21380081EP12LC86CB82-2024-12-31-T01


HSBC UK Bank plc Annual Report and Accounts 2024	1

Contents


	Strategic report
2	About us
4	Financial highlights
5	Key financial metrics
5	Business performance and KPIs
6	Our purpose, values and strategy
7	Economic background and outlook
8	Stakeholder engagement
10	Financial summary
13	Risk overview
14	Risk environment
	Report of the Directors
16	Risk review
72	Corporate Governance Report
77	Directors' Report Disclosures table
78	Statement of Directors’ Responsibilities in respect of the financial statements
79	Independent auditors' report to the member of HSBC UK Bank plc
	Financial statements
85	Financial statements
94	Notes on the financial statements
	Other information
134	Reconciliation of alternative performance measures
135	Abbreviations

Presentation of information

This document comprises the Annual Report and Accounts 2024 for

HSBC UK Bank plc (‘the bank’ or 'the Company') and its subsidiaries

(together ‘HSBC UK’ or ‘the group’). ’We’, ‘us’ and ‘our’ refer to

HSBC UK Bank plc together with its subsidiaries. It contains the

Strategic report, the Report of the Directors, the Statement of

Directors’ Responsibilities and Financial Statements, together with

the Independent Auditors’ Report, as required by the UK Companies

Act 2006. References to ‘HSBC Group’ or ‘the Group’ within this

document mean HSBC Holdings plc together with its subsidiaries.

A full list of abbreviations is provided on page 135.

HSBC UK is exempt from publishing information required by The

Capital Requirements Country-by-Country Reporting Regulations

2013, as this information is published by its ultimate parent, HSBC

Holdings plc. This information is available on the Group's website:

www.hsbc.com.

Pillar 3 disclosures for HSBC UK are also available on

www.hsbc.com, under Investor Relations.

All narrative disclosures, tables and graphs within the Strategic report

and Report of the Directors are unaudited unless otherwise stated.

Our reporting currency is £ sterling. Unless otherwise specified, all £

symbols represent £ sterling and $ symbols represent United States

of America ('US') dollars. The abbreviations '£m' and '£bn' represents

millions and billions (thousands of millions) of £ sterling.

This Annual Report and Accounts 2024 contains certain forward-

looking statements with respect to the financial condition, ESG

related matters, results of operations and business of the group,

including the strategic priorities; financial, investment and capital

targets; and HSBC United Kingdom's ('UK') ability to contribute to the

HSBC Group’s environmental, social and governance (‘ESG’)

ambitions, targets and commitments described herein.

Statements that are not historical facts, including statements about

the group’s beliefs and expectations, are forward-looking statements.

Words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’,

‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of

these words and similar expressions are intended to identify forward-

looking statements. These statements are based on current plans,

estimates and projections, and therefore no undue reliance should be

placed on them. Forward-looking statements apply only as of the date

they are made. HSBC UK makes no commitment to revise or update

any forward-looking statements to reflect events or circumstances

occurring or existing after the date of any forward-looking statement.

Forward-looking statements involve inherent risks and uncertainties.

Readers are cautioned that a number of factors, including ESG related

factors, could cause actual results to differ, in some instances

materially, from those anticipated or implied in any forward-looking

statement.


2	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

About us

HSBC UK Bank plc is a public limited company with debt securities

traded on the London Stock Exchange. The Company is a ring-fenced

bank and wholly owned subsidiary of HSBC Holdings plc. We

leverage the rest of the HSBC Group network to support our

customers and help to grow revenue across key trade corridors

around the world.

Headquartered in Birmingham, we have over 15 million customers

and over 18,400 full-time equivalent staff ('FTE') across the country.

We are supported by approximately 5,500 FTE based in HSBC Global

Services (UK) Limited, who provide services to HSBC UK and the

wider HSBC Group.

In October 2024, the HSBC Group announced a new, simplified

organisational structure to accelerate delivery against strategic

priorities. Effective 1 January 2025, the Group operates through four

new businesses: Hong Kong, UK, Corporate and Institutional Banking

and International, Wealth and Premier Banking. The Group's functions

are being realigned to support the four businesses.

For 2024, the bank operated under, and our reporting remained

aligned to, our prior global business structure, Wealth and Personal

Banking ('WPB'), Commercial Banking ('CMB') and Global Banking

and Markets ('GBM'). The results are presented on this previous

basis of segmentation.

Wealth and Personal Banking

WPB offered a comprehensive set of banking products and services

to support our customers to manage their day-to-day finances and

help manage, protect and grow their wealth. We served over 14.4

million customers under our three brands: HSBC UK (including our

Private Bank), first direct and Marks and Spencer ('M&S') Financial

Services plc.

Commercial Banking

CMB was a full-service international commercial bank, highly

connected to the HSBC Group. We served over 685,000 clients,

delivering the Group’s comprehensive product suite to help meet our

clients' international and domestic needs.

On 13 March 2023, HSBC UK acquired Silicon Valley Bank UK Limited

('SVB UK'), later renamed HSBC Innovation Bank Limited (HINV).

HINV’s results are presented within CMB.

Global Banking and Markets

Within HSBC UK, we offered foreign currency payments, transaction

banking and selected products to enable commercial hedging, as

permitted under UK ring-fencing legislation. Through close

collaboration with HSBC Group, we also make products that are not

offered within HSBC UK available on an arms-length basis.

Corporate Centre

Corporate Centre supports central operations of the HSBC UK

business lines and comprises stewardship costs and interests in a

joint venture.

Our business focus and strategic

priorities

We are committed to building on our strong platform for growth.

HSBC is a highly connected, global business and the plans we set out

in October 2024 aim to increase our leadership and market share in

areas where we have competitive advantage, deliver best-in-class

products and service excellence to our customers, and create a

simpler, more dynamic, more agile organisation with clearer lines of

accountability and faster decision making. These changes will reduce

the duplication of processes built into our prior matrix management

structure.

Our priorities

We will be guided by three overarching priorities:

– Focus on our customers, delivering high satisfaction;

– Drive long-term growth by focusing on our strengths, increasing

our leadership and market share in the areas where we can

generate attractive returns;

– Simplify our structure and operating model. Reshape and

rationalise our portfolio, to meet the needs of a fast-changing

world.

Stakeholder engagement

Building strong relationships with our stakeholders helps us to deliver

our strategy in line with our long-term values and operate the

business in a sustainable way. Our stakeholders are the people who

work for us, bank with us, own us, regulate us, and live in the

societies we serve and the planet we all inhabit. Many of our

employees are customers and shareholders of the Group, while our

business customers are often suppliers. Guided by our purpose, we

aim to create value for our customers and shareholders by doing

business responsibly, and thinking for the long term. Our section 172

statement, detailing our Directors’ responsibility to stakeholders, can

be found on pages 8 to 9.


HSBC UK Bank plc Annual Report and Accounts 2024	3

Financial performance

In 2024, we delivered 5% higher profit before tax of £275m,

excluding the £1,307m non-recurring gain on the acquisition of SVB

UK in 2023. Reported profit before tax is £5,647m, or 15% lower than

2023.

Reported revenue decreased by £828m, or 8%, to £9,979m.

Excluding the gain recognised on the acquisition of SVB UK of

£1,307m in 2023, revenue increased by £479m, or 5%, driven by

balance sheet growth, an extra quarter of revenue from HINV, and

repricing of the structural hedge driving net interest margin ('NIM')

widening from 2.43% in 2023 to 2.56% in 2024, offsetting the impact

of an increase in the mix towards interest-bearing deposit accounts,

competitive mortgage pricing and two base rate cuts during the year.

Our loans and advances have grown by 3% in 2024 with a stable

market share. Customer accounts have grown by 4% in 2024

primarily driven by an increase in retail deposits from a growing

market size, whilst commercial banking deposits have been stable in-

line with the market. There was also an increase in intra-group

deposits.

Expected credit losses ('ECL') and other credit impairment charges

decreased by £106m from £421m in 2023 to £315m in 2024 driven

by lower stage 3 charges in CMB combined with improved forward

economic outlook in 2024.

