m** | **Weighted value \$m** |
| **Available stable funding (‘ASF’) Items** | | | | | | |
| 1 | Capital items and instruments | 186,580 | — | — | 29,142 | 215,722 | 212,569 |
| 2 | – Own funds | 186,580 | — | — | 29,142 | 215,722 | 212,569 |
| 4 | Retail deposits | 899,863 | 1,424 | 2,375 | 833,131 | | 779,605 |
| 5 | – Stable deposits | 394,419 | 47 | 1 | 374,704 | | 333,806 |
| 6 | – Less stable deposits | 505,444 | 1,377 | 2,374 | 458,427 | | 445,799 |
| 7 | Wholesale funding: | 1,199,160 | 39,089 | 155,334 | 563,522 | | 525,447 |
| 8 | – Operational deposits | 268,777 | — | — | 134,389 | | 118,013 |
| 9 | – Other wholesale funding | 930,383 | 39,089 | 155,334 | 429,133 | | 407,434 |
| 10 | Interdependent liabilities | 8,982 | — | — | — | | — |
| 11 | Other liabilities: | 1,852 | 226,098 | 235 | 9,039 | 8,629 | 5,786 |
| 12 | – NSFR derivative liabilities | 1,852 | | | | | |
| 13 | – All other liabilities and capital instruments not included in the above categories | | 226,098 | 235 | 9,039 | 8,629 | 5,786 |
| **14 Total available stable funding (‘ASF’)** | | | | | **1,621,004** | **1,523,407** |
| **Required stable funding (‘RSF’) Items** | | | | | | |
| 15 | Total high-quality liquid assets (‘HQLA’) | | | | | 69,728 | 67,798 |
| 16 | Deposits held at other financial institutions for operational purposes | 453 | — | — | 226 | | 296 |
| 17 | Performing loans and securities: | 550,215 | 108,811 | 837,926 | 858,528 | | 824,970 |
| 18 | – Performing securities financing transactions with financial customers collateralised by Level 1 HQLA subject to 0% haircut | 175,957 | 12,275 | 5,283 | 18,790 | | 13,947 |
| 19 | – Performing securities financing transactions with financial customer collateralised by other assets and loans and advances to financial institutions | 89,686 | 6,372 | 11,036 | 23,531 | | 19,402 |
| 20 | – Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, and PSEs | 143,937 | 51,357 | 280,038 | 330,391 | | 329,340 |
| 21 | – of which: With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk | 2,348 | 1,721 | 17,148 | 11,317 | | 23,862 |
| 22 | – Performing residential mortgages | 9,665 | 7,688 | 365,270 | 262,944 | | 243,710 |
| 23 | – of which: With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk | 6,571 | 6,624 | 328,146 | 229,309 | | 205,843 |
| 24 | – Other loans and securities that are not in default and do not qualify as HQLA, including exchange-traded equities and trade finance on-balance sheet products | 130,970 | 31,119 | 176,299 | 222,872 | | 218,571 |
| 25 | Interdependent assets | — | — | 9,987 | — | | — |
| 26 | Other assets: | 188,096 | 54 | 111,262 | 157,505 | | 132,550 |
| 27 | – Physical traded commodities | | | | | 19,248 | 16,361 |
| 28 | – Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs | 39,862 | — | — | 33,883 | | 29,777 |
| 30 | – NSFR derivative liabilities before deduction of variation margin posted | 89,763 | — | — | 4,676 | | 4,830 |
| 31 | – All other assets not included in the above categories | 58,471 | 54 | 92,014 | 102,585 | | 85,783 |
| 32 | Off-balance sheet items | 196,727 | 85,966 | 703,410 | 47,362 | | 38,877 |
| **33 Total RSF** | | | | | **1,133,349** | **1,064,491** |
| **34 Net stable funding ratio (%)** | | | | | **143** | **143** |

**Table 15: Net stable funding ratio (UK LIQ2) (continued)**

| | **31 Dec 2024** | | | | |
|---|---|---|---|---|---|
| | **No maturity \$m** | **< 6 months \$m** | **6 months to < 1yr \$m** | **≥ 1yr \$m** | **Weighted value \$m** |
| **Available stable funding (‘ASF’) items** | | | | | |
| 1 | Capital items and instruments | 183,355 | 40 | 234 | 29,219 | 212,569 |
| 2 | – Own funds | 183,355 | 40 | 234 | 29,219 | 212,569 |
| 4 | Retail deposits | 845,389 | 351 | 990 | 779,605 | |
| 5 | – Stable deposits | 351,341 | 71 | 1 | 333,806 | |
| 6 | – Less stable deposits | 494,048 | 280 | 989 | 445,799 | |
| 7 | Wholesale funding: | 1,139,335 | 42,884 | 143,605 | 525,447 | |
| 8 | – Operational deposits | 236,022 | — | — | 118,013 | |
| 9 | – Other wholesale funding | 903,313 | 42,880 | 143,605 | 407,434 | |
| 10 | Interdependent liabilities | 3,681 | — | — | — | |
| 11 | Other liabilities: | 2,775 | 241,996 | 317 | 5,789 | 5,786 |
| 12 | – NSFR derivative liabilities | 2,775 | | | | |
| 13 | – All other liabilities and capital instruments not included in the above categories | | 241,996 | 317 | 5,789 | 5,786 |
| **14 Total available stable funding (‘ASF’)** | | | | | **1,523,407** |
| **Required stable funding (‘RSF’) Items** | | | | | |
| 15 | Total high-quality liquid assets (‘HQLA’) | | | | | 67,798 |
| 16 | Deposits held at other financial institutions for operational purposes | 591 | — | — | 296 | |
| 17 | Performing loans and securities: | 531,192 | 99,530 | 806,162 | 824,970 | |
| 18 | – Performing securities financing transactions with financial customers collateralised by Level 1 HQLA subject to 0% haircut | 168,066 | 7,406 | 3,338 | 13,947 | |
| 19 | – Performing securities financing transactions with financial customer collateralised by other assets and loans and advances to financial institutions | 88,863 | 6,147 | 7,223 | 19,402 | |
| 20 | – Performing loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns, and PSEs | 143,943 | 54,110 | 267,634 | 329,340 | |
| 21 | – of which: With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk | 2,291 | 1,690 | 22,680 | 23,862 | |
| 22 | – Performing residential mortgages | 8,992 | 7,629 | 348,177 | 243,710 | |
| 23 | – of which: With a risk weight of less than or equal to 35% under the Basel II standardised approach for credit risk | 6,217 | 6,173 | 306,117 | 205,843 | |
| 24 | – Other loans and securities that are not in default and do not qualify as HQLA, including exchange-traded equities and trade finance on-balance sheet products | 121,328 | 24,238 | 179,790 | 218,571 | |
| 25 | Interdependent assets | — | — | 4,347 | — | |
| 26 | Other assets: | 193,348 | 41 | 89,880 | 132,550 | |
| 27 | – Physical traded commodities | | | | | 14,306 | 12,160 |
| 28 | – Assets posted as initial margin for derivative contracts and contributions to default funds of CCPs | 35,032 | — | — | 29,777 | |
| 30 | – NSFR derivative liabilities before deduction of variation margin posted | 92,569 | — | — | 4,830 | |
| 31 | – All other assets not included in the above categories | 65,747 | 41 | 75,574 | 85,783 | |
| 32 | Off-balance sheet items | 182,151 | 90,206 | 656,639 | 38,877 | |
| **33 Total RSF** | | | | | **1,064,491** |
| **34 Net stable funding ratio (%)** | | | | | **143** |

# Interest rate risk in the banking book
## Banking net interest income sensitivity and Economic value of equity sensitivity
Banking NII sensitivity is the sensitivity of our banking net interest income to interest rate shocks. This metric includes the sensitivity arising from the use of banking book liabilities to fund trading assets, as well as the impacts of vanilla foreign exchange swaps to optimise cash management across the Group. It is aligned with the presentation in the Group’s financial disclosures of banking NII as an alternative performance measure intended to approximate the Group’s banking revenue that is directly impacted by changes in interest rates.

The BNII sensitivities are shown in the $\Delta$NII column in the UK IRRBB1 table.

EVE sensitivity measures the impact to the present value of banking book assets and liabilities excluding equity, based on a run-off balance sheet, from a movement in interest rates, including the assumed term profile of non-maturing deposits ('NMDs') having adjusted for stability and price sensitivity. It is measured and reported as part of HSBC’s internal risk metrics, regulatory rules (including the Supervisory Outlier Test) and external Pillar 3 disclosure. The Group and operating entities monitor EVE sensitivities as a percentage of their capital resources.

The measurement frequency of BNII sensitivity and EVE sensitivity is quarterly, and for the material entities we assess this monthly.

## Interest rate shock and stress scenarios applied
The BNII sensitivities are indicative and based on the shocks prescribed by the PRA instructions (Rule 9.7 of the PRA Rulebook: CRR II Firms: Internal Capital Adequacy Assessment) and in accordance with Article 448(1) of the CRR II.

The BNII sensitivity calculations are done under the following shocks:
– parallel up;
– parallel down.

These shocks consider an immediate impact of +/-200 basis points for US dollars, euros, Hong Kong dollars and +/-250 basis points for pounds sterling to the current market-implied path of interest rates across all four currencies (effects over one year); and other currency shocks are as per the regulatory guidelines (effects over one year).

The EVE sensitivities are based on the six PRA Supervisory Outlier Test shocks:
– parallel up;
– parallel down;
– steepener;
– flattener;
– short rates shock up; and
– short rates shock down.

## Key modelling assumptions
The banking NII sensitivities shown represent a hypothetical simulation of the base case banking NII, assuming a static balance sheet (specifically no assumed migration from current account to term deposits), and no management actions from Global Treasury. This also incorporates the effect of interest rate behaviouralisation, prepayment of mortgages and commercial margins. The sensitivity calculations exclude pensions, insurance exposures, and our interests in associates.

All forecasted market rates are based on implied forward rates from the reporting date. Customer pricing includes flooring where there are contractual obligations.

As the market and policy rates move, the degree to which these changes are passed on to customers will vary based on several factors, including the absolute level of market interest 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 asset pass-on 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.

For EVE sensitivities, commercial margins and other spread components have been excluded from the interest cash flows calculation, and all balance sheet items are discounted at risk free rates back to the reporting date. As prescribed by the regulator, the interest rate floors start at -1.0% for overnight yield curve tenors and increase five basis points per year to 0.0% at 20-year tenors. All of the negative values are netted with 50% of the positive values by currency, as per the regulatory guidelines.

NMDs are deposits that have no explicit maturity and no explicit repricing date, thus behavioural assumptions are applied.

The Pillar 3 disclosure has different assumptions to Group IRRBB’s internal model assumptions. These different assumptions include, but are not limited to, treatment of NMDs, shocks and flooring.

## Quantitative information on IRRBB
The most adverse BNII sensitivity scenario over the next 12 months is the parallel down shock, resulting in a decrease in projected BNII of \$8,136m as at 31 December 2025, compared with \$6,624m as at 31 December 2024.At 31 December 2025, the maximum decline in EVE was in the parallel up shock at \$10,881m. This is equivalent to 7.09% of tier 1 capital.

The changes in sensitivities have been driven by factors including balance sheet evolution, an increase in stabilisation activities in line with our strategy and modelling improvements. Additionally, the BNII sensitivity in the down scenario is further impacted due to rate floors in the context of lower prevailing market rates.

The average repricing maturity for NMDs as of 31 December 2025, was 16 months, which was stable compared with 31 December 2024. The longest repricing maturity for NMDs as of 31 December 2025, was 120 months.

u For further details of our IRRBB and BNII, see page 164 of the Annual Report and Accounts 2025.

**Table 16: Quantitative information on IRRBB (UK IRRBB1)**

| PD scale | **$\Delta$EVE \$m** | **$\Delta$NII \$m** | **Tier 1 capital \$m** |
|---|---|---|---|
| | **31 Dec 2025** | **31 Dec 2024** | **31 Dec 2025** | **31 Dec 2024** | **31 Dec 2025** | **31 Dec 2024** |
| 10 Parallel shock up | (10,881) | (8,369) | 5,118 | 4,696 | | |
| 20 Parallel shock down | 5,355 | 4,095 | (8,136) | (6,624) | | |
| 30 Steepener shock | (607) | (460) | | | | |
| 40 Flattener shock | (2,188) | (1,648) | | | | |
| 50 Short rates shock up | (5,559) | (4,371) | | | | |
| 60 Short rates shock down | 2,810 | 2,211 | | | | |
| 70 Maximum | (10,881) | (8,369) | (8,136) | (6,624) | | |
| 80 Tier 1 capital | 153,397 | 144,127 | | | | |

## Asset encumbrance
The below asset encumbrance tables are prepared on the regulatory scope of consolidation basis consistent with the regulatory scope of consolidation used to prepare other liquidity reporting. Each of the reported values in the below tables is based on the average of the previous four quarters.

Assets pledged that are subject to any restrictions in withdrawal, such as assets that require prior approval before withdrawal or replacement by other assets, are considered encumbered.

The carrying amount of unencumbered assets includes amounts that are not readily available for encumbrance in the normal course of business, such as debt and equity securities designated through profit and loss, prepayments, accrued income and Hong Kong Government certificates of indebtedness.

HSBC Group has \$299bn of encumbered assets, which represents 9.7% of the total assets. The carrying amount of encumbered other assets is \$99bn, which is predominantly cash collateral posted for derivative margin requirements of \$58bn and loans and advances of \$27bn.