Operating expenses increased by £310m or 8% to £4,017m in 2024.

This was driven by ongoing planned investment in technology, wage

inflation and an extra quarter of costs from HINV. In addition to the

new Bank of England ('BoE') levy introduced in 2024 (which replaced

the Cash Ratio Deposit (‘CRD’) scheme) and lower accounting benefit

from our defined benefit pension surplus, offset by a favourable net

movement in certain provisions. We continue to actively manage our

cost base, whilst remaining committed to investing in our business.

Our 2024 reported Return on Tangible Equity ('RoTE') of 20.2% was

8.2% lower than the 2023 reported RoTE of 28.4%. The profit for

2023 included the impact of a gain recognised on the acquisition of

SVB UK, excluding which the RoTE was 22.4%. Supported by a

Common equity tier 1 ('CET1') ratio of 13.6% and Liquidity coverage

ratio ('LCR') of 190% as at 31 December 2024, our balance sheet

remains resilient with sufficient capital and liquidity.

Our Financial summary, containing further details of our financial

performance, can be found on page 10.

Risk overview

We use an established risk management framework underpinned by

a strong culture to enable effective risk governance and an

understanding of the risks that apply to HSBC UK. All our people are

responsible for the management of risk, with the ultimate

accountability residing with the Board. Full details of our top and

emerging risks are included on page 18.

Other statutory information

During November and December 2024, HSBC UK Bank plc

restructured its shareholders' funds, with no overall impact on its

regulatory capital, and:

– converted its Share premium account (£9bn) into Retained

earnings; and

– capitalised its Group Reorganisation Reserve (£5.2bn) via a bonus

issue of ordinary shares which were subsequently cancelled and

converted into Retained earnings.

The cancellation of the share premium account and the bonus shares

was approved by the Court in November 2024 and became effective

upon registration at Companies House in December 2024.


4	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Financial highlights

For the year ended 31 December 2024

Profit before tax

£5.6bn

(2023: £6.7bn)

Expected credit losses and other credit impairment charges

£315m

(2023: £421m)

Loans and advances to customers

£217.6bn

(2023: £211.9bn)

Risk-weighted assets

£110.4bn

(2023: £101.5bn)

Revenue

£10.0bn

(2023: £10.8bn)

Operating Expenses

£4.0bn

(2023: £3.7bn)

Customer accounts

£280.4bn

(2023: £268.3bn)

Common equity tier 1 capital ratio

13.6%

(2023: 14.0%)


	For 2024, Customer accounts include £6.8bn of short term Markets Treasury deposits from HSBC Holdings plc. For 2023, Profit before tax and revenue includes a non-recurring gain on the acquisition of SVB UK of £1.3bn.


HSBC UK Bank plc Annual Report and Accounts 2024	5

Key financial metrics


	Year ended
	31 Dec 2024	31 Dec 2023
Reported results
Revenue (£m)1	9,979	10,807
Profit before tax (£m)2	5,647	6,679
Profit after tax (£m)	4,139	5,254
Profit attributable to the shareholders of the parent company (£m)	4,134	5,249
Net interest margin (%)	2.56	2.43
Cost efficiency ratio (%)2	40.3	34.3
Alternative performance measures
Expected credit losses and other credit impairment charges as % of average gross loans and advances to customers (%)	0.15	0.20
Return on average ordinary shareholder's equity6 (%)	16.5	22.8
Return on average tangible equity2,6,7 (%)	20.2	28.4

	At
	31 Dec 2024	31 Dec 2023
Balance sheet
Total assets (£m)	340,877	332,876
Net loans and advances to customers (£m)	217,604	211,887
Customer accounts (£m)	280,366	268,345
Average interest-earning assets (£m)	316,007	320,354
Loans and advances to customers as % of customer accounts (%)	77.6	79.0
Total shareholders' equity (£m)	25,911	26,010
Tangible ordinary shareholders equity (£m)	19,351	19,463
Capital, leverage and liquidity
Common equity tier 1 capital ratio (%)2,3	13.6	14.0
Total capital ratio (%)3	18.6	19.5
Risk-weighted assets3 (£m)	110,423	101,478
Leverage ratio3 (%)	5.8	6.1
High-quality liquid assets (liquidity value) (£m)4	91,348	94,765
Liquidity coverage ratio (%)5	190	201

1Revenue also refers to net operating income before change in expected credit losses and other credit impairment charges.

2These metrics are tracked as Key Performance Indicators ('KPIs') of the group.

3Unless stated otherwise, figures have been prepared on an IFRS 9 transitional basis, which ends from 1 January 2025. Consolidated capital figures and ratios

are reported on a Revised Capital Requirements Regulation and Directive ('CRR II') transitional basis for capital instruments and the leverage ratio is calculated

using the CRR II end point basis for capital.

4Regulatory numbers and ratios are as presented at the date of reporting. Small changes may exist between these numbers and ratios and those subsequently

submitted in regulatory filings. Where differences are significant, we will restate in subsequent periods.

5The LCR is based on the average month-end value over the preceding 12 months.

6Excluding a gain recognised on the acquisition of SVB UK in 2023, RoTE was 22.4%in 2023.

7In the event that the current IAS 19 Pension fund surplus was zero, RoTE would be 22.8% (2023: 32.4%, 25.5% excluding a gain on acquisition of SVB UK), we

refer to this as Pension Adjusted RoTE. Further details are on page 134.

Business performance and KPIs

Management tracks the bank’s progress in implementing its strategy with a range of financial and non-financial measures or KPIs. Progress is

assessed by comparison with the group's strategic priorities, operating plan targets and historical performance. KPIs are reviewed regularly and

Management may adopt new or refined measures to better align with HSBC UK’s strategic priorities.

For further details on non-financial KPIs, such as customer service and satisfaction, please refer to page 6; for employee engagement and inclusion refer to

page 7; for sustainability refer to page 7 and for other non-financial KPIs refer to the Corporate Governance section on pages 72 to 76.

1 Data is weighted based on turnover and region.

2 Coalition Greenwich Voice of Client – 2024 Europe Large Corporate Banking Study.

3 BoE – Gross Lending, Net Lending & Stock, DEC24.

4 Argus data to OCT24.


6	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Our purpose, values and strategy

Our purpose

Opening up a world of opportunity.

Our values

Our values help define who we are as an organisation, and are key to

our long-term success:

– We value difference

– We succeed together

– We take responsibility

– We get it done

Strategic performance

We have been recognised by The Banker as Bank of the Year 2024,

for the second consecutive year, in addition to being recognised as

the UK Best Bank in the Euromoney Awards for Excellence 2024.

Focus on the customer

We aim to attract more customers, improve their experience and

deliver good customer outcomes. We are proud to have reached a

significant milestone in 2024, and now bank over 15 million retail and

commercial customers.

Improving customer experience, measured in part through Net

Promoter Score ('NPS'), is a key strategic imperative and guides our

investment decisions. In HSBC UK WPB, our latest strategic NPS

results in 2024 showed a modest improvement in rank vs. our peers,

moving to joint 11th, from joint 13th at the end of 2023. first direct

continues to be ranked among the top retail providers. In CMB, as

measured by the Savanta MarketVue Business Banking Survey 1, our

Mid-Market Enterprise ('MME') segment has improved its rank to 2nd

position at FY24 (FY23: 3rd). Our Business Banking Portfolio Managed

segment maintained 7th position and our Relationship Managed

segment fell one rank to 5th. HSBC is Share Leader in UK Corporate

Banking with 75% market penetration 2, and our Large Corporate

sector was ranked 3rd for NPS in the 2024 Coalition Greenwich UK

Commercial Study. We acknowledge there is more to be done to

consistently meet our customers' expectations.

We have continued to invest in our physical footprint and have

committed to announce no further branch closures until 2026. We

have spent over £59m refurbishing our branches and invested in

upgrading our self-service machines. We have complimented our

branch presence, with HSBC UK now present in 64 banking hubs,

and over 3,600 'HSBC UK Local' pop-up events delivered over 2024.

To support vulnerable customers, this year we launched our new

online self-service disclosure form to allow customers to tell us if

they require additional, tailored support.

Drive long-term growth

Our international network remains one of our key differentiators,

and we aim to scale our international propositions and global

connectivity. We continue to receive external recognition for our

international capabilities with HSBC Group being recognised as the

#1 Payments Bank, #1 Trade Bank and #1 FX provider for Corporates

among our global and UK peers, and voted Best Bank for Corporates

in the UK (Euromoney 2024). Inbound and outbound revenues have

increased by 10.8% and 8.5% respectively and Multi-Jurisdictional

Revenue has increased 8% (vs FY23). Global Wallet, our multi-

currency account, is now available to all business customers. In WPB,

Global Money now has 1.3 million customers and we have expanded

our international mortgage proposition to help facilitate and simplify

cross-border financing.

We aim to support individuals and businesses to manage and grow

their wealth. In March, we introduced our first Fixed Rate Cash ISA,

expanding the suite of savings options available to our customers.

More recently, in November, we relaunched our Premier proposition,

with new and improved account features aiming to support

customers in a number of different elements of their lifestyle: wealth,

health, travel and international. Across our Retail and Private Bank,

wealth balances, which includes invested assets and wealth

deposits, increased 11% to over £53.1bn (FY23: £47.8bn).

We leverage our balance sheet to seek to fulfil our customers’

lending needs and aim to provide a seamless payments experience.

Our loans and advances increased by 3% in 2024, driven by CMB

lending and mortgage growth, with mortgage market stock share

now at 8.1% 3. We have delivered our second consecutive strongest

year for Credit Card sales, with a 9.6% 4 acquisition market share. In

April, we announced a renewed seven-year relationship with Marks

and Spencer plc, focused on enhancing credit and payments offering

through M&S Bank. More recently, in November, we launched

FlexiPay, our buy-now-pay-later proposition with a large UK energy

provider, to enhance our credit offering to customers wishing to

retrofit their home. In CMB, we remained focused on our Transaction

Banking approach, delivering joined-up solutions to help support our

clients’ domestic and international aspirations through our full range

of solutions across Trade, Payments and Foreign Exchange. In Global

Payment Services, we launched Smart Transact, designed to provide

our customers with quicker, more consistent on-boarding and product

fulfilment journeys, across markets.

HINV is a core part of the global HSBC Innovation Banking

proposition, aiming to deliver globally connected specialised banking

services and expertise to innovation businesses and their investors.

2024 saw continued growth with client acquisition volumes

exceeding our expectations, signifying the opportunity HINV provides

our customers as a valuable member of the HSBC Group. We have

also successfully implemented the HSBC UK Risk Management

Framework into HINV.

Our strength in collaboration across lines of business, brands, and

other parts of the Group remained a competitive advantage. We can

leverage the scale of our business and seek to unlock value for our

customers by supporting their holistic needs. In 2024, cross business

collaboration generated revenue of $1.5bn, up 13% vs. FY23. CMB

generated 53% of all net new money for the Private Bank, in addition

to recently launching a new Private Credit solution in partnership with

HSBC Asset Management, to support a market that continues to

grow and diversify.

Be simple and agile

From 1 January 2025, the UK will become one of the four HSBC

Group businesses and we will benefit from shorter lines of decision

making, empowering our colleagues to get things done.

In 2024, we continued to invest in technology to simplify our

business, enhance customer experience and drive operational

resilience. Our investment aimed to improve the agility, usability,

reliability and security of our services. We have introduced a number

of new digital capabilities for our customers. In WPB, we launched a

new streamlined customer onboarding journey and improved real

time decision making in our fraud management systems through the

use of new software. To improve digital access for our Private

Banking clients, we started migrating our clients across an improved

digital banking platform to give access to better online and mobile

banking functionality. In CMB, we are phasing in our new Digital

Credit Platform to streamline our credit journey to provide quicker


HSBC UK Bank plc Annual Report and Accounts 2024	7

decisions and time to cash availability for our clients. In HSBC Trade

Services, we migrated to a new platform, providing improved

foundations for client interaction through digital channels. We also

continued to simplify our product range, closing a number of off-sale

products.

ESG update

In 2020, HSBC Group set out an ambition to help our customers

transition to net zero and a sustainable future by providing and

facilitating between $750bn and $1tn of sustainable finance and

investment by 2030. In January 2024, HSBC Group published their

first Net Zero Transition Plan, which provides an overview of our

approach to net zero and the actions we are taking to help meet our

ambition across the HSBC Group.

For further details please refer to the ‘ESG Overview’ section in the HSBC

Holdings plc ARA 2024.

In 2024, HSBC UK facilitated and provided $9.6bn of sustainable

finance and investment, providing expertise and guidance in key

areas such as infrastructure and renewables. We launched our

Sustainability Improvement Loan to support SMEs, and partnered

with a carbon management company to help clients measure their

carbon footprint. We also launched our Sustainable Farming Pathway

in partnership with an agricultural charity, providing discounted loan

arrangement fees for farming businesses who have a relevant

sustainability certification. For retail customers we introduced an

Energy Efficient Home Cashback Mortgage incentive for customers

who purchase energy efficient homes through our broker channel and

launched a new Sustainability Hub on our website to support

customers to make more sustainable choices.

Our philanthropic climate partnerships support projects that seek to

tackle climate change. In 2024 we have continued to support the

National Trust to create woodland habitats, with over 1,022 hectares

created and one million trees planted and established since 2021. We

have also worked with Imperial College London and the University of

Birmingham to support early-stage ventures to develop services or

technologies which have the potential to adapt or mitigate against the

effects of climate change. Since the start of the programme, 185

ventures have participated in these university accelerators.

Our social partnerships aim to help people and businesses make the

most of their money now and in the future. Our partnership with the

housing and homelessness charity Shelter has helped more than

61,000 people since launch in April 2023. We continue to support

building children’s financial capability with Money Heroes, the Scouts,

the King’s Trust and our colleague Education Volunteer Network. In

addition, we launched a new partnership with Girlguiding in

November 2024, to create activities and the Money Skills 'I’m Money

Confident' badge. These will help Rainbows, Brownies, Guides and

Rangers build their confidence with money. In 2024, HSBC UK

donated £7.2m to charities and non-profit organisations running

programmes and projects in the UK. Our employee-led projects

supported 62 local charities and 3,661 employees took paid

volunteering leave to support their local communities.

We are embedding a customer-centric, high-performance culture.

The results from our 2024 employee sentiment survey were

encouraging, with record high participation and a 10ppts increase in

employee engagement. To help drive further colleague advocacy, we

have improved our employee banking proposition, offering all UK

employees access to our new Premier proposition. We continue to

drive our inclusion strategy, focused on Representation, Reputation

and Respect. In 2024 we have progressed against our senior

representation ambitions, meeting our goals for both Black Heritage

and female representation. Additionally, we are proud to have been

named Outstanding Employer of the Year at the UK Ethnicity Awards,

ranked 3rd for LGBTQ+ inclusion in the Stonewall index, won a

Disability Smart Accessible Built Environment Award for integrating

accessibility into all our branch refurbishments and driven a 30 place

gain in the Social Mobility Employer Index (37th for 2024).

Empowering colleagues to speak up and raise issues remains critical.

Multiple channels are available to our employees, including our HSBC

Confidential whistleblowing and Human Resources ('HR') Direct

platform.

Economic background and outlook

UK economic outlook

The UK saw a Gross Domestic Product ('GDP') growth recovery in

the first half of 2024, followed by a sharp loss of momentum in the

second. GDP was flat in the third quarter and grew a modest 0.1%

quarter on quarter in Q4. Much of the weakness in H224 came from

the private sector which reported a contraction. Nonetheless, GDP

grew 0.9% in 2024, up from 0.4% in 2023.

While HSBC Global Research forecast the UK economy to expand by

0.9% in 2025, much of this reflects increases in spending and

investment by the public sector. For the private sector, business

surveys suggest sentiment has deteriorated and the outlook is a little

more sluggish, particularly if interest rates come down only slowly

and the government tightens fiscal policy at the Spring Statement.