HSBC Group has \$2.8tn of unencumbered assets, which represents 90.3% of the total assets. The carrying amount of unencumbered other assets of \$2.1tn is predominantly loans and advances of \$1.4tn and derivatives financial assets of \$229bn.

The carrying amount of selected financial liabilities is \$325bn, which primarily relates to repurchase agreements of \$218bn and derivatives margin requirements of \$78bn.

HSBC has \$313bn of collateral encumbered, which represents 53% of the total collateral received.

### Importance of encumbrance
We are a deposit-led bank and hence the majority of our funding is from customer current accounts and customer savings deposits payable on demand or at short notice. Given this structural unsecured funding position, we have little requirement to fund ourselves in secured markets, and our overall low level of encumbrance reflects this position. However, we do provide collateralised financing services to clients as part of our CIB business model, providing cash financing or specific securities.

The other sources that contribute to encumbrance are securities pledged in derivative transactions, mostly for hedging purposes, issuance of asset-backed securities, and covered bond programmes. HSBC Holdings ALCO reviews the asset encumbrance of the institution as a whole quarterly, and any events changing the asset encumbrance level are examined.

The table below provides a split of on-balance sheet assets between encumbered and unencumbered.

**Table 17: Encumbered and unencumbered assets (UK AE1)**

| | **Carrying amount of encumbered assets \$m** | **Fair value of encumbered assets \$m** | **Carrying amount of unencumbered assets \$m** | **Fair value of unencumbered assets \$m** |
|---|---|---|---|---|
| | **Total** | **of which: notionally eligible EHQLA and HQLA** | **Total** | **of which: notionally eligible EHQLA and HQLA** | **Total** | **of which: EHQLA and HQLA** | **Total** | **of which: EHQLA and HQLA** |
| 010 | Assets of the reporting institution | 298,541 | 154,439 | 2,768,345 | 746,274 | | | | |
| 030 | Equity instruments | 50,030 | 26,750 | 50,030 | 26,750 | 114,870 | 22,701 | 114,870 | 22,701 |
| 040 | Debt securities | 149,756 | 127,689 | 149,635 | 127,689 | 552,043 | 468,012 | 551,217 | 467,312 |
| 050 | – of which: | | | | | | | | |
| | covered bonds | 162 | 162 | 162 | 162 | 11,992 | 11,311 | 11,995 | 11,311 |
| 060 | securitisations | 600 | — | 600 | — | 9,156 | 4,561 | 9,146 | 4,561 |
| 070 | issued by general governments | 139,390 | 123,277 | 139,270 | 123,277 | 429,971 | 382,592 | 429,220 | 381,923 |
| 080 | issued by financial corporations | 5,601 | 2,643 | 5,601 | 2,643 | 70,311 | 52,122 | 70,290 | 52,122 |
| 090 | issued by non-financial corporations | 3,799 | 1,042 | 3,799 | 1,042 | 16,559 | 4,645 | 16,561 | 4,646 |
| 120 | Other assets | 98,755 | — | 2,101,432 | 255,561 | | | | |

The table below provides details for collateral received and own debt securities issued.

**Table 18: Collateral received and own debt securities issued (UK AE2)**

| | **At 31 Dec 2025** | | |
|---|---|---|---|
| | **Fair value of encumbered collateral received or own debt securities issued \$m** | **Unencumbered Fair value of collateral received or own debt securities issued available for encumbrance \$m** |
| | **Total** | **of which: notionally eligible EHQLA and HQLA** | **Total** | **of which: EHQLA and HQLA** |
| 130 | Collateral received by the reporting institution | 313,429 | 216,476 | 281,637 | 184,279 |
| 150 | Equity instruments | 47,569 | 18,885 | 26,495 | 5,223 |
| 160 | Debt securities | 265,860 | 197,591 | 255,142 | 179,056 |
| 170 | – of which: | | | | |
| | covered bonds | 1,774 | 1,714 | 5,783 | 5,273 |
| 180 | securitisations | 1,571 | 2 | 7,975 | 1,428 |
| 190 | issued by general governments | 228,724 | 188,089 | 188,979 | 155,195 |
| 200 | issued by financial corporations | 25,676 | 5,812 | 36,664 | 9,263 |
| 210 | issued by non-financial corporations | 11,171 | 3,447 | 23,513 | 10,188 |
| 241 | Own covered bonds and asset-backed securities issued and not yet pledged | | | 2,948 | — |
| **250** | **Total assets, collateral received and own debt securities issued** | **611,970** | **370,915** | | |

The table below provides sources of encumbrance, values are the average of quarterly data points in the year.

**Table 19: Sources of encumbrance (UK AE3)**

| | Matching liabilities, contingent liabilities or securities lent \$m | Assets, collateral received and own debt securities issued other than covered bonds and securitisations encumbered \$m |
|---|---|---|
| 010 | Carrying amount of selected financial liabilities at 31 Dec 2025 | 325,020 | 453,738 |

# Pillar 2 and ICAAP

## Pillar 2
We conduct an Internal capital adequacy assessment process (‘ICAAP’) to determine a forward-looking assessment of our capital requirements given our business strategy, risk profile, risk appetite and capital plan. The process incorporates the Group’s risk management processes and governance framework. Economic capital models, coupled with stress testing and other risk assessment techniques, are used to assess our internal capital adequacy requirements and inform our view of our internal capital planning buffer. The ICAAP is formally approved by the Board, which holds ultimate responsibility for risk management.

The ICAAP is reviewed by the PRA as part of the joint risk assessment and decision process, during the Supervisory Review and Evaluation Process. This process occurs periodically to enable the regulator to define the individual capital requirement (‘ICR’) or total minimum capital requirements for HSBC, including Pillar 2A.

Pillar 2A considers any supplementary requirements for those risks assessed under Pillar 1, and any requirements for risk categories not captured under Pillar 1. The risk categories covered under Pillar 2A depend on the specific circumstances of a firm and the nature and scale of its business.

Pillar 2B, also known as the PRA buffer, consists of guidance from the PRA on the capital buffer a firm would require in order to remain above its ICR in adverse circumstances that may be largely outside the firm’s normal and direct control; for example, during a period of severe but plausible downturn stress, when asset values and the firm’s capital surplus may become strained. The assessment is informed by stress tests and a rounded judgement of a firm’s business model, also taking into account the PRA’s view of a firm’s options and capacity to protect its capital position under stress, such as through capital generation.

Where the PRA assesses that a firm’s risk management and governance are significantly weak, it may also increase the PRA buffer to cover the risks posed by those weaknesses until they are addressed.

The PRA buffer is not intended to duplicate the Capital Requirements Regulation and Directive (CRD IV) buffers, and is intended to be drawn upon in times of stress. Its use is not of itself a breach of capital requirements that would trigger automatic restrictions on distributions. In specific circumstances, the PRA should agree a plan with a firm for its restoration over an agreed timescale. The PRA buffer is not disclosed.

## Internal capital adequacy assessment
The Board manages the Group ICAAP and, together with the RMM and the GRC, it examines the Group’s risk profile from a regulatory and economic capital viewpoint. They aim to ensure that capital resources:
– remain sufficient to support our risk profile and outstanding commitments;
– meet current and future regulatory requirements;
– allow the Group to remain adequately capitalised in the event of a severe economic downturn stress scenario; and
– remain consistent with our strategic and operational goals, and our shareholder and investor expectations.

The minimum regulatory capital that we are required to hold is determined by the rules and guidance established by the PRA for the consolidated Group and by local regulators for individual Group companies. These capital requirements are a primary factor in influencing and shaping the business planning process, in which targets are established for our businesses in accordance with the Group’s strategic direction and risk appetite.

Economic capital is the internally calculated capital requirement that we deem necessary to support the risks to which we are exposed. The economic capital assessment is a more risk-sensitive measure than the regulatory minimum, and takes account of the diversification of risk accruing from our operations. Both the regulatory and the economic capital assessments rely upon the use of models that are integrated into our risk management processes.

Our economic capital models are calibrated to quantify the level of capital that is sufficient to absorb potential losses over a one-year time horizon to a 99.95% level of confidence for our credit risk, a 99.9% level of confidence for our trading and operational risks, and a 99.5% level of confidence for our insurance activities and pension risks.

Preserving our strong capital position remains a priority, and the level of integration of our risk and capital management helps to optimise our response to business demand for regulatory and economic capital. Risks that are explicitly assessed through economic capital are credit risk, counterparty credit risk, market risk, operational risk, IRRBB, insurance risk, pension risk and structural foreign exchange risk.

## Minimum requirement for own funds and eligible liabilities
### Overview and requirements
A minimum requirement for total loss-absorbing capacity (‘TLAC’) in line with the final standards adopted by the Financial Stability Board came into effect in the UK in January 2019. This includes a minimum requirement for own funds and eligible liabilities (‘MREL’).

MREL includes own funds and eligible 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. The framework is complemented with disclosure requirements and these disclosures are based on the formats provided in the Basel Committee Standards for Pillar 3 disclosures requirements.

HSBC’s preferred resolution strategy is a multiple point of entry (‘MPE’) bail-in, as determined by the BoE in coordination with HSBC’s other regulators and members of HSBC’s Global Crisis Management Group. This strategy provides flexibility for a resolution in two ways:
– through a bail-in at the HSBC Holdings level, which facilitates recapitalisation of operating bank subsidiaries in the Group (as required) through the write-down or conversion to equity of TLAC/ MREL issued on an intra-Group basis, while restructuring actions are undertaken, with the Group remaining together; and/or
– at a resolution group level pursuant to the application of statutory resolution powers by host resolution authorities locally.

HSBC is expected to maintain a sufficient amount of resources that can credibly and feasibly be used to absorb losses in resolution and recapitalise to a level that ensures compliance with the conditions for regulatory authorisation and sustains market confidence. Further details on HSBC’s resolvability can be found in our Resolvability Assessment Framework available on the hsbc.com website.

HSBC considers that the first option is the optimal strategy to deliver the most effective resolution outcome for its stakeholders, as it should help reduce the risk of disrupting the continuity of critical functions, including cross-border, wholesale services to clients between resolution groups and across the HSBC network, avoid the destruction of value associated with a disorderly and/or sudden break up of our business segment lines, and minimise the risk to public funds.

HSBC issues loss-absorbing instruments to external investors from HSBC Holdings in order to ensure loss-absorbing capacity is available to support the objectives of a resolution, were such an event to occur. In the event of a resolution of the Group, it is anticipated that the BoE will apply statutory powers to write down or convert to equity the TLAC/MREL issued externally by HSBC Holdings. This would enable operating bank subsidiaries of the Group to be recapitalised, as needed, to support the resolution objectives and maintain the provision of critical functions globally. Recapitalisation of operating bank subsidiaries could be achieved through the write-down, or conversion to equity, of internally issued TLAC/MREL as required. This approach to recapitalising the Group’s operating bank subsidiaries would aim to allow the Group to stay together to ensure an effective stabilisation of the Group as a whole and the continuity of critical functions, while also facilitating an orderly restructuring process, to address the cause of failure.

It is anticipated that any resolution of HSBC as a group would be coordinated by the BoE and the PRA as HSBC’s home resolution authority and prudential regulator, respectively. HSBC expects that the BoE would coordinate closely with the Group’s host resolution authorities outside the UK in the run-up to resolution and would seek to apply our resolution strategy pre-emptively to recapitalise operating bank subsidiaries as needed.

Given the Group’s corporate structure, HSBC is overseen by various regulators and resolution authorities. Host resolution authorities outside the UK could also use their statutory resolution powers in respect of their resolution groups for which they are responsible. This may occur, for example, in the event that host resolution authorities felt that holding the Group together may no longer achieve their resolution objectives. The application of these local statutory resolution powers may or may not result in such resolution groups ceasing to be part of the Group, depending on the resolution strategy adopted by the relevant host resolution authority. HSBC’s operating bank subsidiaries that are not part of the three resolution groups would be subject to relevant statutory proceedings independently of the rest of the Group, if the conditions to initiating such proceedings were met.

In line with its existing structure and business model, HSBC has three resolution groups - the European resolution group (‘ERG’), the Asian resolution group (‘ARG’) and the US resolution group (‘URG’). There are some smaller entities that fall outside of these resolution groups. The table below lists the resolution groups, the related resolution entities and their material subsidiaries that are subject to TLAC requirements.

## Resolution structure
| Resolution group | Resolution entity | Material entity or subgroup with MREL requirements |
|---|---|---|
| European resolution group | HSBC Holdings plc | HSBC UK Bank plc, HSBC Continental Europe |
| Asian resolution group | HSBC Asia Holdings Limited | The Hongkong and Shanghai Banking Corporation Limited, Hang Seng Bank Limited |
| US resolution group | HSBC North America Holdings Inc. | N/A |

The current binding requirement for the Group is the sum-of-the-parts (‘SoTP’) requirement, which is made up of the sum of each resolution group’s local regulatory requirements and other group entities’ local regulatory requirements.

Including capital buffers this requirement is equivalent to 28.4% of RWAs as at 31 December 2025 against which we have a buffer of \$40bn. The chart below highlights the Group’s binding requirements.

The external MREL requirement applicable in 2025 was the highest of the following:
– the sum of all loss absorbing capital (‘LAC’) requirements and other capital requirements relating to other Group entities or sub groups; or
– 18% of the Group’s consolidated RWAs; or
– 6.75% of the Group’s consolidated leverage exposure.

An additional requirement will take effect from 1 January 2026, equivalent to twice the combined Pillar 1 and Pillar 2 requirements, however we expect the SoTP requirement to remain binding.

## MREL/TLAC position versus requirements of Group RWAs

### Current binding requirement
```mermaid
pie
    title Current binding requirement
    "Own funds and eligible liabilities" : 32.9
    "SoTP requirement" : 28.4
```

**Composition of the SoTP requirement**
```mermaid
pie
    title Composition of the SoTP requirement
    "Europe" : 8.9
    "Asia" : 10.5
    "US" : 2.4
    "Other*" : 1.4
    "CET1 buffers¹" : 5.2
    "Total" : 28.4
```
¹ Group CET1 buffers are shown in addition to the MREL requirements. The requirements are calculated in accordance with PRA supervisory statement 16/16 updated in December 2020, and exclude Pillar 2B requirements.

* Capital or TLAC requirements relating to other Group entities.

HSBC Holdings is the provider of own funds, MREL-eligible debt and other types of funding to its subsidiaries. These investments are funded by HSBC Holdings’ own equity capital and MREL-eligible debt. In line with the BoE MREL statement of policy, non-CET1 own funds instruments issued to external holders are no longer eligible as external or internal MREL if issued by a non-resolution entity. Therefore, non-CET1 own funds issued by HSBC Bank plc and HSBC Bank USA do not qualify as external or internal MREL. Their eligibility as own funds is not impacted.

u For further details of our approach to capital management, see ‘Treasury risk management’ on page 156 of the Annual Report and Accounts 2025.

### Key metrics of the resolution groups
The Group and the ERG report in accordance with CRR II, while reporting for the ARG and URG follow the Hong Kong Monetary Authority (‘HKMA’) regulatory rules and US regulatory rules respectively. The ARG results reflect the implementation of the Basel 3.1 standards in Hong Kong from 1 January 2025.

IFRS9 transitional arrangements, and those in the US accounting standard corresponding to IFRS 9, ceased to apply after 31 December 2024. Accordingly, our current period capital figures are the same on both the transitional and end-point basis. No such arrangements applied in HKMA reporting.

Leverage exposures and ratios in the ERG exclude central bank claims, in line with UK PRA rules. For URG, leverage exposures and ratios are based on ‘total assets for the leverage ratio’ as reported in US regulatory capital calculations.

**Table 20.i: Key metrics of the European resolution group¹ (KM2)**

| | **At 31 Dec 2025 \$bn** | **At 30 Sep 2025 \$bn** | **At 30 Jun 2025 \$bn** | **At 31 Mar 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|---|---|---|
| 1 | Total loss absorbing capacity ('TLAC') available | 116.5 | 111.0 | 114.7 | 102.2 | 107.1 |
| 1a | Fully loaded ECL accounting model TLAC available | 116.5 | 111.0 | 114.7 | 102.2 | 107.0 |
| 2 | Total RWAs at the level of the resolution group | 327.7 | 319.4 | 322.6 | 298.1 | 290.9 |
| 3 | TLAC as a percentage of RWA (row1/row2) (%) | 35.5 | 34.7 | 35.6 | 34.3 | 36.8 |
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%) | 35.5 | 34.7 | 35.6 | 34.3 | 36.8 |
| 4 | Leverage exposure measure at the level of the resolution group | 1,163.3 | 1,144.6 | 1,123.6 | 1,026.1 | 966.8 |
| 5 | TLAC as a percentage of leverage exposure measure (row1/row4) (%) | 10.0 | 9.7 | 10.2 | 10.0 | 11.1 |
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage exposure measure (%) | 10.0 | 9.7 | 10.2 | 10.0 | 11.1 |
| 6a | Does the subordination exemption in the antepenultimate paragraph of section 11 of the FSB TLAC term sheet apply? | No | No | No | No | No |
| 6b | Does the subordination exemption in the penultimate paragraph of section 11 of the FSB TLAC term sheet apply? | No | No | No | No | No |
| 6c | If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%) | N/A | N/A | N/A | N/A | N/A |
1 From 30 June 2025, the regulatory valuation of tier 2 capital and TLAC includes the associated accrued interest. Prior periods have not been restated.

**Table 20.ii: Key metrics of the Asian resolution group (KM2)**

| | **At 31 Dec 2025 \$bn** | **At 30 Sep 2025 \$bn** | **At 30 Jun 2025 \$bn** | **At 31 Mar 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|---|---|---|
| 1 | Total loss absorbing capacity ('TLAC') available | 120.6 | 116.4 | 116.8 | 113.3 | 111.3 |
| 1a | Fully loaded ECL accounting model TLAC available | 120.6 | 116.4 | 116.8 | 113.3 | 111.3 |
| 2 | Total RWAs at the level of the resolution group | 380.0 | 388.7 | 383.4 | 383.6 | 407.8 |
| 3 | TLAC as a percentage of RWA (row1/row2) (%) | 31.7 | 29.9 | 30.5 | 29.5 | 27.3 |
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%) | 31.7 | 29.9 | 30.5 | 29.5 | 27.3 |
| 4 | Leverage exposure measure at the level of the resolution group | 1,384.6 | 1,379.9 | 1,354.3 | 1,306.1 | 1,292.1 |
| 5 | TLAC as a percentage of leverage exposure measure (row1/row4) (%) | 8.7 | 8.4 | 8.6 | 8.7 | 8.6 |
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage exposure measure (%) | 8.7 | 8.4 | 8.6 | 8.7 | 8.6 |
| 6a | Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply? | No | No | No | No | No |
| 6b | Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply? | No | No | No | No | No |
| 6c | If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%) | N/A | N/A | N/A | N/A | N/A |

**Table 20.iii: Key metrics of the US resolution group (KM2)**

| | **At 31 Dec 2025 \$bn** | **At 30 Sep 2025 \$bn** | **At 30 Jun 2025 \$bn** | **At 31 Mar 2025 \$bn** | **At 31 Dec 2024 \$bn** |
|---|---|---|---|---|---|
| 1 | Total loss absorbing capacity ('TLAC') available | 24.0 | 24.2 | 26.1 | 26.9 | 23.8 |
| 1a | Fully loaded ECL accounting model TLAC available | 24.0 | 24.2 | 26.1 | 26.9 | 23.8 |
| 2 | Total RWAs at the level of the resolution group | 109.7 | 110.9 | 110.8 | 109.0 | 106.4 |
| 3 | TLAC as a percentage of RWA (row1/row2) (%) | 21.9 | 21.8 | 23.6 | 24.7 | 22.3 |
| 3a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%) | 21.9 | 21.8 | 23.6 | 24.7 | 22.3 |
| 4 | Leverage exposure measure at the level of the resolution group | 237.6 | 238.4 | 237.5 | 233.3 | 233.4 |
| 5 | TLAC as a percentage of leverage exposure measure (row1/row4) (%) | 10.1 | 10.1 | 11.0 | 11.5 | 10.2 |
| 5a | Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage exposure measure (%) | 10.1 | 10.1 | 11.0 | 11.5 | 10.2 |
| 6a | Does the subordination exemption in the antepenultimate paragraph of section 11 of the FSB TLAC term sheet apply? | No | No | No | No | No |
| 6b | Does the subordination exemption in the penultimate paragraph of section 11 of the FSB TLAC term sheet apply? | No | No | No | No | No |
| 6c | If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with excluded liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with excluded liabilities and that would be recognised as external TLAC if no cap was applied (%) | N/A | N/A | N/A | N/A | N/A |

Given the MPE resolution strategy, and the fact that the BoE framework includes requirements set on the basis of the HSBC Group consolidated position, the following table presents data for both the consolidated Group and the resolution groups.

The ERG must meet minimum eligible liabilities requirements and it has no capital or leverage requirements. Total TLAC resources are reduced to avoid duplication of own funds and TLAC eligible liabilities across resolution groups and non-resolution group entities. This deduction is made on a corresponding basis in that the deduction is made from the same tier at which it is invested in each subsidiary.

To allow for this, we exclude these investments from the RWA calculation. The leverage exposure measure also excludes all items excluded from total TLAC resources rather than solely those from tier 1, as the ERG is not subject to capital or leverage requirements. This approach ensures that all items are treated consistently in both the numerator and denominators of both the TLAC/RWA and TLAC/leverage ratios.

The difference between Group CET1 and the aggregate of resolution groups’ CET1 is driven by entities that fall outside of the resolution groups and by differences in regulatory frameworks.

**Table 21: TLAC composition (TLAC1)**

| | **At 31 Dec 2025** | | | | | **At 31 Dec 2024** | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | **Group¹ \$bn** | **Resolution group** | | | **Group¹ \$bn** | **Resolution group** | | | |
| | | **European¹ \$bn** | **Asian \$bn** | **US \$bn** | | **European¹ \$bn** | **Asian \$bn** | **US \$bn** |
| **Regulatory capital elements of TLAC and adjustments (\$bn)** | | | | | | | | | |
| 1 | Common equity tier 1 capital ('CET1') | 132.6 | 19.3 | 72.4 | 12.4 | 124.9 | 19.2 | 66.5 | 12.9 |
| 2 | Additional tier 1 capital ('AT1') before TLAC adjustments | 20.8 | 20.5 | 10.2 | 1.6 | 19.2 | 19.0 | 8.4 | 1.6 |
| 4 | Other adjustments | — | (11.3) | — | — | — | (9.5) | — | — |
| 5 | AT1 instruments eligible under the TLAC framework | 20.8 | 9.2 | 10.2 | 1.6 | 19.2 | 9.5 | 8.4 | 1.6 |
| 6 | Tier 2 capital ('T2') before TLAC adjustments | 29.0 | 29.4 | 7.0 | 2.1 | 28.3 | 28.1 | 8.0 | 2.2 |
| 7 | Amortised portion of T2 instruments where remaining maturity > 1 year | 1.6 | — | — | — | 1.4 | 1.4 | — | — |
| 8 | T2 capital ineligible as TLAC as issued out of subsidiaries to third parties | (1.0) | (0.5) | — | — | (0.9) | (0.5) | — | — |
| 9 | Other adjustments | — | (10.0) | — | (2.1) | — | (9.4) | — | (2.2) |
| 10 | T2 instruments eligible under the TLAC framework | 29.6 | 20.5 | 7.0 | — | 28.8 | 19.6 | 8.0 | — |
| 11 | TLAC arising from regulatory capital | 183.0 | 49.0 | 89.6 | 14.0 | 172.9 | 48.3 | 82.9 | 14.5 |
| **Non-regulatory capital elements of TLAC** | | | | | | | | | |
| 12 | External TLAC instruments issued directly by the bank and subordinated to excluded liabilities | 109.3 | 109.3 | 31.0 | 10.0 | 96.5 | 96.5 | 28.4 | 9.3 |
| 17 | TLAC arising from non-regulatory capital instruments before adjustments | 109.3 | 109.3 | 31.0 | 10.0 | 96.5 | 96.5 | 28.4 | 9.3 |
| **Non-regulatory capital elements of TLAC: adjustments** | | | | | | | | | |
| 18 | TLAC before deductions | 292.3 | 158.3 | 120.6 | 24.0 | 269.4 | 144.8 | 111.3 | 23.8 |
| 19 | Deductions of exposures between MPE resolution groups that correspond to items eligible for TLAC ¹ | — | (41.8) | — | — | — | (37.7) | — | — |
| 22 | TLAC after deductions | 292.3 | 116.5 | 120.6 | 24.0 | 269.4 | 107.1 | 111.3 | 23.8 |
| **Risk-weighted assets and leverage exposure measure for TLAC purposes** | | | | | | | | | |
| 23 | Total risk-weighted assets | 888.6 | 327.7 | 380.0 | 109.7 | 838.3 | 290.9 | 407.8 | 106.4 |
| 24 | Leverage exposure measure | 2,877.1 | 1,163.3 | 1,384.6 | 237.6 | 2,571.1 | 966.8 | 1,292.1 | 233.4 |
| **TLAC ratios and buffers** | | | | | | | | | |
| 25 | TLAC (as a percentage of risk-weighted assets) | 32.9 | 35.5 | 31.7 | 21.9 | 32.1 | 36.8 | 27.3 | 22.3 |
| 26 | TLAC (as a percentage of leverage exposure) | 10.2 | 10.0 | 8.7 | 10.1 | 10.5 | 11.1 | 8.6 | 10.2 |
| 27 | CET1 (as a percentage of risk-weighted assets) available after meeting the resolution group’s minimum capital and TLAC requirements | 9.0 | N/A | N/A | 3.9 | 8.9 | N/A | N/A | 4.3 |
| 28 | Institution-specific buffer requirement expressed as a percentage of risk-weighted assets | 5.2 | N/A | N/A | 2.5 | 5.2 | N/A | N/A | 2.5 |
| 29 | – of which: | | | | | | | | |
| | capital conservation buffer requirement | 2.5 | N/A | N/A | 2.5 | 2.5 | N/A | N/A | 2.5 |
| 30 | bank specific countercyclical buffer requirement | 0.7 | N/A | N/A | N/A | 0.7 | N/A | N/A | N/A |
| 31 | higher loss absorbency (G-SIB) requirement | 2.0 | N/A | N/A | N/A | 2.0 | N/A | N/A | N/A |
1 From 30 June 2025, the regulatory valuation of tier 2 capital and TLAC includes the associated accrued interest. Prior periods have not been restated.