The labour market has weakened, although there is some uncertainty

over the unemployment rate, pending the Office for National

Statistics’ review of its Labour Force Survey. Latest estimates

suggest unemployment stood at around 4.4% in November up from a

low of 3.6% in August 2022, with vacancies down 38% on their May

2022 peak. With the market still relatively tight, annual pay growth

has picked back up again, and public sector pay settlements and the

6.7% rise in the National Living Wage in April will keep the rate

relatively high. HSBC Global Research expects total pay growth of

4.7% in 2025, down from 5.2% in 2024.

UK Consumer Price Index ('CPI') inflation fell from its high point of

11.1% year on year in October 2022 to a low of 1.7% year on year in

September 2024, before rising back to stand at 2.5% in December

2024. Core CPI inflation stood at 3.2% year on year in December

2024, down from its May 2023 high of 7.1%.

With energy prices back up and the pound having weakened, and

with additional risks that new taxes on businesses will be passed

onto consumers, HSBC Global Research expects CPI headline

inflation to remain above the BoE 2% target throughout 2025 and

2026. On an average annual basis, HSBC Global Research expects

CPI inflation of 2.5% in 2025 and then 2.4% in 2026.

The BoE cut Bank Rate by 25 basis points ('bps') in August 2024,

November 2024, and February 2025, reducing it from 5.25% to

4.50%. Market pricing currently implies between two and three

25bps further cuts in 2025. In September 2024, the BoE announced

that it would continue its quantitative tightening programme, with a

further £100bn of balance sheet reduction in the year to September

2025.


8	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Stakeholder engagement

This section forms our section 172(1) statement for the year. The

purpose of this section is to describe how the Directors have had

regard to the matters set out in section 172(1) (a) to (f) of the

Companies Act 2006 when discharging their duty to promote the

long-term success of the bank. The first part, 'Engaging with our key

stakeholders', sets out information about the stakeholders we view

as critical to the bank and its prospects, including how the Board

considered them in its discussions and decision-making throughout

the year. The second part, 'Principal Strategic Decisions', provides

two examples of principal discussions and decisions taken by the

Board in 2024 when discharging their responsibility. These show how

the Directors and Board respectively discharged their individual and

collective responsibility for promoting the long-term success of the

bank and took different stakeholder considerations into account in

reaching a decision or forming a view. More detailed information on

the activities of the Board during 2024 are set out in the Corporate

Governance Report on page 72.

Engaging with our key stakeholders

A broad range of events were attended by members of the Board to

help them understand what really mattered to the bank’s

stakeholders and validate that the bank’s strategy continued to

support them.

Through our Board Engagement Plan we continued to provide

opportunities for the Board to hear more of the employee voice

within the business and engage directly with customers.

Customers

Meeting customers' needs is central to the bank's business. How we

have served and supported our customers during 2024 is covered in

the 'Our strategy' section on page 6 in the Strategic report. Examples

of how the Board has engaged with customers during 2024 include:

– Chief Executive Officer (‘CEO’) reports provided key customer-

related metrics and performance indicators, such as customer

survey feedback and net promoter scores. This allowed the Board

to monitor the bank's approach to supporting customers and

oversee the impact of associated activities. Other reports to the

Board covered issues such as complaints, supporting vulnerable

customers, and improving the customer experience and journey to

meet the Financial Conduct Authority (‘FCA’s’) Consumer Duty

obligations. This enabled the Board to assess whether more was

required to achieve HSBC UK’s ambition to be a truly customer-

centric organisation.

– Undertaking a review of the bank’s customer-centric

transformation and assessing whether the key actions being taken

to improve the bank's Strategic Net Promoter Score were

sufficient to drive the improvements expected.

– Directors hosted an engagement session with some of HINV's

customers to understand how they had felt the transition to HSBC

had been handled, what their key areas of focus and priorities

were, and how HSBC could support them.

Employees

The Board recognises that our employees help us fulfil our potential

and execute our strategy. We are committed to fostering an inclusive

and diverse working environment where the health and well-being of

our employees enables them to serve our customers better. How we

engage with employees in different ways, as well as our focus on

improving diversity and inclusion in HSBC UK, is detailed on page 7.

Examples of how the Board engaged with employees in 2024

include:

– Directors hosted events with colleagues from across the bank to

hear their perspectives of what it is like to work for HSBC UK,

whether they felt HSBC UK was making a difference for its

customers and what more can be done to improve their own

experiences in the workplace.

– Directors interacted with the bank’s top talent to deepen their

familiarity with those employees in the talent pool. They also

hosted events with small groups of employees from the talent

pool to help foster a culture of excellence and continuous

improvement.

– CEO reports provided updates on employee related activities and

events, metrics on employee attrition, gender-diversity, personal

conduct cases and the results of the internal employee survey.

This allowed the Board to understand employee sentiment, health

and well-being throughout 2024.

– The Board received a People and Culture update allowing directors

to evaluate whether HSBC UK's People Priorities were enabling

employees to drive high-performance, reinforcing customer-

centricity and conduct expectations, and supporting the Bank's

growth ambitions.

Shareholder and investors

The bank is a wholly owned subsidiary of HSBC Holdings plc and

therefore the Board and its executive management consider the

impact and implications of their decisions in relation to its shareholder

and debt security investors. Examples of how the Board did this

include:

– Removing a constraint to dividend capacity to support the

distribution of excess capital to its shareholder, in line with its

Dividend Policy. Further information can be found in the 'HSBC UK

capital reorganisation' section on page 9.

– The Board Chairman and Committee Chairs engaged with their

Group counterparts and attended Group forums and Board

Committee meetings, together with Executive Directors, to

engage on common issues and strategic priorities.

– Evaluating the strength of the bank's balance sheet to ensure that

the ability to pay principal or interest on its listed debt securities

was not at risk.

Suppliers

Suppliers provide critical support to help us operate our business

effectively. We work with our suppliers to ensure mutually beneficial

relationships. An example of Board engagement during 2024

includes:

– The Chief Operating Officer’s regular reports on third-party

supplier matters such as the operating model, relationship

management, material outsourcing, performance and operational

resilience.

Further detail on third party risk management is included in the Risk Section

in the Report of Directors on page 23

Communities

HSBC UK has an important role in supporting the communities in

which it operates. We have established a number of community

partnerships which are detailed in the ‘ESG update’ section on page

7. During the year, the Board encouraged management to increase

the impact of HSBC UK’s societal purpose by supporting social and

community projects which increase people and business’ financial

inclusion; resilience; capability; and opportunity. This included:

– Expanding the partnership with the homelessness charity Shelter,

with Directors attending Candlelight Concerts hosted by the bank

to both raise funds for Shelter and build awareness of the

important work the charity does.

– Assessing HSBC UK's societal ambition and funding

commitments to ensure a continued focus on financial resilience

and education.


HSBC UK Bank plc Annual Report and Accounts 2024	9

– Reviewing HSBC UK's net zero transition plans and challenging

the level of HSBC UK's ambition, priority areas of focus for UK

WPB and CMB, as well as the approach to resourcing to support

the programme.

Regulators and Government

As a UK bank, the government and regulators in the UK are key

stakeholders with whom we maintain constructive dialogue and

relations. Examples of Board engagement with them during 2024

include:

– Robust review and challenge of the Internal Capital Adequacy

Assessment Process and Internal Liquidity Adequacy Assessment

Process, including the key underlying assumptions for deposit

outflows from digitally active and multi-banked customers, and the

sequence and timing of management actions in response to

stress.

– Meetings between Directors and regulators, both as part of

continuous assessment and on specific issues such as the

Prudential Regulation Authority (‘PRA's’) Periodic Summary

Meeting Letter and the FCA’s Firm Evaluation Letter.

– Participation by Directors in government and regulatory

consultations, industry forums and round table events with

particular focus on how banks, regulators and government can

work together to help Britain grow.

Principal Strategic Decisions

To provide some examples of how the Directors have exercised their

statutory duties under section 172(1) of the Companies Act 2006 in

relation to matters of strategic importance during 2024, set out below

are overviews of two of the principal decisions made by the Board

during 2024 and some of the matters the Board took into account in

taking such decisions.