# Creditor ranking at legal entity level
The following tables present information regarding the ranking of creditors in the liability structure of HSBC legal entities at 31 December 2025.

u The main features of capital instruments disclosure for the Group, ARG and URG are published on our website, https://www.hsbc.com/investors/fixed-income-investors/regulatory-debt-main-features.

## European resolution group
The ERG comprises HSBC Holdings plc, the designated resolution entity, together with its material operating entities – namely HSBC Bank plc and its subsidiaries including HSBC Continental Europe, and HSBC UK Bank plc and its subsidiaries. The tables below present the ranking of creditors of HSBC Holdings plc and their material sub-group entities. Nominal values are disclosed.

**Table 22: HSBC Holdings plc creditor ranking (TLAC3)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares¹** | **2 Preference shares, AT1 instruments and certain \$m** | **3 Subordinated notes \$m** | **4 Senior notes and other pari passu liabilities \$m** |
| 1 | Description of creditor ranking | | | | |
| 2 | Total capital and liabilities net of credit risk mitigation | 8,588 | 20,895 | 35,075 | 116,486 | 181,044 |
| 3 | – of row 2 that are excluded liabilities² | — | — | — | 110 | 110 |
| 4 | Total capital and liabilities less excluded liabilities (row 2 minus row 3)³ | 8,588 | 20,895 | 35,075 | 116,376 | 180,934 |
| 5 | – of row 4 that are potentially eligible as TLAC³ | 8,588 | 20,895 | 31,289 | 109,702 | 170,474 |
| 6 | – of row 5: | | | | | |
| | with 1 year ≤ residual maturity < 2 years | — | — | 872 | 10,593 | 11,465 |
| 7 | with 2 years ≤ residual maturity < 5 years | — | — | 2,044 | 47,510 | 49,554 |
| 8 | with 5 years ≤ residual maturity < 10 years | — | — | 18,709 | 39,001 | 57,710 |
| 9 | with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | 8,772 | 12,598 | 21,370 |
| 10 | that are perpetual securities | 8,588 | 20,895 | — | — | 29,483 |

1 Excludes the value of share premium and reserves attributable to ordinary shareholders.
2 Excluded liabilities are defined in CRR II Article 72a (2). The current balance mainly relates to intercompany accruals for service company recharges.
3 The total difference between rows 4 and 5 represents senior securities of \$3.7bn (which are maturing within one year hence ineligible for TLAC), pari passu liabilities of \$2.2bn, and voluntarily derecognised legacy securities comprised of \$0.7bn senior securities and \$3.8bn subordinated securities.
4 The total difference of \$0.9bn between row 5 and the sum of rows 6-10 represents the full notional value of instruments maturing within one year, which are considered eligible for TLAC up to the value included in own funds.

**Table 23: HSBC UK Bank plc creditor ranking (TLAC2)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares²** | **2 AT1 instruments \$m** | **3 Subordinated loans \$m** | **4 Senior subordinated loans \$m** |
| 1 | Is the resolution entity the creditor/investor?¹ | Yes | Yes | Yes | Yes |
| 2 | Description of creditor ranking | | | | |
| 3 | Total capital and liabilities net of credit risk mitigation | — | 3,615 | 4,826 | 17,381 | 25,822 |
| 5 | Total capital and liabilities less excluded liabilities | — | 3,615 | 4,826 | 17,381 | 25,822 |
| 6 | – of row 5 that are eligible as TLAC | — | 3,615 | 4,826 | 17,381 | 25,822 |
| 7 | – of row 6 with 1 year ≤ residual maturity < 2 years | — | — | — | 1,342 | 1,342 |
| 8 | with 2 years ≤ residual maturity < 5 years | — | — | — | 12,686 | 12,686 |
| 9 | with 5 years ≤ residual maturity < 10 years | — | — | 3,360 | 3,353 | 6,713 |
| 10 | with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | 1,466 | — | 1,466 |
| 11 | that are perpetual securities | — | 3,615 | — | — | 3,615 |

1 The entity’s capital and TLAC are owned by HSBC Holdings plc.
2 The nominal value of ordinary shares is £50,002. This excludes the value of share premium and reserves attributable to ordinary shareholders.

**Table 24: HSBC Bank plc creditor ranking (TLAC2)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares²** | **2 Third Dollar preference shares and AT1 instruments \$m** | **3 Deeply Subordinated Notes \$m** | **4 Subordinated notes and subordinated loans \$m** | **4 Subordinated notes and subordinated loans \$m** |
| 1 | Is the resolution entity the creditor/investor?¹ | Yes | Yes | No | No | Yes |
| 2 | Description of creditor ranking | | | | | |
| 3 | Total capital and liabilities net of credit risk mitigation | 1,069 | 6,039 | 939 | 623 | 25,056 | 33,726 |
| 5 | Total capital and liabilities less excluded liabilities³ | 1,069 | 6,039 | 939 | 623 | 25,056 | 33,726 |
| 6 | – of row 5 that are eligible as TLAC | 1,069 | 6,039 | — | — | 25,056 | 32,164 |
| 7 | – of row 6: | | | | | |
| | with 1 year ≤ residual maturity < 2 years | — | — | — | — | 750 | 750 |
| 8 | with 2 years ≤ residual maturity < 5 years | — | — | — | — | 6,891 | 6,891 |
| 9 | with 5 years ≤ residual maturity < 10 years | — | — | — | — | 15,817 | 15,817 |
| 10 | with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | — | — | 1,598 | 1,598 |
| 11 | that are perpetual securities | 1,069 | 6,039 | — | — | — | 7,108 |

1 The entity’s ordinary shares are owned by HSBC Holdings plc.
2 Excludes the value of share premium and reserves attributable to ordinary shareholders.
3 The difference between row 5 and 6 relates to externally issued non-CET1 own funds.

## Asian resolution group
The ARG comprises HSBC Asia Holdings Limited, The Hongkong and Shanghai Banking Corporation Limited, Hang Seng Bank and their subsidiaries. HSBC Asia Holdings Ltd is the designated resolution entity and the entity’s capital and LAC are held by HSBC Holdings plc. The following tables present information regarding the ranking of creditors of HSBC Asia Holdings Limited, The Hongkong and Shanghai Banking Corporation Limited, and Hang Seng Bank.

**Table 25: HSBC Asia Holdings Ltd creditor ranking (TLAC3)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares** | **2 AT1 instruments \$m** | **3 Tier 2 instruments \$m** | **4 LAC loans \$m** |
| 1 | Description of creditor ranking | | | | |
| 2 | Total capital and liabilities net of credit risk mitigation | 57,587 | 10,288 | 3,086 | 30,868 | 101,829 |
| 4 | Total capital and liabilities less excluded liabilities | 57,587 | 10,288 | 3,086 | 30,868 | 101,829 |
| 5 | – of row 4 that are potentially eligible as TLAC | 57,587 | 10,288 | 3,086 | 30,868 | 101,829 |
| 6 | – of row 5 | | | | | |
| | with 1 year ≤ residual maturity < 2 years | — | — | — | 3,517 | 3,517 |
| 7 | with 2 years ≤ residual maturity < 5 years | — | — | — | 11,532 | 11,532 |
| 8 | with 5 years ≤ residual maturity < 10 years | — | — | 3,086 | 10,206 | 13,292 |
| 9 | with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | — | 5,613 | 5,613 |
| 10 | that are perpetual securities | 57,587 | 10,288 | — | — | 67,875 |

**Table 26: The Hongkong and Shanghai Banking Corporation Limited creditor ranking (TLAC2)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares** | **2 AT1 instruments \$m** | **3 Tier 2 instruments \$m** | **4 LAC loans \$m** |
| 1 | Is the resolution entity the creditor/investor? | Yes | Yes | Yes | Yes |
| 2 | Description of creditor ranking | | | | |
| 3 | Total capital and liabilities net of credit risk mitigation | 23,147 | 10,288 | 3,086 | 30,868 | 67,389 |
| 5 | Total capital and liabilities less excluded liabilities (row 3 minus row 4) | 23,147 | 10,288 | 3,086 | 30,868 | 67,389 |
| 6 | – of row 5 that are eligible as TLAC | 23,147 | 10,288 | 3,086 | 30,868 | 67,389 |
| 7 | – of row 6 with 1 year ≤ residual maturity < 2 years | — | — | — | 3,517 | 3,517 |
| 8 | – of row 6 with 2 years ≤ residual maturity < 5 years | — | — | — | 11,532 | 11,532 |
| 9 | – of row 6 with 5 years ≤ residual maturity < 10 years | — | — | 3,086 | 10,206 | 13,292 |
| 10 | – of row 6 with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | — | 5,613 | 5,613 |
| 11 | – of row 6 that are perpetual securities | 23,147 | 10,288 | — | — | 33,435 |

## US resolution group
The URG comprises HSBC North America Holdings Inc. and its subsidiaries. HSBC North America Holdings Inc. is the designated resolution entity. The following table presents information regarding the ranking of creditors of HSBC North America Holdings Inc.

**Table 28: HSBC North America Holdings Inc. creditor ranking¹ (TLAC3)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 4 (most senior)** |
|---|---|---|
| | **1 (most junior) Common stock²** | **2 Preferred stock \$m** | **3 Subordinated loans \$m** | **4 Senior unsecured loans and other pari passu liabilities \$m** |
| 1 | Description of creditor ranking | | | | |
| 2 | Total capital and liabilities net of credit risk mitigation | — | 1,640 | — | 14,522 | 16,162 |
| 3 | – of row 2 that are excluded liabilities³ | — | — | — | 217 | 217 |
| 4 | Total capital and liabilities less excluded liabilities (row 2 minus row 3)⁴ | — | 1,640 | — | 14,305 | 15,945 |
| 5 | – of row 4 that are potentially eligible as TLAC | — | 1,640 | — | 10,000 | 11,640 |
| 7 | – of row 5 | | | | | |
| | with 2 years ≤ residual maturity < 5 years | — | — | — | 4,750 | 4,750 |
| 8 | with 5 years ≤ residual maturity < 10 years | — | — | — | 3,250 | 3,250 |
| 9 | with residual maturity ≥ 10 years, but excluding perpetual securities | — | — | — | 2,000 | 2,000 |
| 10 | that are perpetual securities | — | 1,640 | — | — | 1,640 |

1 The entity’s capital and TLAC are held by HSBC Overseas Holdings (UK) Limited.
2 The nominal value of common stock is \$2. This excludes the value of share premium and reserves attributable to ordinary shareholders.
3 Excluded liabilities consists of ‘unrelated liabilities’ as defined in the Final US TLAC rules. This mainly represents accrued employee benefit obligations.
4 Row 4 includes liabilities related to intercompany borrowings with URG subsidiaries that are not eligible as TLAC.

**Table 27: Hang Seng Bank Ltd creditor ranking (TLAC2)**

| | **Creditor ranking (\$m)** | **Sum of 1 to 3 (most senior)** |
|---|---|---|
| | **1 (most junior) Ordinary shares** | **2 AT1 instruments \$m** | **3 LAC loans \$m** |
| 1 | Is the resolution entity the creditor/investor? | No | No | No |
| 2 | Description of creditor ranking | | | |
| 3 | Total capital and liabilities net of credit risk mitigation | 1,241 | 1,500 | 2,730 | 5,471 |
| 5 | Total capital and liabilities less excluded liabilities (row 3 minus row 4) | 1,241 | 1,500 | 2,730 | 5,471 |
| 6 | – of row 5 that are eligible as TLAC | 1,241 | 1,500 | 2,730 | 5,471 |
| 7 | – of row 6 with 1 year ≤ residual maturity < 2 years | — | — | 642 | 642 |
| 8 | – of row 6 with 2 years ≤ residual maturity < 5 years | — | — | 2,088 | 2,088 |
| 11 | – of row 6 that are perpetual securities | 1,241 | 1,500 | — | 2,741 |

**Table 28: HSBC North America Holdings Inc. creditor ranking¹ (TLAC3)**

See Table 28 above on page 36.

HSBC Holdings plc Pillar 3 Disclosures at 31 December 2025
35

# Credit risk
## Overview and responsibilities
Credit risk represents our largest regulatory capital requirement.

The principal objectives of our credit risk management function are:
– to maintain across HSBC a strong culture of responsible lending and a robust credit risk policy and control framework;
– to both partner and challenge our businesses in defining, implementing and continually re-evaluating our credit risk appetite under actual and stress scenario conditions; and
– to ensure there is independent, expert scrutiny of credit risks, their costs and their mitigation.

The credit risk functions within Wholesale and Retail Credit Risk Management are the constituent parts of Global Risk that support the GCRCO in overseeing credit risks. Their major duties comprise undertaking independent reviews of large and high-risk credit proposals, overseeing large exposure policy and reporting on our wholesale and retail credit risk management disciplines. They also own our credit policy and credit systems programmes, oversee portfolio management and report on risk matters to senior executive management and regulators.

These credit risk functions work closely with other parts of Global Risk, for example, with Enterprise Risk Management on the internal control framework and the risk appetite process. In addition, they work jointly with Treasury Risk and Global Finance on stress testing.

u For further details of the credit responsibilities of Global Risk, see page 99 of the Annual Report and Accounts 2025.