Operational Resilience Self-

Assessment

Throughout 2024, the Board has highlighted the strong link between

delivering good customer outcomes under the Consumer Duty and

improving operational resilience, for example, improving customer

experience by reducing service outages. The Board reviewed the

investment spend which was allocated to modernise the technology

estate and assessed additional initiatives that had been identified to

support customer experience by improving resilience within

customer journeys. The Board stressed the importance of digitising

the production of sufficient data to enable it to monitor the following

items effectively: resilience; customer outcomes; progress of

execution against the consolidated action plan; and cultural change.

The Board is required to approve HSBC UK’s Operational Resilience

Self-Assessment ('ORSA') on an annual basis, together with any

changes to HSBC UK’s Important Business Services ('IBS') and

Impact Tolerance ('ITOL'). When considering the ORSA, the Board

was mindful of the following:

– The importance of regular engagement with the regulators to

ensure that HSBC UK's operational resilience areas of priority

were aligned with those of the regulators.

– The need for Management to ensure that any Group

dependencies were well managed, as well as ensuring HSBC UK

was adequately supporting the Group-led Operational Resilience

Acceleration Plan.

– Those employees that were Business Service Owners ('BSOs')

were core to the successful embedding of the Operational

Resilience programme. To this end, it was critical that they were

well supported and that the model for BSO interaction with Group

colleagues was sufficiently focused on technology, third-party

management, and business continuity & incident management.

To support HSBC's Operational Resilience programmes, an external

consultancy firm had been appointed to help drive change across the

Group as a core aspect of the ongoing operational resilience work.

The Board considered that the strength of the observations and

recommendations that had been raised needed to be better reflected

in the tone and language of the ORSA. Following this feedback, and a

further review by the Board's Risk Committee who challenged

Management, the ORSA (including the IBS and ITOL) was updated

and subsequently approved by the Board.

HSBC UK capital reorganisation

To simplify HSBC UK’s shareholders' funds structure, Management

recommended converting HSBC UK’s share premium account and

Group reorganisation reserve ('GRR') to retained earnings, which

required Prudential Regulation Authority ('PRA'), shareholder and

Court approval (the “Capital Reorganisation”). The Capital

Reorganisation involved:

– capitalising the GRR via a bonus issue of ordinary shares to HSBC

Holdings plc;

– cancelling and extinguishing those ordinary shares, creating

additional Retained earnings; and

– cancelling the share premium account in its totality, creating

additional Retained earnings.

When considering the Capital Reorganisation, the Board was mindful

of the different interests of key stakeholder groups, in particular:

– The need to engage with the PRA given that the capitalisation of

the GRR via the bonus issue of ordinary shares required a Pre-

Issuance Notification to the PRA, and the cancellation of the

bonus shares and the share premium account required PRA

consent;

– The importance of protecting creditors by undertaking

proportionate due diligence to confirm that the Capital

Reorganisation would not result in HSBC UK being unable to

discharge its debt or claims when they fall due;

– Engagement with HSBC UK’s sole shareholder, HSBC Holdings

plc, to call a general meeting to provide shareholder approval for

the GRR capitalisation and subsequent cancellation of the bonus

shares and the share premium account; and

– The requirements of the High Court of Justice in England and

Wales given that the cancellation of the bonus shares and the

share premium account required Court approval.

Based on the information provided, and taking into account the

interests of relevant stakeholders, the Board decided to proceed with

the Capital Reorganisation to simplify the company’s shareholders'

funds structure.

Shareholder approval for the Capital Reorganisation was obtained at a

General Meeting of the company on 17 October 2024. The

cancellation of the bonus shares and the share premium account was

approved by the High Court of Justice in England and Wales on

19 November 2024 and took effect upon the Court order being

registered with Companies House on 12 December 2024.


10	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Financial summary


Summary consolidated income statement for the year ended
Audited	Year ended
	31 Dec 2024	31 Dec 2023
	£m	£m
Net interest income	8,084	7,787
Net fee income	1,308	1284
Net income from financial instruments held for trading or managed on a fair value basis	454	414
Gain on acquisition of subsidiary1	—	1,307
Other operating income	133	15
Net operating income before change in expected credit losses and other credit impairment charges	9,979	10,807
Change in expected credit losses and other credit impairment charges	(315)	(421)
Net operating income	9,664	10,386
Total operating expenses	(4,017)	(3,707)
Operating profit	5,647	6,679
Profit before tax	5,647	6,679
Tax expense	(1,508)	(1,425)
Profit for the year	4,139	5,254
Profit attributable to shareholders of the parent company	4,134	5,249
Profit attributable to non-controlling interests	5	5

1Gain of £1.3bn recognised in respect of the acquisition of SVB UK.

Reported performance

The 2024 reported profit before tax of £5,647m was £1,032m, or

15%, lower than 2023. 2023 included £1,307m a non-recurring gain

on the acquisition of SVB UK. Excluding this, profit before tax

increased by £275m, or 5%.

Reported revenue decreased by £828m or 8%, to £9,979m.

Excluding the gain recognised on the acquisition of SVB UK in 2023,

revenue increased by £479m, or 5%.

Net interest income (‘NII’) increased by £297m, or 4%, despite two

BoE Base Rate cuts in 2024. This is mainly driven by balance sheet

growth, an extra quarter of income from HINV, and repricing of the

structural hedge, partly offset by the impacts of competitive

mortgage and deposit pricing, as well as an increase in the mix

towards interest-bearing deposit accounts.

Net fee income increased by £24m, or 2%, driven by the addition of

fee income from HINV and capital financing fees, partly offset by

lower fees in transaction banking, lower foreign exchange fees and

higher credit card reward costs.

Net income from financial instruments held for trading or

managed on a fair value basis increased by £40m, or 10%,

principally due to higher income from foreign exchange spot deals.

Other operating income increased by £118m, mainly due to non-

recurring disposal losses in 2023 from repositioning and risk

management activities in our hold-to-collect-and-sell portfolio.

ECL decreased by £106m from £421m in 2023 to £315m in 2024

driven by lower stage 3 charges in CMB combined with improved

forward economic outlook in 2024.

Total operating expenses increased by £310m or 8% to £4,017m in

2024. This includes the new BoE levy introduced in 2024 (which

replaced the CRD scheme) and lower accounting benefit of our

defined benefit pension surplus, offset by a favourable net movement

in conduct and legal provisions. Excluding the favorable movement in

provisions, operating expenses increased due to ongoing planned

investment in technology, wage inflation and an extra quarter of costs

from HINV. We continue to actively manage our cost base, whilst

remaining committed to investing in our business.

Tax expense effective rate is 26.7% (2023: 21.3%). The effective tax

rate ('ETR') for 2024 is lower than the statutory tax rate mainly due to

tax relief on Additional Tier 1 ('AT1') coupon payments, prior year

adjustments and tax credits from release of provisions. The effective

tax rate for 2023 was reduced by 5.4% due to non-taxable gain

arising on the acquisition of SVB UK in the period. The effective tax

rate excluding this item was 26.7% and reflected the statutory

blended tax rate of 27.75%, tax relief on AT1 coupon payments and a

tax credit from the release of provisions for uncertain tax positions.

On 1 April 2023, the main rate of UK corporation tax increased from

19% to 25% and the UK banking surcharge rate decreased from 8%

to 3%, giving a rate of 28% for HSBC UK Bank plc and its banking

subsidiaries in 2024 (2023: 27.75%). The tax rate applicable for non-

banking entities in 2024 is 25% (2023: 23.5%).


Net interest income
	Year ended
	31 Dec 2024	31 Dec 2023
	£m	£m
Interest income	14,789	12,915
Interest expense	(6,705)	(5,128)
Net interest income	8,084	7,787
Average interest-earning assets (AIEA)	316,007	320,354
	%	%
Gross interest yield1	4.68	4.03
Less: Gross interest payable1	(2.69)	(2.06)
Net interest spread2	1.99	1.97
Net interest margin3	2.56	2.43

1Gross interest yield is the interest income as a percentage of Average

interest-earning assets ('AIEA'). Gross interest payable is the interest

expense as a percentage of average interest-bearing liabilities.