The credit risk functions form a network of credit risk management offices around the Group reporting within regional risk functions. They fulfil an essential role as independent risk control units distinct from business line management, providing objective scrutiny of risk rating assessments, credit proposals for approval and other risk matters.

Our credit risk procedures operate through a hierarchy of personal credit limit approval authorities. Operating company chief executives, acting under authorities delegated by their boards and Group standards, are accountable for credit risk and other risks in their business. In turn, chief executives delegate authority to operating company chief risk officers and management teams on an individual basis. Each operating company is responsible for the quality and performance of its credit portfolios in accordance with Group standards. Above these thresholds of delegated personal credit limited approval authorities, approval must be sought from the regional and, as appropriate, the global credit risk function.

## Credit risk management
### Credit risk
Our exposure to credit risk arises from a wide range of customer types and products, and the risk rating systems in place to measure and monitor these risks are correspondingly diverse. Senior management receives reports on our credit risk exposures, including expected credit losses (‘ECL’), total exposures and RWAs, as well as updates on specific portfolios that are considered to have heightened credit risk.

Credit risk exposures are generally measured and managed in portfolios of either customer types or product categories. Risk rating systems are designed to assess the PD and LGD associated with distinct customers who are typically managed as individual relationships or, in the case of retail business exposures, on a product portfolio basis.

Risk rating systems for retail exposures are generally quantitative in nature, applying techniques such as behavioural analysis across product portfolios comprising large numbers of homogeneous transactions.

Rating systems for individually managed relationships typically use customer financial statements and market data analysis, but also qualitative elements and a final judgemental overlay to reflect any relevant risk drivers not captured in the rating system.

u For further details of the application of the IRB approach, see page 59.

A fundamental principle of our policy and approach is that analytical risk rating systems and scorecards are valuable management tools that are fully embedded within the credit risk management framework, ensuring compliance with the regulatory use test requirements.

The credit process for wholesale lending requires a review of the PDs at least annually, and for retail lending revolving facilities an annual review is undertaken. Review may be more frequent as required by circumstances, such as the emergence of adverse risk factors.

We seek to continually improve the quality of our risk management. Group IT systems that process credit risk data continue to be enhanced to deliver both comprehensive management information in support of business strategy, and solutions to evolving regulatory reporting requirements.

Like other facets of risk management, analytical risk rating systems are not static. They are subject to review and modification in light of the changing economic environment, changing regulatory requirements and any deficiencies identified through internal and external regulatory review. Structured processes and metrics are in place to capture relevant data and feed this into continuous model improvement.

Post Model Adjustments (‘PMAs’) are held to ensure that capital requirements are not understated due to non-compliance of risk rating systems or other IRB model limitations. PMAs will be held until new models are approved by the PRA or model limitations have been remediated. PMAs are reviewed at least quarterly and updated where required.

u For further details of model performance, see page 79.

### Dilution risk
Dilution risk is the risk that an amount receivable is reduced through cash or non-cash credit to the obligor, and arises mainly from factoring and invoice discounting transactions.

Where there is recourse to the seller, we treat these transactions as loans secured by the collateral of the debts purchased and do not report dilution risk for them. For our non-recourse portfolio we obtain an indemnity from the seller that indemnifies us against this risk. Factoring transactions involve lending at a discount to the face-value of the receivables, which provides protection against dilution risk.

## Credit risk linkage to Annual Report and Accounts 2025
In addition to prudential consolidations differences, financial reporting has scoping treatment differences for acceptance and settlement balances, reverse purchase agreements, other demands deposits, in the below tables 29 to 37.

## Credit quality of assets
Our credit risk is diversified across a number of asset classes and geographies with a credit quality profile mainly concentrated in the higher quality bands.

The IFRS 9 stages have the following characteristics:
– Stage 1: These financial assets are unimpaired and without a significant increase in credit risk. 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. 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. A lifetime ECL is recognised.
– Purchased or originated credit-impaired: Financial assets purchased or originated at a deep discount are seen to reflect incurred credit losses and a lifetime ECL is recognised. These exposures are included in stage 3 in the table below.

The table below breaks down the gross carrying amount of the performing and non-performing exposures and related impairments, and details of the collateral and financial guarantees received within each of the FINREP categories and definitions. Gross carrying amount includes reverse repos and settlement accounts, and the on-balance sheet exposures exclude assets held for sale. The staging analysis is non-additive as totals contain instruments not eligible for staging, such as those held at fair value through profit and loss.

**Table 29: Performing and non-performing exposures and related provisions (CR1)**

| | **Gross carrying amount/nominal amount** | **Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions** | **Collateral and financial guarantees received** |
|---|---|---|---|
| | **Performing exposures \$bn** | **Non-performing exposures \$bn** | **Performing exposures \$bn** | **Non performing exposures \$bn** | **On performing exposures \$bn** | **On non performing exposures \$bn** |
| | **Total** | **of which: stage 1** | **of which: stage 2** | **of which: stage 3** | **of which: stage 1** | **of which: stage 2** | **of which: stage 3** | **Total** |
| 005 | Cash balances at central banks and other demand deposits | 294.2 | 294.1 | 0.1 | — | — | — | — | — | — | — | 980.7 | 14.9 |
| 010 | Loans and advances | 1,398.9 | 1,305.8 | 83.7 | 25.4 | 25.4 | (3.8) | (1.3) | (2.5) | (7.5) | (7.5) | (4.9) | 980.7 | 14.9 |
| 020 | Central banks | 22.8 | 22.8 | — | — | — | — | — | — | — | — | — | 6.3 | — |
| 030 | General governments | 10.2 | 10.1 | 0.1 | 0.1 | 0.1 | — | — | — | — | — | — | 3.0 | — |
| 040 | Credit institutions | 159.2 | 158.9 | — | — | — | — | — | — | — | — | — | 119.2 | — |
| 050 | Other financial corporations | 305.1 | 295.0 | 3.5 | 0.7 | 0.7 | (0.1) | (0.1) | — | (0.3) | (0.3) | (0.2) | 208.5 | 0.4 |
| 060 | Non-financial corporations | 424.3 | 365.9 | 56.0 | 20.6 | 20.6 | (1.8) | (0.5) | (1.3) | (6.3) | (6.3) | (3.3) | 218.4 | 12.0 |
| 070 | – of which: SMEs | 21.0 | 17.1 | 3.8 | 1.0 | 1.0 | (0.2) | (0.1) | (0.1) | (0.2) | (0.2) | — | 16.4 | 0.5 |
| 080 | Households | 477.3 | 453.1 | 24.1 | 4.0 | 4.0 | (1.9) | (0.7) | (1.2) | (0.9) | (0.9) | (1.4) | 425.3 | 2.5 |
| 090 | Debt securities | 570.6 | 566.8 | 0.3 | — | — | — | — | — | — | — | — | 40.1 | — |
| 100 | Central banks | 25.7 | 25.7 | — | — | — | — | — | — | — | — | — | — | — |
| 110 | General governments | 485.6 | 484.4 | 0.3 | — | — | — | — | — | — | — | — | 38.5 | — |
| 120 | Credit institutions | 41.7 | 41.3 | — | — | — | — | — | — | — | — | — | 1.4 | — |
| 130 | Other financial corporations | 12.2 | 11.5 | — | — | — | — | — | — | — | — | — | 0.1 | — |
| 140 | Non-financial corporations | 5.4 | 3.9 | — | — | — | — | — | — | — | — | — | 0.1 | — |
| 150 | Off-balance-sheet exposures | 1,087.1 | 701.7 | 22.3 | 2.2 | 1.1 | (0.3) | (0.2) | (0.1) | (0.4) | (0.2) | — | 108.9 | 0.1 |
| 160 | Central banks | 1.1 | 1.0 | — | — | — | — | — | — | — | — | — | — | — |
| 170 | General governments | 6.7 | 5.5 | 0.1 | — | — | — | — | — | — | — | — | — | — |
| 180 | Credit institutions | 65.5 | 58.7 | — | — | — | — | — | — | — | — | — | — | — |
| 190 | Other financial corporations | 116.6 | 91.9 | 4.0 | — | — | — | — | — | — | — | — | 12.4 | — |
| 200 | Non-financial corporations | 623.3 | 272.7 | 16.2 | 2.1 | 1.0 | (0.3) | (0.2) | (0.1) | (0.4) | (0.2) | — | 34.9 | 0.1 |
| 210 | Households | 273.9 | 271.9 | 2.0 | 0.1 | 0.1 | — | — | — | — | — | — | 61.6 | — |
| 220 | **Total at 31 Dec 2025** | **3,350.8** | **2,868.4** | **106.4** | **27.6** | **26.5** | **(4.1)** | **(1.5)** | **(2.6)** | **(7.9)** | **(7.7)** | **(4.9)** | **1,129.7** | **15.0** |
| | **31 Dec 2024** | | | | | | | | | | | | | |
| 005 | Cash balances at central banks and other demand deposits | 314.7 | 314.6 | 0.1 | — | — | — | — | — | — | — | — | — | — |
| 010 | Loans and advances | 1,278.0 | 1,174.0 | 96.4 | 23.3 | 23.3 | (3.9) | (1.2) | (2.7) | (6.3) | (6.4) | (3.2) | 886.8 | 13.4 |
| 020 | Central banks | 23.1 | 23.1 | — | — | — | — | — | — | — | — | — | 3.6 | — |
| 030 | General governments | 11.4 | 11.3 | 0.1 | 0.2 | 0.2 | — | — | — | — | — | — | 5.1 | 0.1 |
| 040 | Credit institutions | 125.9 | 125.3 | 0.1 | — | — | — | — | — | — | — | — | 87.3 | — |
| 050 | Other financial corporations | 258.3 | 250.8 | 2.3 | 0.7 | 0.7 | (0.1) | (0.1) | — | (0.3) | (0.4) | — | 187.9 | 0.3 |
| 060 | Non-financial corporations | 410.1 | 354.4 | 53.8 | 18.8 | 18.8 | (2.0) | (0.5) | (1.5) | (5.2) | (5.2) | (3.0) | 204.3 | 10.7 |
| 070 | – of which SMEs | 21.7 | 18.1 | 3.7 | 1.2 | 1.2 | (0.2) | (0.1) | (0.1) | (0.2) | (0.2) | (0.1) | 16.2 | 0.9 |
| 080 | Households | 449.2 | 409.1 | 40.1 | 3.6 | 3.6 | (1.8) | (0.6) | (1.2) | (0.8) | (0.8) | (0.2) | 398.6 | 2.3 |
| 090 | Debt securities | 494.6 | 491.3 | 0.8 | — | — | (0.1) | (0.1) | — | — | — | — | 35.4 | — |
| 100 | Central banks | 22.9 | 22.9 | — | — | — | — | — | — | — | — | — | — | — |
| 110 | General governments | 416.3 | 414.7 | 0.8 | — | — | (0.1) | (0.1) | — | — | — | — | 31.6 | — |
| 120 | Credit institutions | 38.4 | 38.2 | — | — | — | — | — | — | — | — | — | 3.5 | — |
| 130 | Other financial corporations | 12.3 | 12.0 | — | — | — | — | — | — | — | — | — | 0.1 | — |
| 140 | Non-financial corporations | 4.7 | 3.5 | — | — | — | — | — | — | — | — | — | 0.2 | — |
| 150 | Off-balance-sheet exposures | 985.7 | 626.7 | 23.1 | 2.7 | 1.4 | (0.4) | (0.1) | (0.1) | (0.4) | (0.2) | — | 106.2 | 0.2 |
| 160 | Central banks | 0.7 | 0.7 | — | — | — | — | — | — | — | — | — | — | — |
| 170 | General governments | 3.8 | 3.4 | — | — | — | — | — | — | — | — | — | — | — |
| 180 | Credit institutions | 50.8 | 43.1 | 0.1 | — | — | — | — | — | — | — | — | 0.5 | — |
| 190 | Other financial corporations | 104.0 | 78.1 | 2.1 | 0.1 | 0.1 | — | — | — | — | — | — | 13.5 | — |
| 200 | Non-financial corporations | 571.3 | 248.4 | 19.2 | 2.5 | 1.2 | (0.4) | (0.1) | (0.1) | (0.4) | (0.2) | — | 36.1 | 0.2 |
| 210 | Households | 255.1 | 253.0 | 1.7 | 0.1 | 0.1 | — | — | — | — | — | — | 56.1 | — |
| 220 | **Total at 31 Dec 2024** | **3,072.9** | **2,606.6** | **120.4** | **26.0** | **24.7** | **(4.4)** | **(1.4)** | **(2.8)** | **(6.7)** | **(6.6)** | **(3.2)** | **1,028.4** | **13.6** |

## Maturity of exposures
The table below presents the residual maturity breakdown of on-balance sheet loans and debt securities. This table excludes on-balance sheet assets held for sale, cash balances with central banks, other demand deposits, and off-balance sheet exposures.

**Table 30: Maturity of exposures (CR1-A)**

| | **Net exposure value** | | | | | |
|---|---|---|---|---|---|---|
| | **On demand \$m** | **<= 1 year \$m** | **> 1 year <= 5 years \$m** | **> 5 years \$m** | **No stated maturity \$m** | **Total \$m** |
| 1 | Loans and advances | 79,782 | 583,555 | 293,568 | 427,746 | 28,391 | 1,413,042 |
| 2 | Debt securities | 51 | 198,316 | 270,334 | 101,392 | 436 | 570,529 |
| 3 | **Total at 31 Dec 2025** | **79,833** | **781,871** | **563,902** | **529,138** | **28,827** | **1,983,571** |
| 1 | Loans and advances | 72,757 | 527,107 | 265,383 | 403,805 | 22,039 | 1,291,091 |
| 2 | Debt securities | 177 | 196,961 | 205,187 | 91,831 | 342 | 494,498 |
| 3 | **Total at 31 Dec 2024** | **72,934** | **724,068** | **470,570** | **495,636** | **22,381** | **1,785,589** |

The table below shows changes in gross carrying amount of on-balance sheet non-performing loans and advances during the 12 months to December 2025. ‘Outflow due to other situations’ include foreign exchange movements, repayments and assets held for sale in default.

**Table 31: Changes in the stock of non-performing loans and advances (CR2)**

| | **12 months to 31 Dec 2025 \$m** |
|---|---|
| 10 | Initial stock of non-performing loans and advances | 23,340 |
| 20 | Inflows to non-performing portfolios | 11,196 |
| 30 | Outflows from non-performing portfolios | (1,797) |
| 40 | Outflows due to write-offs | (3,569) |
| 50 | Outflow due to other situations | (3,776) |
| 60 | Final stock of non-performing loans and advances | 25,394 |

## Non-performing and forborne exposures
Tables 32 to 36 are presented in accordance with the European Banking Authority’s (‘EBA’) 'Guidelines on disclosure of non-performing and forborne exposures'. The PRA has acknowledged that, while the EBA’s guidelines relating to the management of non-performing exposures and forborne exposures are not applicable in the UK, the prudential aspects of these guidelines broadly represent good credit risk management standards.

The EBA defines non-performing exposures as exposures with material amounts that are more than 90 days past due or exposures where the debtor is assessed as unlikely to pay its credit obligations in full without the realisation of collateral, regardless of the existence of any past due amounts or number of days past due. For our retail portfolios a past due credit obligation is recognised where any amount of principal, interest or fees has not been paid at the date it was due (or the cycle date). Any debtors that are in default for regulatory purposes or impaired under the applicable accounting framework are always considered as non-performing exposures. The Annual Report and Accounts 2025 definition of stage 3 credit-impaired is aligned to the EBA's definition of non-performing exposures. Under the IFRS 9 accounting standard, ECLs are classified as regulatory specific credit risk adjustments.

Forborne exposures are defined by the EBA as exposures where the bank has made concessions to a debtor that is experiencing or about to experience financial difficulties in meeting its financial commitments. Our definition of forborne captures non-payment related concessions.

In the Annual Report and Accounts 2025, forborne exposures are reported within the table ‘Forborne loans and advances to customers at amortised cost by stage allocation’.

Forbearance measures consist of concessions towards a debtor that is experiencing or about to experience difficulties in meeting its financial commitments (‘financial difficulties’).

Under the EBA’s definition, exposures cease to be reported as forborne if they pass three tests:
– the forborne exposure must have been considered to be performing for a ‘probation period’ of at least two years;
– regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period; and
– no exposure to the debtor is more than 30 days past due during, or at the end, of the probation period.

The table below breaks down performing and non-performing forborne exposures by FINREP counterparty sector and shows the gross carrying amount, accumulated impairments and collateral and financial guarantees received against these exposures. The on-balance sheet exposures exclude assets held for sale.

**Table 32: Credit quality of forborne exposures (CQ1)**

| | **Gross carrying amount/nominal amount** | **Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions** | **Collateral received and financial guarantees received on forborne exposures** |
|---|---|---|---|
| | **Performing forborne \$m** | **Non-performing forborne \$m** | **On performing forborne exposures \$m** | **On non performing forborne exposures \$m** | **Total \$m** | **of which: forborne non performing \$m** | **Total exposures \$m** | **of which: defaulted \$m** |
| 010 | Loans and advances | 4,735 | 9,998 | 9,998 | 9,998 | (372) | (2,701) | 7,945 | 5,304 |
| 050 | Other financial corporations | 165 | 4 | 4 | 4 | (4) | — | 137 | — |
| 060 | Non-financial corporations | 3,951 | 8,336 | 8,336 | 8,336 | (303) | (2,373) | 6,775 | 4,468 |
| 070 | Households | 619 | 1,658 | 1,658 | 1,658 | (65) | (328) | 1,033 | 836 |
| 090 | Loan commitments given | 525 | 254 | 254 | 254 | (4) | (3) | 120 | 78 |
| **100 Total at 31 Dec 2025** | **5,260** | **10,252** | **10,252** | **10,252** | **(376)** | **(2,704)** | **8,065** | **5,382** |
| 010 | Loans and advances | 4,869 | 9,051 | 9,051 | 9,051 | (533) | (2,365) | 6,636 | 4,404 |
| 050 | Other financial corporations | 78 | 191 | 191 | 191 | (1) | (36) | 214 | 150 |
| 060 | Non-financial corporations | 4,246 | 7,438 | 7,438 | 7,438 | (462) | (2,023) | 5,565 | 3,556 |
| 070 | Households | 545 | 1,422 | 1,422 | 1,422 | (70) | (306) | 857 | 698 |
| 090 | Loan commitments given | 186 | 307 | 307 | 307 | — | (4) | 67 | 33 |
| **100 Total at 31 Dec 2024** | **5,055** | **9,358** | **9,358** | **9,358** | **(533)** | **(2,369)** | **6,703** | **4,437** |

## Credit quality of performing and non-performing exposures by past due days
The table below shows an analysis of gross performing and non-performing exposures by days past due. The gross non-performing loan ratio at 31 December 2025 was 1.78 % calculated in line with the EBA’s guidelines.

**Table 33: Credit quality of performing and non-performing exposures by past due days (CQ3)**

| | **Gross carrying amount/nominal amount** | | | **Non-performing exposures** | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **Performing exposures** | | | **Total** | **Unlikely to pay that are not past due or are past due ≤ 90 days** | **Past due > 90 days ≤ 180 days** | **Past due > 180 days ≤ 1 year** | **Past due > 1 year ≤ 2 years** | **Past due > 2 years ≤ 5 years** | **Past due > 5 years ≤ 7 years** | **Past due > 7 years** | **of which: defaulted** |
| | **Total** | **Not past due or past due ≤ 30 days** | **Past due > 30 days ≤ 90 days** | | | | | | | | | |
| 005 | Cash balances at central banks and other demand deposits | 294.2 | 294.2 | — | — | — | — | — | — | — | — | — | — |
| 010 | Loans and advances | 1,398.9 | 1,397.5 | 1.4 | 25.4 | 15.4 | 2.3 | 2.3 | 3.1 | 1.9 | 0.3 | 0.1 | 25.4 |
| 020 | Central banks | 22.8 | 22.8 | — | — | — | — | — | — | — | — | — | — |
| 030 | General governments | 10.2 | 10.2 | — | 0.1 | — | — | — | — | 0.1 | — | — | 0.1 |
| 040 | Credit institutions | 159.2 | 159.2 | — | — | — | — | — | — | — | — | — | — |
| 050 | Other financial corporations | 305.1 | 304.9 | 0.2 | 0.7 | 0.4 | 0.1 | — | 0.1 | 0.1 | — | — | 0.7 |
| 060 | Non-financial corporations | 424.3 | 424.0 | 0.3 | 20.6 | 12.8 | 1.4 | 1.9 | 2.8 | 1.3 | 0.3 | 0.1 | 20.6 |
| 070 | – of which SMEs | 21.0 | 20.9 | 0.1 | 1.0 | 0.5 | 0.1 | 0.3 | — | 0.1 | — | — | 1.0 |
| 080 | Households | 477.3 | 476.4 | 0.9 | 4.0 | 2.2 | 0.8 | 0.4 | 0.2 | 0.4 | — | — | 4.0 |
| 090 | Debt securities | 570.6 | 570.6 | — | — | — | — | — | — | — | — | — | — |
| 100 | Central banks | 25.7 | 25.7 | — | — | — | — | — | — | — | — | — | — |
| 110 | General governments | 485.6 | 485.6 | — | — | — | — | — | — | — | — | — | — |
| 120 | Credit institutions | 41.7 | 41.7 | — | — | — | — | — | — | — | — | — | — |
| 130 | Other financial corporations | 12.2 | 12.2 | — | — | — | — | — | — | — | — | — | — |
| 140 | Non-financial corporations | 5.4 | 5.4 | — | — | — | — | — | — | — | — | — | — |
| 150 | Off-balance-sheet exposures | 1,087.1 | 2.2 | 2.2 | 1.4 | 2.2 | (0.3) | (0.2) | (0.1) | (0.4) | (0.2) | — | 2.1 |
| 160 | Central banks | 1.1 | — | — | — | — | — | — | — | — | — | — | — |
| 170 | General governments | 6.7 | — | — | — | — | — | — | — | — | — | — | — |
| 180 | Credit institutions | 65.5 | — | — | — | — | — | — | — | — | — | — | — |
| 190 | Other financial corporations | 116.6 | — | — | — | — | — | — | — | — | — | — | — |
| 200 | Non-financial corporations | 623.3 | 2.1 | 2.1 | 1.0 | 1.0 | (0.3) | (0.2) | (0.1) | (0.4) | (0.2) | — | — |
| 210 | Households | 273.9 | 0.1 | 0.1 | — | — | — | — | — | — | — | — | — |
| 220 | **Total at 31 Dec 2025** | **3,350.8** | **2,262.3** | **1.4** | **27.6** | **15.4** | **2.3** | **2.3** | **3.1** | **1.9** | **0.3** | **0.1** | **27.6** |
| | **31 Dec 2024** | | | | | | | | | | | | | |
| 005 | Cash balances at central banks and other demand deposits | 314.7 | 314.7 | — | — | — | — | — | — | — | — | — | — |
| 010 | Loans and advances | 1,278.0 | 1,276.8 | 1.2 | 23.3 | 14.6 | 2.2 | 2.9 | 1.5 | 1.8 | 0.1 | 0.2 | 23.3 |
| 020 | Central banks | 23.1 | 23.1 | — | — | — | — | — | — | — | — | — | — |
| 030 | General governments | 11.4 | 11.4 | — | 0.2 | — | — | — | — | 0.1 | — | 0.1 | 0.2 |
| 040 | Credit institutions | 125.9 | 125.9 | — | — | — | — | — | — | — | — | — | — |
| 050 | Other financial corporations | 258.3 | 258.2 | 0.1 | 0.7 | 0.7 | — | — | — | — | — | — | 0.7 |
| 060 | Non-financial corporations | 410.1 | 409.9 | 0.2 | 18.8 | 11.7 | 1.6 | 2.5 | 1.4 | 1.4 | 0.1 | 0.1 | 18.8 |
| 070 | – of which SMEs | 21.7 | 21.6 | 0.1 | 1.2 | 0.6 | 0.1 | 0.5 | — | — | — | — | 1.2 |
| 080 | Households | 449.2 | 448.3 | 0.9 | 3.6 | 2.2 | 0.6 | 0.4 | 0.1 | 0.3 | — | — | 3.6 |
| 090 | Debt securities | 494.6 | 494.6 | — | — | — | — | — | — | — | — | — | — |
| 100 | Central banks | 22.9 | 22.9 | — | — | — | — | — | — | — | — | — | — |
| 110 | General governments | 416.3 | 416.3 | — | — | — | — | — | — | — | — | — | — |
| 120 | Credit institutions | 38.4 | 38.4 | — | — | — | — | — | — | — | — | — | — |
| 130 | Other financial corporations | 12.3 | 12.3 | — | — | — | — | — | — | — | — | — | — |
| 140 | Non-financial corporations | 4.7 | 4.7 | — | — | — | — | — | — | — | — | — | — |
| 150 | Off-balance-sheet exposures | 985.7 | 2.7 | 2.7 | 1.4 | 1.4 | (0.4) | (0.1) | (0.1) | (0.4) | (0.2) | — | 0.2 |
| 160 | Central banks | 0.7 | — | — | — | — | — | — | — | — | — | — | — |
| 170 | General governments | 3.8 | — | — | — | — | — | — | — | — | — | — | — |
| 180 | Credit institutions | 50.8 | — | — | — | — | — | — | — | — | — | — | — |
| 190 | Other financial corporations | 104.0 | 0.1 | 0.1 | — | — | — | — | — | — | — | — | — |
| 200 | Non-financial corporations | 571.3 | 2.5 | 2.5 | 1.2 | 1.2 | (0.4) | (0.1) | (0.1) | (0.4) | (0.2) | — | — |
| 210 | Households | 255.1 | 0.1 | 0.1 | — | — | — | — | — | — | — | — | — |
| 220 | **Total at 31 Dec 2024** | **3,072.9** | **2,086.1** | **1.2** | **26.0** | **14.6** | **2.2** | **2.9** | **1.5** | **1.8** | **0.1** | **0.2** | **26.0** |

## Collateral obtained by taking possession and execution processes
The table below provides information on the instruments that were cancelled in exchange for collateral obtained by taking possession and on the value of the collateral. The value at initial recognition represents the gross carrying amount of the collateral obtained by taking possession at initial recognition on the balance sheet. The accumulated negative changes represent the accumulated impairment or negative change in the value of the collateral since initial recognition, including amortisation in the case of property, plant and equipment and investment properties.