2Net interest spread is the difference between the gross interest yield and

the gross interest payable.

3Net interest margin is net interest income as a percentage of AIEA.

Net interest margin increased from 2.43% in 2023 to 2.56% in 2024.

This was driven by the benefits of structural hedge repricing, partly

offset by narrowing of mortgage margins as a result of higher margin

back-book continuing to roll-off despite our front-book margin

improving, and higher funding costs as the mix of interest-bearing

deposits increased.

Return on average tangible equity

RoTE is measured as reported profit attributable to the ordinary

shareholders, excluding impairment of goodwill and other intangible

assets for the period, divided by average reported equity adjusted for

goodwill and intangibles. A reconciliation is provided on page 134,

which details the adjustments made to the reported results and

equity in calculating RoTE. Our 2024 reported RoTE was 20.2%

which was 8.2% lower than the 2023 RoTE of 28.4%, driven by

lower reported profit before tax.


HSBC UK Bank plc Annual Report and Accounts 2024	11

Alternative performance measures

To measure our performance, we supplement our IFRS Accounting

Standards figures with non-IFRS Accounting Standards measures,

which constitute alternative performance measures. All alternative

performance measures are reconciled to the closest reported

performance measure.

Segmental reporting

Global businesses are our reportable segments under IFRS 8.

The HSBC Group Chief Executive, supported by the rest of the Group

Executive Committee, is considered the Chief Operating Decision

Maker ('CODM') for the purposes of identifying the HSBC Group's,

and therefore HSBC UK's, reportable segments. HSBC UK's CODM

is the HSBC UK Chief Executive, supported by the HSBC UK

Executive Committee.

Our operations are closely integrated and, accordingly, the

presentation of data includes internal allocations of certain items of

income and expense. These allocations include the costs of certain

support services and global functions to the extent that they can be

meaningfully attributed to global businesses. While such allocations

have been made on a systematic and consistent basis, they

necessarily involve a degree of subjectivity. Costs which are not

allocated to global businesses are included in Corporate Centre.

Where relevant, income and expense amounts presented include the

results of inter-segment funding along with inter-company and inter-

business line transactions. All such transactions are undertaken on

arm’s length terms. The intra-group elimination items are presented

in the Corporate Centre.

A description of the global businesses is provided in the Strategic

report, page 2.


Reported profit before tax and balance sheet data for the year ended
At 31 Dec 2024	WPB	CMB	GBM	Corporate Centre	Total
At 31 Dec 2024	£m	£m	£m	£m	£m
Net operating income/(expense) before change in expected credit losses and other credit impairment charges	4,641	5,199	159	(20)	9,979
– external	4,215	4,974	389	401	9,979
– inter-segment	426	225	(230)	(421)	—
– of which: net interest income	3,951	4,250	(2)	(115)	8,084
Change in expected credit losses and other credit impairment charges	(46)	(269)	—	—	(315)
Net operating income/(expense)	4,595	4,930	159	(20)	9,664
Total operating income/(expenses)	(2,536)	(1,512)	(45)	76	(4,017)
Operating profit	2,059	3,418	114	56	5,647
Profit before tax	2,059	3,418	114	56	5,647
	%	%	%	%	%
Cost efficiency ratio	54.6	29.1	28.3	380.0	40.3
Balance sheet information	£m	£m	£m	£m	£m
Loans and advances to customers (net)	147,756	70,025	—	(177)	217,604
Customer accounts	178,873	101,853	—	(360)	280,366


At 31 Dec 2023
Net operating income/(expense) before change in expected credit losses and other credit impairment charges	4,620	6,109	154	(76)	10,807
– external	3,784	6,250	396	377	10,807
– inter-segment	836	(141)	(242)	(453)	—
– of which: net interest income	3,996	3,883	(2)	(90)	7,787
– of which: gain on the acquisition of SVB UK	—	1,307	—	—	1,307
Change in expected credit losses and other credit impairment charges	(18)	(403)	—	—	(421)
Net operating income/(expense)	4,602	5,706	154	(76)	10,386
Total operating expenses	(2,383)	(1,434)	(38)	148	(3,707)
Operating profit	2,219	4,272	116	72	6,679
Profit before tax	2,219	4,272	116	72	6,679
	%	%	%	%	%
Cost efficiency ratio	51.6	23.5	24.7	194.7	34.3
Balance sheet information	£m	£m	£m	£m	£m
Loans and advances to customers (net)	143,588	68,651	—	(352)	211,887
Customer accounts	170,684	98,093	—	(432)	268,345


12	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Wealth and Personal Banking

Profit before tax of £2,059m in 2024 was £160m, or 7%, lower than

2023, primarily due to higher operating expenses.

Revenue increased by £21m, or 0.5%, to £4,641m, mainly due to

repricing of the structural hedge, partly offset by loan margin

compression particularly in mortgage lending, as well as an increase

in the mix towards interest-bearing deposit accounts.

ECL has remained low in 2024, increased by £28m, to £46m,

reflecting resilience in our unsecured lending portfolio with low loan

loss experienced as well as releases of provisions for forward

economic outlook.

Operating expenses increased by £153m, or 6%, to £2,536m, driven

by the new BoE levy, increased technology investment costs and

wage inflation, partly offset by actions taken to continuously optimise

operational costs and a favourable net movement in conduct and

legal provisions.

Commercial Banking

Profit before tax of £3,418m in 2024 was £453m, or 15% higher than

2023, excluding the £1,307m non-recurring gain on the acquisition of

SVB UK in 2023, due to higher revenue and lower ECL, partly offset

by higher operating expenses.

Excluding the gain of £1,307m recognised on the acquisition of SVB

UK in 2023, revenue increased by £397m to £5,199m, or 8%, driven

by wider deposit margin resulting from structural hedge benefits and

an extra quarter of revenue from HINV, partly offset by the impact of

an increase in the mix towards interest-bearing deposit accounts.

ECL decreased by £134m, or 33%, from a £403m charge in 2023 to a

£269m charge in 2024, driven by lower stage 3 charges.

Operating expenses increased by £78m or 5%, driven by the new

BoE levy, wage inflation, increased technology investment costs, and

an extra quarter of HINV costs.

Global Banking and Markets

GBM in HSBC UK reflects the transacting of foreign currency

exchange for WPB and CMB customers.

The majority of the foreign exchange revenue is transferred to WPB

and CMB, with an element retained in GBM.

Profit before tax of £114m was £2m, or 2%, lower than 2023.

Corporate Centre

Profit before tax of £56m in 2024 was £16m, or 22%, lower than

2023, due to higher operating expenses mainly reflecting lower

accounting benefit from our defined benefit pension surplus, partly

offset by lower funding costs on fixed assets.

Dividends

The consolidated reported profit for the year attributable to the

shareholders of the bank was £4,134m.

Total interim dividends of £3,336m were paid on the ordinary share

capital during the year, of which £1,412m relates to the previous year

and £1,924m relates to the current year. £228m of dividends were

paid in respect of our additional tier 1 capital instruments.

On 11 February 2025, the Directors resolved to pay an interim

dividend of £595m to the ordinary shareholder of the parent company

in respect of the financial year ending 31 December 2024.

Further information regarding dividends is given in Note 6.


Summary consolidated balance sheet as at
	31 Dec 2024	31 Dec 2023
	£m	£m
Total assets	340,877	332,876
– cash and balances at central banks	52,276	65,719
– financial assets mandatory measured at fair value through profit and loss	174	135
– derivatives	298	178
– loans and advances to banks	7,263	7,980
– loans and advances to customers	217,604	211,887
– reverse repurchase agreements – non-trading	11,776	7,686
– financial investments	37,801	26,315
– other assets	13,685	12,976
Total liabilities	314,906	306,806
– deposits by banks	11,144	10,843
– customer accounts	280,366	268,345
– repurchase agreements – non-trading	420	4,652
– derivatives	107	108
– debt securities in issue	2,044	1,988
– other liabilities	20,825	20,870
Total equity	25,971	26,070
– total shareholders’ equity1	25,911	26,010
– non-controlling interests	60	60

1Total shareholders' equity includes share capital, share premium, additional Tier 1 instruments and reserves.

The group maintained a strong and liquid balance sheet. The ratio of customer advances to customer accounts decreased to 78% compared to

79% at 31 December 2023.


HSBC UK Bank plc Annual Report and Accounts 2024	13

Impact of Climate Risk

We have assessed the impact of climate risk on our balance sheet

and have concluded that there is no material impact on the financial

statements for the year ended 31 December 2024. We considered

the impact on a number of areas of our balance sheet including ECL,

classification and measurement of financial instruments, goodwill and

other intangible assets, our owned properties, our pension plan, as

well as our going concern.

For further detail on how climate risk may impact HSBC UK in the

medium to long-term see page 69 and on credit risk see page 27.

Additionally, for further disclosure on how management has

considered the impact of climate-related risks on its financial position

and performance see critical estimates and judgements, detailed in

Note 1 ‘Basis of preparation and significant accounting policies’ from

page 94.

Assets

Cash and balances at central banks decreased by £13.4bn due to

continued growth in customer lending of £5.7bn, an increase in

reverse repurchase agreements of £4.1bn, a decrease in repurchase

agreements of £4.2bn and increase in financial investments held of

£11.5bn, offset by a £12.0bn increase in customer accounts.

Loans and advances to customers increased by £5.7bn, primarily

from growth in retail mortgage lending of £3.7bn and £1.4bn growth

in CMB.

Reverse repurchase agreements increased by £4.1bn due to

diversification of the liquid asset buffer and cash deployment at

favourable market levels.

Financial investments increased by £11.5bn mainly due to Treasury

management activities.

Liabilities

Customer accounts increased by £12.0bn, across both WPB (£8.2bn)

and CMB (£3.8bn) reflecting an increase in retail deposits of £4.9bn

primarily driven by continued growth in Term and Instant Access

Savings. The increase in customer accounts included the benefit of

an increase in short term Markets Treasury deposits from HSBC

Holdings plc of £6.8bn allocated to WPB (£3.3bn) and CMB (£3.5bn)

in line with our reportable segments policy.

Repurchase agreements have decreased by £4.2bn due to lower

market demand.

Equity

Total shareholders’ equity, including non-controlling interests,

decreased by £0.1bn or 0.4% compared with 31 December 2023.

This reflected the effects of profits generated of £4.1bn, offset by

dividend payments of £3.6bn and decrease in Other comprehensive

income of £0.6bn from cashflow hedge reserves and remeasurement

of the defined benefit asset.

Risk overview

Our customers and our organisation have continued to be impacted

by uncertain economic conditions in the UK in 2024. Economic

growth has been muted and despite some reduction in interest rates,

these remain relatively high compared to the recent past. The rate of

inflation has fallen, but consumers continue to face elevated prices

and mortgage payments. We continue to monitor the impacts on our

customers from the current economic environment and policy

changes introduced by the UK government including those delivered

in the last budget. Our personal and business lending portfolios

remain resilient but we continue to see some signs of stress. We

remain focussed on seeking to ensure that we support all our

customers, through offering solutions appropriately tailored to

customers' vulnerability, including those adopted through the UK

government's Mortgage Charter. The economic outlook is detailed in

the 'Description of consensus economic scenarios' from page 34.

We have integrated HSBC Innovation Bank Limited (previously Silicon

Valley Bank UK) into the group following its purchase in March 2023.

This has included the roll-out of HSBC UK risk tools, systems and

practices and aligning the management of HINV risks to be consistent

with our risk and compliance frameworks and policies.

Our balance sheet and liquidity have remained strong which has

helped us to support our customers. Pressure on business operations

and customer support has continued to be high as our people,

processes and systems have responded to meet the current

economic challenges. We remain focussed on our operational

resilience and we seek to improve the performance of our customer

support systems and processes.

We continue to monitor, and seek to manage, the potential

implications of all the above developments on our customers and our

business and have maintained our focus on improving the quality and

timeliness of the data we use to inform management decisions and

for regulatory reporting. We have employed an active but prudent

approach in managing our risk appetite, and have aimed to ensure

regular communication with our Board and key stakeholders.


14	HSBC UK Bank plc Annual Report and Accounts 2024

Strategic report

Risk environment

We continuously identify, assess, manage and monitor risks. This

process, which is informed by our risk factors and the results of the

stress testing programme, gives rise to the classification of certain

financial and non-financial risks. Changes in the assessment of these

risks may result in adjustments to our business strategy and,

potentially, our risk appetite.

Our material banking risks include credit risk, treasury risk, market

risk, climate risk, resilience risk, regulatory compliance risk, financial

crime and fraud risk and model risk. See pages 25 to 71.

In addition to these banking risks, we have identified top and

emerging risks with the potential to have a material impact on our

financial results or reputation and the sustainability of our long-term

business model. See pages 18 to 23.

The exposure to our risks and risk management of these are

explained in more detail in the Risk section of the Report of the

Directors on pages 16 to 77.

Our suite of top and emerging risks is subject to regular review by

senior governance forums. We continue to monitor closely the

identified risks with an aim to ensure management actions are in

place, as required.


Risk		Description
Externally driven
Geopolitical and macroeconomic risk	p	Our operations and portfolios are exposed to risks arising from political instability, civil unrest and military conflict, which could lead to disruption of our operations, physical risk to our staff and/or physical damage to our assets. We are also subject to cyclical and idiosyncratic macroeconomic risks which can be significant. Following the change in the UK Government, we are monitoring impacts from its legislative programme as this develops. Amongst the key risks to the economic outlook is the prospective recalibration of economic and trade policies following elections in the US and other major countries in 2024. This could prove disruptive to the global economy with potential impacts on our business and our customers.
Credit risk	u	We remain focused on assessing and managing the impacts of the evolving geopolitical and macroeconomic environment, with our early warning indicators helping us to identify segments that we believe may be at risk. This includes our mortgage customers who may be impacted by increased monthly payments with interest rates relatively high compared to recent times and vulnerable customers across our other lending portfolios. We seek to ensure adequate capacity within our Financial Support Team and that support tools are in place to assist impacted customers. We remain focused on managing credit facilities appropriately, and adjusting policy and strategy as needed, including regular refreshes of our affordability models. Industry sector analysis is regularly conducted with particular focus on the hospitality, travel, retail, consumer, and healthcare sectors as well as Commercial Real Estate (Offices) and parts of UK utilities and Manufacturing. We continue to undertake in-depth monitoring activities across portfolios and customers to help identify areas of stress or portfolio degradation.
Evolving regulatory environment risk	p	The regulatory risk environment is increasingly complex, with ongoing focus by regulators to improve outcomes for banks’ consumers, particularly vulnerable ones, as well as the orderly and transparent operation of financial markets. These, alongside other regulatory priorities including operational resilience (which includes cyber risk), model risk and financial crime risk management practices, are resulting in high volumes of often complex change requirements across HSBC UK in the short to medium term. We continue to monitor regulatory and wider industry developments closely, engaging with regulators as appropriate.
Financial crime and fraud risk	p	We are exposed to financial crime risk from our customers, staff and third-parties engaging in criminal activity. The financial crime risk environment is heightened due to increasingly complex geopolitical challenges, the macroeconomic outlook, the elevated and dynamic nature of sanctions and export control compliance, evolving financial crime regulations, rapid technological developments, and an increasing number of national data privacy requirements. Fraud, which is becoming ever-more sophisticated, continues to be an area of focus for HSBC UK. Regulatory scrutiny has increased around scams and the impacts from recent changes to the Payment Systems Regulator's ('PSR') reimbursement requirements. As a result, we will continue to face the possibility of regulatory enforcement and reputational risk.
Cyber threat and unauthorised access to systems	p	HSBC UK faces a risk of service disruption or loss of data resulting from technology failures or malicious activities by internal or external cyber threats. We continue to monitor for any changes to the technology and threat landscape, including those arising from ongoing geopolitical and macroeconomic events and any impact this may have on our third-party providers. HSBC UK operates a continuous improvement programme to help protect and support the resilience and stability of our technology operations to enable us to counter a fast-evolving and heightened cyber threat environment.
Environmental, social and governance risk	p	We are subject to ESG risks, including climate change, wider environmental, social and reputational risks. These risks are increasing owing to the pace and volume of regulatory developments, and greater frequency of severe weather events, alongside stakeholders placing more emphasis on actions and decisions in respect of ESG matters. Failure to meet these evolving expectations, along with the transitional and physical risks, would increase financial and non-financial risks for HSBC UK including reputational, legal and regulatory compliance risks.
Digital currencies and disintermediation risk	u	Focus remains on digital currencies from governments, regulatory bodies and central banks. There has been increased focus on Central Bank Digital Currency ('CBDC') and tokenisation with the BoE and His Majesty’s Treasury ('HMT') consulting on the subject in the UK and more design studies and pilots taking place in locations such as Hong Kong, India, Singapore, the Eurozone and Japan. All economies developing a CBDC are doing so by using the existing banking intermediary networks and infrastructure. The cryptocurrency and stablecoin ecosystem has seen exceedingly volatile prices with some risk of contagion spreading beyond these markets. We currently do not expect cryptocurrencies or stablecoins to move from being a speculative asset to being replacements for existing fiat currencies. We continue to monitor the evolution of digital assets and decentralised finance across channels including consultations, pilots and issuances of digital currencies to assess the implications for our products and services, and our customers.
Internally driven
People risk	p	HSBC UK is exposed to risks associated with employee retention and talent availability, changing skills requirements of our workforce and compliance with employment laws and regulations. Whilst HSBC UK attrition remains stable, a failure to manage these risks may impact the delivery of our strategic objectives or lead to regulatory sanctions or legal claims, with the risk heightened during the current period of fundamental organisational change.