**Table 34: Collateral obtained by taking possession and execution processes (CQ7)**

| | **At 31 Dec 2025** | | **At 31 Dec 2024** | |
|---|---|---|---|---|
| | **Collateral obtained by taking possession \$m** | **Collateral obtained by taking possession \$m** |
| | **Value at initial recognition** | **Accumulated negative changes** | **Value at initial recognition** | **Accumulated negative changes** |
| 020 | Other than property, plant and equipment | 100 | (19) | 93 | (18) |
| 030 | – Residential immovable property | 70 | (4) | 67 | (6) |
| 040 | – Commercial immovable property | 30 | (15) | 25 | (12) |
| 050 | – Movable property (auto, shipping, etc.) | — | — | 1 | — |
| 080 | **Total** | **100** | **(19)** | **93** | **(18)** |

## Concentration risk
Concentration of credit risk occurs when multiple counterparties share similar economic traits or operate in the same sectors or regions, making them collectively vulnerable to changes in economic or political conditions. To mitigate this risk, the bank uses various controls such as portfolio and counterparty limits, approval and review processes, and stress testing across industries, countries and businesses.

The table below shows the credit quality of on- and off- balance sheet exposures by geography. The geographical breakdown is based on the country or territory of residence of the immediate counterparty. The table presents the countries that are contributing 10% or more of the total on-balance sheet and off-balance sheet exposures separately, with the remaining exposures aggregated within ‘other countries’. The on-balance sheet exposures exclude cash and balances at central banks and assets held for sale.

**Table 35: Quality of non-performing exposures by geography (CQ4)**

| | **Gross carrying/ Nominal amount \$m** | **Accumulated impairment \$m** | **Provisions on off-balance sheet commitments and financial guarantee given \$m** |
|---|---|---|---|
| | **Total** | **of which: non-performing** | **of which: defaulted** | **of which: subject to impairment** | |
| **010 On-balance sheet exposures** | **1,994,883** | **25,405** | **25,405** | **1,981,994** | **(11,305)** | |
| 020 United Kingdom | 448,703 | 4,553 | 4,553 | 447,023 | (2,008) | |
| 030 Hong Kong | 333,040 | 11,551 | 11,551 | 330,095 | (3,735) | |
| 040 United States | 375,936 | 1,204 | 1,204 | 373,774 | (378) | |
| 070 Other countries/territories | 837,204 | 8,097 | 8,097 | 831,102 | (5,184) | |
| **080 Off-balance sheet exposures** | **1,089,286** | **2,217** | **2,217** | | **(727)** |
| 090 Hong Kong | 234,498 | 128 | 128 | | (27) |
| 100 United Kingdom | 143,337 | 445 | 445 | | (148) |
| 110 United States | 136,833 | 288 | 288 | | (92) |
| 140 Other countries/territories | 574,618 | 1,356 | 1,356 | | (460) |
| **150 Total at 31 Dec 2025** | **3,084,169** | **27,622** | **27,622** | **1,981,994** | **(11,305)** | **(727)** |
| **31 Dec 2024** | | | | | | |
| 010 On-balance sheet exposures | 1,795,926 | 23,347 | 23,347 | 1,785,814 | (10,329) | |
| 020 United Kingdom | 375,331 | 4,694 | 4,694 | 373,007 | (2,242) | |
| 030 Hong Kong | 341,109 | 9,693 | 9,693 | 339,321 | (2,945) | |
| 040 United States | 318,818 | 904 | 904 | 317,371 | (352) | |
| 070 Other countries/territories | 760,668 | 8,056 | 8,056 | 756,115 | (4,790) | |
| 080 Off-balance sheet exposures | 988,355 | 2,682 | 2,682 | | (769) |
| 090 Hong Kong | 218,528 | 224 | 224 | | (30) |
| 100 United Kingdom | 127,378 | 614 | 614 | | (164) |
| 110 United States | 122,885 | 366 | 366 | | (56) |
| 140 Other countries/territories | 519,564 | 1,478 | 1,478 | | (519) |
| **150 Total at 31 Dec 2024** | **2,784,281** | **26,029** | **26,029** | **1,785,814** | **(10,329)** | **(769)** |

## Credit quality of loans and advances to non-financial corporations by industry
The table below shows the gross carrying amount of loans and advances to non-financial corporations, the related accumulated impairment and the accumulated changes in fair value to credit risk by industry types. The on-balance sheet exposures exclude assets held for sale.

**Table 36: Credit quality of loans and advances to non-financial corporations by industry (CQ5)**

| | **Gross carrying amount** | | **Accumulated impairment \$m** |
|---|---|---|---|
| | **Total \$m** | **of which: non-performing \$m** | **of which: defaulted \$m** | **of which: subject to impairment \$m** | **Accumulated Impairment \$m** |
| 010 | Agriculture, forestry and fishing | 7,686 | 355 | 355 | 7,686 | (98) |
| 020 | Mining and quarrying | 7,908 | 126 | 126 | 7,908 | (88) |
| 030 | Manufacturing | 93,648 | 2,405 | 2,405 | 92,581 | (1,035) |
| 040 | Electricity, gas, steam and air conditioning supply | 21,848 | 240 | 240 | 21,789 | (147) |
| 050 | Water supply | 2,570 | 112 | 112 | 2,570 | (41) |
| 060 | Construction | 27,404 | 3,286 | 3,286 | 26,810 | (1,668) |
| 070 | Wholesale and retail trade | 95,435 | 2,790 | 2,790 | 95,213 | (1,529) |
| 080 | Transport and storage | 22,398 | 307 | 307 | 22,375 | (177) |
| 090 | Accommodation and food service activities | 14,392 | 1,436 | 1,436 | 14,389 | (399) |
| 100 | Information and communication | 25,445 | 377 | 377 | 25,408 | (198) |
| 110 | Financial and insurance activities | 981 | 93 | 93 | 981 | (43) |
| 120 | Real estate activities | 61,686 | 7,256 | 7,256 | 61,642 | (1,682) |
| 130 | Professional, scientific and technical activities | 24,877 | 520 | 520 | 24,571 | (218) |
| 140 | Administrative and support service activities | 19,554 | 672 | 672 | 19,548 | (407) |
| 150 | Public administration and defence, compulsory social security | 80 | — | — | 80 | (3) |
| 160 | Education | 3,230 | 74 | 74 | 3,230 | (49) |
| 170 | Human health services and social work activities | 4,460 | 98 | 98 | 4,404 | (32) |
| 180 | Arts, entertainment and recreation | 2,313 | 123 | 123 | 2,313 | (52) |
| 190 | Other services | 8,961 | 329 | 329 | 8,940 | (173) |
| **200 Total at 31 Dec 2025** | **444,876** | **20,599** | **20,599** | **442,438** | **(8,039)** |
| | **31 Dec 2024** | | | | | |
| 010 | Agriculture, forestry and fishing | 7,101 | 282 | 282 | 7,101 | (96) |
| 020 | Mining and quarrying | 8,419 | 318 | 318 | 8,419 | (46) |
| 030 | Manufacturing | 89,832 | 1,602 | 1,602 | 88,921 | (943) |
| 040 | Electricity, gas, steam and air conditioning supply | 18,407 | 239 | 239 | 18,339 | (133) |
| 050 | Water supply | 2,963 | 43 | 43 | 2,963 | (23) |
| 060 | Construction | 30,184 | 3,279 | 3,279 | 29,993 | (1,768) |
| 070 | Wholesale and retail trade | 87,428 | 2,989 | 2,989 | 87,203 | (1,595) |
| 080 | Transport and storage | 24,003 | 418 | 418 | 23,956 | (322) |
| 090 | Accommodation and food service activities | 14,795 | 1,611 | 1,611 | 14,715 | (298) |
| 100 | Information and communication | 19,883 | 229 | 229 | 19,850 | (160) |
| 110 | Financial and insurance activities | 270 | — | — | 270 | (1) |
| 120 | Real estate activities | 61,175 | 5,700 | 5,700 | 61,129 | (964) |
| 130 | Professional, scientific and technical activities | 26,158 | 648 | 648 | 25,878 | (266) |
| 140 | Administrative and support service activities | 20,272 | 739 | 739 | 20,269 | (320) |
| 150 | Public administration and defence, compulsory social security | 87 | — | — | 87 | — |
| 160 | Education | 2,637 | 81 | 81 | 2,637 | (58) |
| 170 | Human health services and social work activities | 4,031 | 184 | 184 | 4,031 | (51) |
| 180 | Arts, entertainment and recreation | 2,065 | 78 | 78 | 2,065 | (35) |
| 190 | Other services | 9,212 | 338 | 338 | 9,194 | (116) |
| **200 Total at 31 Dec 2024** | **428,922** | **18,778** | **18,778** | **427,020** | **(7,195)** |

## Risk mitigation
Our approach to granting credit facilities is on the basis of capacity to repay, rather than placing primary reliance on credit risk mitigants. Depending on a customer’s standing and the type of product, facilities may be provided unsecured.

Mitigation of credit risk is a key aspect of effective risk management and takes many forms. Our general policy is to promote the use of credit risk mitigation, justified by commercial prudence and capital efficiency. Detailed policies cover the acceptability, structuring and terms relating to the availability of credit risk mitigation, such as in the form of collateral security. These policies, together with the setting of suitable valuation parameters, are subject to regular review to ensure that they are supported by empirical evidence and continue to fulfil their intended purpose.

### Collateral
The most common method of mitigating credit risk is to take a charge over collateral. In our retail residential and commercial real estate (‘CRE’) businesses, a mortgage over the property is usually taken to help secure claims. Physical collateral is also taken in various forms of specialised lending and leasing transactions where income from the physical assets that are financed is also the principal source of facility repayment. In the commercial and industrial sectors, charges are created over business assets such as premises, stock and debtors. Loans to private banking clients may be made against a pledge of eligible marketable securities, cash or real estate. Facilities to SMEs are commonly granted against guarantees given by their owners and/or directors.

For credit risk mitigants in the form of immovable property, the key determinant of concentration at Group level is geography. Use of immovable property mitigants for risk management purposes is predominantly in Asia and Europe.

u For further details of collateral held over CRE and residential property, see pages 143 and 134 of the Annual Report and Accounts 2025.

## Financial collateral
In the institutional sector, trading facilities are supported by charges over financial instruments, such as cash, debt securities and equities. Financial collateral in the form of marketable securities is used in much of the Group’s derivatives activities and in securities financing transactions, such as repos, reverse repos, securities lending and borrowing. Netting is used extensively and is a prominent feature of market standards documentation.

u For further details of collateral held for trading exposures, see page 144 of the Annual Report and Accounts 2025.

In the banking book, we provide customers with working capital management products. In some cases, these products combine loans and advances to customers, whose accounts we have the right of offset, which complies with the regulatory requirements for on balance sheet netting. Where this applies, the customer accounts are treated as cash collateral and are reflected in our LGD estimates.

Under on-balance sheet netting agreements, the customer accounts are treated as though they are covered by cash collateral and the effects of this collateral are incorporated in our LGD estimates. For risk management purposes, the net amounts of such exposures are subject to limits and the relevant customer agreements are subject to review to ensure the legal right of offset remains appropriate.

## Other forms of credit risk mitigation
Our CIB business uses credit risk mitigation to manage the credit risk of its portfolios, with the goal of reducing concentrations in individual names, sectors or portfolios. The techniques in use include credit default swap (‘CDS’) purchases, structured credit notes and securitisation structures. Buying credit protection creates credit exposure against the protection provider, which is monitored as part of the overall credit exposure to them. Where applicable, the transaction is entered into directly with a central clearing house counterparty; otherwise our exposure to CDS protection providers is diversified among mainly banking counterparties with strong credit ratings.

In our corporate lending, we also take guarantees from banks, corporates and export credit agencies. Corporates would normally provide guarantees as part of a parent and subsidiary or common parent relationship and would span a number of credit grades. The external credit agency (‘ECAs’) will normally be investment grade.

## Policy and procedures
Policies and procedures cover the end-to-end credit lending process including the governance of the protection of our position from the outset of a customer relationship; for instance, in requiring standard terms and conditions or specifically agreed documentation permitting the offset of credit balances against debt obligations, and through controls over the integrity, current valuation and, if necessary, realisation of collateral security.

## Valuing collateral
Valuation strategies are established to monitor collateral mitigants to ensure that they will continue to provide the anticipated secure secondary repayment source. The frequency of valuation increases with the volatility of the collateral. For market trading activities such as collateralised over-the-counter (‘OTC’) derivatives and SFTs, we typically carry out daily valuations. For residential mortgages, Group policy prescribes a revaluation of the portfolio at a minimum of every three years, or every 6 months for material portfolios. More frequent revaluations are required where market conditions are subject to significant change, and for non performing loans are subject to monitoring at a minimum annually. Residential property collateral values are determined through a combination of professional appraisals, desktop valuations, automated valuation models (‘AVMs’), house price indices or statistical analysis.

For CRE, 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. Revaluations are sought where, for example, material concerns arise in relation to the performance of the collateral. CRE revaluation also occurs commonly in circumstances where an obligor’s credit quality has declined sufficiently to cause concern that the principal payment source may not fully meet the obligation.

## Recognition of risk mitigation under the IRB approach
Within an IRB approach, risk mitigants are considered in two broad categories:
– those which reduce the intrinsic PD of an obligor and therefore operate as determinants of PD; and
– those which affect the estimated recoverability of obligations and require adjustment of LGD or, in certain limited circumstances, EAD.

The first category typically includes full parental guarantees where one obligor within a group guarantees another. In these circumstances, the PD of the parent guarantor is used to adjust or substitute the PD of the guaranteed obligor. PD estimates may be subject to a ‘sovereign ceiling’, constraining the risk ratings assigned to obligors in countries of higher risk, and where only partial parental support exists. In certain jurisdictions, certain types of third-party guarantee are recognised by substituting the obligor’s PD with that of the guarantor.

In the second category, LGD estimates are affected by a wider range of collateral, including cash, charges over real estate property, fixed assets, trade goods, receivables and floating charges such as mortgage debentures. Unfunded mitigants, such as third-party guarantees, are also considered in LGD estimates where there is evidence that they reduce loss expectation.

The main types of guarantor are banks, other financial institutions and corporates. The creditworthiness of providers of unfunded credit risk mitigation is taken into consideration as part of the guarantor’s risk profile. Internal limits for such contingent exposure are approved in the same way as direct exposures.

EAD and LGD values are calculated using regulatory approved models, where available. For those portfolios on a Foundation IRB approach, regulatory values are used. For retail portfolios, funded and unfunded credit protection is typically reflected in the LGD risk parameter based on a modelled impact using historical data.

A range of collateral recognition approaches are applied to IRB capital treatments:
– Unfunded protection, includes credit derivatives and guarantees under the AIRB approach, recognition may be through PD or LGD.
– Eligible financial collateral under the AIRB approach is recognised in LGD models. Under the FIRB approach, regulatory LGD values are adjusted. The adjustment to LGD is based on the degree to which the exposure value would be adjusted notionally if the financial collateral comprehensive method were applied.
– For all other types of collateral, including real estate, the LGD for exposures under the AIRB approach is calculated by models. For FIRB, regulatory LGDs are adjusted depending on the value and type of the asset taken as collateral relative to the exposure. The types of eligible mitigation recognised under the FIRB approach are more limited.

Table 37 sets out the exposure value and the effective value of credit risk mitigation expressed as the exposure value covered by the credit risk mitigant.

## Recognition of risk mitigation under the standardised approach
Where credit risk mitigation is available in the form of an eligible guarantee, non-financial collateral or a credit derivative, the exposure is divided into covered and uncovered portions. The covered portion is determined after applying an appropriate ‘haircut’ for currency and maturity mismatches (and for omission of restructuring clauses in credit derivatives, where appropriate) to the amount of the protection provided and attracts the risk weight of the protection provider. The uncovered portion attracts the risk weight of the obligor.

**Table 37: Credit risk mitigation techniques – overview (CR3)**

| | **Total Exposures: secured and unsecured \$m** | **Exposures unsecured: carrying amount \$m** | **Exposures secured: carrying amount \$m** | **of which: Exposures secured by collateral \$m** | **of which: Exposures secured by financial guarantees \$m** |
|---|---|---|---|---|---|
| **1 Loans and advances** | **1,707,263** | **711,602** | **995,661** | **890,002** | **105,659** |
| Central banks | 301,584 | 295,267 | 6,317 | 6,267 | 50 |
| General governments | 10,316 | 7,285 | 3,031 | 2,693 | 338 |
| Credit Institutions | 174,608 | 55,379 | 119,229 | 118,495 | 734 |
| Other financial corporations | 305,503 | 96,624 | 208,879 | 200,106 | 8,773 |
| Non-financial corporations | 436,838 | 206,439 | 230,399 | 135,359 | 95,040 |
| Households | 478,414 | 50,608 | 427,806 | 427,082 | 724 |
| **2 Debt securities** | **570,529** | **530,436** | **40,093** | **—** | **40,093** |
| Central banks | 25,641 | 25,641 | — | — | — |
| General governments | 485,572 | 447,128 | 38,444 | — | 38,444 |
| Credit Institutions | 41,737 | 40,297 | 1,440 | — | 1,440 |
| Other financial corporations | 12,175 | 12,084 | 91 | — | 91 |
| Non-financial corporations | 5,404 | 5,286 | 118 | — | 118 |
| **3 Total at 31 Dec 2025** | **2,277,792** | **1,242,038** | **1,035,754** | **890,002** | **145,752** |
| 4 – of which: non-performing exposures | 17,941 | 3,013 | 14,928 | 13,139 | 1,789 |
| 5 – of which: defaulted | 17,941 | 3,013 | 14,928 | | |
| 1 | Loans and advances | 1,605,775 | 705,621 | 900,154 | 806,819 | 93,335 |
| Central banks | 324,486 | 320,865 | 3,621 | 3,567 | 54 |
| General governments | 11,535 | 6,384 | 5,151 | 4,785 | 366 |
| Credit Institutions | 139,167 | 51,856 | 87,311 | 87,082 | 229 |
| Other financial corporations | 258,618 | 70,437 | 188,181 | 179,161 | 9,020 |
| Non-financial corporations | 421,727 | 206,757 | 214,970 | 138,361 | 76,609 |
| Households | 450,242 | 49,322 | 400,920 | 393,863 | 7,057 |
| **2 Debt securities** | **494,498** | **459,101** | **35,397** | **—** | **35,397** |
| Central banks | 22,876 | 22,876 | — | — | — |
| General governments | 416,270 | 384,634 | 31,636 | — | 31,636 |
| Credit Institutions | 38,338 | 34,851 | 3,487 | — | 3,487 |
| Other financial corporations | 12,330 | 12,250 | 80 | — | 80 |
| Non-financial corporations | 4,684 | 4,490 | 194 | — | 194 |
| **3 Total at 31 Dec 2024** | **2,100,273** | **1,164,722** | **935,551** | **806,819** | **128,732** |
| 4 – of which: non-performing exposures | 16,993 | 3,670 | 13,323 | 11,159 | 2,164 |
| 5 – of which: defaulted | 16,993 | 3,670 | 13,323 | | |

The table below shows the composition of total exposures for loans and advances reported in the above table 37, credit risk mitigation techniques - overview (‘CR3’), based on Group’s financial balance sheet line items. Cash and balances at central banks recognised as loans and advances excludes cash in hand of \$5,131m. Other financial assets includes acceptances, settlement balances and items in course of collection; financial assets measured at fair value through other comprehensive income (‘FVOCI’); fair value through profit or loss (‘FVTPL’) and amortised cost, and de-consolidation of insurance/other entities and consolidation of banking associates.

**Table 37.i: Analysis of accounting lines comprising total exposures in CR3**

| | **Loans and advances : Secured and unsecured \$m** |
|---|---|
| **Assets as reported in financial statements** | **31 Dec 2025** | **31 Dec 2024** |
| Cash and balances at central banks | 237,728 | 262,559 |
| Loans and advances to banks | 108,462 | 102,039 |
| Loans and advances to customers | 988,399 | 930,639 |
| Reverse repurchase agreement - non trading | 298,392 | 252,549 |
| Other financial assets | 74,282 | 57,989 |
| **Carrying amount reported in the table CR3** | **1,707,263** | **1,605,775** |

# Counterparty credit risk
Counterparty credit risk management
Counterparty credit risk (‘CCR’) arises for derivatives, long settlement transactions and SFTs. It is calculated in both the trading and non trading books, and is the risk that a counterparty may default before final settlement, for cases where there is a bilateral risk of loss.

Banks are permitted to apply the following methods to determine exposure values for CCR:
– the Internal Model Method (‘IMM’);
– the Standardised Approach (‘SA-CCR’) – for derivatives and long settlement transactions;
– the simple/comprehensive approach to recognition of collateral with SFTs; and
– the VaR approach, applicable for SFTs.

Exposure values calculated under these approaches are used to determine RWAs.

Under the SA-CCR approach, the EAD is calculated as the sum of replacement cost and potential future exposure multiplied by an alpha factor of 1.4. We use this approach for all derivative and long settlement transactions not covered by our IMM permission. Under the IMM approach, EAD is calculated by multiplying the effective expected positive exposure (‘EEPE’) with a multiplier ‘alpha’. The two alpha factors for standardised and internal model methods are distinct.

Alpha, for IMM, is currently set at 1.45 and accounts for several portfolio features that increase EL above that indicated by EEPE in the event of default, such as:
– co-variance of exposures;
– correlation between exposures and default;
– level of volatility/correlation that might coincide with a downturn;
– concentration risk; and
– model risk.

The EEPE is derived from simulation, pricing and aggregation of internal model calculations, which have been approved by regulators.

The IMM model is subject to ongoing model validation including monthly model performance monitoring.

From a risk management perspective, products not covered by IMM are subject to regulatory asset class add-ons. Products covered and not covered under IMM are subject to daily monitoring of credit limit utilisation.

Limits for CCR exposures, including to central counterparties (‘CCPs’), are assigned within the overall credit risk management process. The credit risk function assigns a limit against each counterparty to cover exposure that may arise as a result of a counterparty default. The magnitude of this limit will depend on the overall risk appetite, type of derivatives and type of SFT trading undertaken with a counterparty.

Models and methodologies used in the calculation of CCR are overseen and monitored by the Traded Risk Model Oversight Forum. Models are subject to ongoing monitoring and validation. Additionally, they are subject to independent review at inception and on an ongoing basis.

HSBC have established a measure, Cat F, specifically to monitor derivative financing and securities financing transactions at a counterparty level. This is ancillary to the existing Cat B counterparty credit risk measure.

The table below analyses CCR exposures by approach for derivatives and securities financing transactions, excluding the credit valuation adjustment (‘CVA’) charge, failed settlements, free deliveries and exposures to CCPs. From 1 January 2025, EAD pre-CRM are reported on a gross basis i.e. before application of collateral benefits.

**Table 52: Analysis of counterparty credit risk exposure by approach (excluding centrally cleared exposures) (CCR1)**

| | **Replace ment cost \$m** | **Potential future exposure \$m** | **Effective expected positive exposure \$m** | **Alpha used for computing regulatory exposure value** | **EAD pre-CRM \$m** | **EAD post-CRM \$m** | **Exposure value \$m** | **RWAs \$m** |
|---|---|---|---|---|---|---|---|---|
| 1 | SA-CCR (for derivatives) | 4,207 | 11,095 | — | 1.40 | 31,478 | 20,960 | 20,960 | 9,641 |
| 2 | IMM (for derivatives and SFTs) | — | — | 31,229 | 1.45 | 100,647 | 45,282 | 45,282 | 15,011 |
| 2b | derivatives and long settlement transactions netting sets | — | — | 31,229 | 1.45 | 100,647 | 45,282 | 45,282 | 15,011 |
| 4 | Financial collateral comprehensive method (for SFTs) | | | | | 60,882 | 63,803 | 63,803 | 10,603 |
| 6 | **Total at 31 Dec 2025** | **1,121,535** | | | | **149,758** | **149,758** | **38,793** |
| 1 | SA-CCR (for derivatives) | 7,577 | 10,151 | — | 1.40 | 24,819 | 24,819 | 24,819 | 9,225 |
| 2 | IMM (for derivatives and SFTs) | — | — | 30,909 | 1.45 | 44,818 | 44,818 | 44,818 | 13,771 |
| 2b | derivatives and long settlement transactions | — | — | 30,909 | 1.45 | 44,818 | 44,818 | 44,818 | 13,771 |
| 4 | Financial collateral comprehensive method (for SFTs) | | | | | 60,882 | 63,803 | 63,803 | 10,603 |
| 6 | **Total at 31 Dec 2024** | **130,519** | | | | **133,440** | **133,440** | **33,599** |

# Credit valuation adjustment
CVAs represent the risk of mark-to-market losses on the expected counterparty risk to OTC derivatives and SFTs that are subject to fair-value accounting. Certain qualifying central counterparties are exempt from CVA.

The table below sets out exposures and RWAs related to CVA regulatory calculations with the breakdown by standardised and advanced approaches.

**Table 53: Credit valuation adjustment capital charge (CCR2)**

| | **At 31 Dec 2025** | | **At 31 Dec 2024** | |
|---|---|---|---|---|
| | **Exposure value \$m** | **RWAs \$m** | **Exposure value \$m** | **RWAs \$m** |
| 1 | Total transactions subject to the Advanced method | 27,999 | 612 | 28,059 | 1,232 |
| 2 | – VaR component (including the 3 × multiplier) | | 96 | | 196 |
| 3 | – stressed VaR component (including the 3 × multiplier) | | 516 | | 1,036 |
| 4 | Transactions subject to the Standardised method | 10,234 | 682 | 13,618 | 1,003 |
| 5 | **Total transactions subject to own funds requirements for CVA risk** | **38,233** | **1,294** | **41,677** | **2,235** |

The table below presents information on the risk weighting of CCR exposures under the standardised approach by regulatory portfolio. It excludes the failed settlements, free deliveries, default fund contributions, CVA charge and exposures to central counterparties.

**Table 54: Standardised approach – CCR exposures by regulatory exposure class and risk weights (CCR3)**

| Risk Weight | **0% \$m** | **4% \$m** | **20% \$m** | **50% \$m** | **100% \$m** | **150% \$m** | **Total exposure value \$m** | **Risk weight \$m** |
|---|---|---|---|---|---|---|---|---|
| **At 31 Dec 2025** | | | | | | | | |
| 1 | Central governments and central banks¹ | 15,053 | — | 9 | — | 51 | — | 15,113 | — |
| 2 | Regional government or local authorities | 232 | — | 5 | — | 10 | — | 247 | — |
| 3 | Public sector entities | — | — | 94 | 32 | — | — | 126 | — |
| 4 | Multilateral development banks | 92