HSBC UK Bank plc Annual Report and Accounts 2024	15


Risk		Description
Internally driven (continued)
IT systems infrastructure and service resilience	u	The HSBC UK IT estate is complex and strengthening operational resilience remains a strategic imperative. Modernising and simplifying our technology architecture is key to strengthening the resiliency of our environment and remains a core focus. Multi- year investment is planned to modernise and uplift our service resiliency standards. We are committed to delivering better customer outcomes by reducing disruptions for our customers. To achieve this, we are reducing reliance on non-strategic platforms, reducing complexity for colleagues and customers and supporting stronger and safer change deployment controls. We are also increasing our use of cloud infrastructure to benefit from its resiliency and support scalability when customer demand rises. We are also reducing the lead time to deploy code changes and increasing the use of iterative releases to support improved testing of the delivery of new products and features to help meet customer needs quicker.
Model risk	p	Model risk arises whenever business decision making includes reliance on models. We use models in both financial and non- financial contexts, as well as in a range of business applications. The model landscape continues to be impacted by regulatory requirements driving material changes to the way model risk is managed across the banking industry in the UK. The PRA’s Supervisory Statement (SS 1/23) 'Model Risk Management Principles for Banks' effective since May 2024 requires increased oversight and controls on the management of model risks. New technologies, including AI and generative AI, are driving a need for enhanced model risk controls.
Conduct and customer detriment	u	The first phase of the UK Consumer Duty, which was delivered in 2023, is helping ensure we act to deliver good outcomes for our customers across all impacted products and services. The second phase was implemented in July 2024 where the focus was on delivering good customer outcomes within our closed book of products. We remain focussed on the continuous improvement of our management information capabilities.
Data risk	u	We use data to serve our customers and run our operations, often in real-time within digital experiences and processes. Data risk remains a key area of focus for HSBC UK and is receiving significant management attention as we continue to enhance our control environment. If our data is not accurate and timely, our ability to serve customers, operate with resilience or meet regulatory requirements could be impacted. We seek to ensure that non-public data is kept confidential, and that we comply with the growing number of regulations that govern data privacy and cross-border movement of data.
Third-party risk	u	We procure goods and services from a range of third party providers. Due to the ongoing changes in the macroeconomic and geopolitical climate, the risk of service disruption in our supply chain is heightened. Any deficiency in the management of risks associated with our third parties could affect our ability to support our customers and meet regulatory expectations. We will continue to strengthen our third party risk management controls, oversight, policies and processes including identifying reliance on our third parties’ own provider supply chains, particularly for key activities that could affect our operational resilience.
Execution risk	u	Delivering change effectively is critical to achieving our strategy and enables us to meet rapidly evolving customer and stakeholder needs. We seek to deliver complex change in line with established risk management processes, prioritising sustainable outcomes and understanding the associated risks. We focus on meeting industry and regulatory expectations and fulfilling our obligations to customers and clients.


p	Risk has heightened during 2024
u	Risk remains at the same level as 2023

The Strategic report comprising pages 2 to 15 was approved by the Board on 18 February 2025 and is signed on its behalf by:

John David Stuart

Director

HSBC UK Bank plc

Registered number: 9928412


16	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Risk review



16	How we manage our risks
17	Risk management
18	What are our principal risks and uncertainties
18	Top and emerging risks
18	Externally driven
22	Internally driven
24	Our material banking risks
25	Credit risk
62	Treasury risk
68	Market risk
69	Climate risk
69	Resilience risk
70	Regulatory compliance risk
71	Financial crime risk
71	Model risk

How we manage our risks

Our risk appetite

We recognise the importance of a strong risk culture, which refers to

our shared attitudes, values and standards that shape behaviours

including those related to risk awareness, risk taking and risk

management. All our people are responsible for the management of

risk, with the ultimate accountability residing with the Board.

We seek to build our business for the long term by balancing social,

environmental and economic considerations in the decisions we

make. Our strategic priorities are underpinned by our endeavours to

operate in a sustainable way. This helps us to carry out our social

responsibility and manage the risk profile of the business. We are

committed to managing and mitigating climate-related risks, both

physical and transitional, and continue to incorporate consideration of

these into how we manage and oversee risks internally and with our

customers.

Enterprise-wide application

Our risk appetite is expressed holistically through various risk

management mechanisms and activities, in both quantitative and

qualitative terms. The Board reviews and approves the group's risk

appetite regularly to help ensure it remains fit for purpose. HSBC

UK's risk appetite is considered, developed and enhanced following

these principles:

– alignment with our strategy, purpose, values, external risk

environment, reputational and customer needs;

– compliance with applicable laws, regulations and regulatory

priorities;

– forward looking insights into future risk exposure;

– sufficiency of available capital, liquidity and balance sheet leverage

to absorb the risks;

– capacity and capabilities of people to manage the risk landscape;

– functionality, capacity and resilience of available systems to

manage the risk landscape;

– effectiveness of the applicable control environment to mitigate

risk; and

– internally and externally disclosed commitments.

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,

including the key principles and practices that we employ in

managing material risks, both financial and non-financial. The

framework fosters continuous monitoring, promotes risk awareness

and encourages a sound operational and strategic decision-making

and escalation process. It also supports a consistent approach to

identifying, assessing, managing and reporting the risks we accept

and incur in our activities, with clear accountabilities. We actively

review and enhance our risk management framework and our

approach to managing risk, through our activities with regard to:

people and capabilities; governance; reporting and management

information; credit risk management models; and data.

The implementation of our business strategy remains a key focus. As

we implement change initiatives, we actively manage the execution

risks. We also perform periodic risk assessments, including against

strategies, to help ensure retention of key personnel for our

continued safe operation.

Our Risk Committee focuses on risk governance and seeks to

provide a forward-looking view of risks and their mitigation. The Risk

Committee is a committee of the Board and has responsibility for

oversight and advice to the Board on, amongst other things, the

bank’s risk appetite, tolerance and strategy, systems of risk

management, internal control and compliance. Additionally, members

of the Risk Committee attend meetings of the Chairman’s

Nominations and Remuneration Committee at which the alignment of

the reward structures to risk appetite is considered.

In carrying out its responsibilities, the Risk Committee is closely

supported by the CRO, the CFO, the Head of Internal Audit and the

Head of Compliance, together with other business functions on risks

within their respective areas of responsibility.

Responsibility for managing both financial and non-financial risk,

including regulatory compliance and financial crime related risks, lies

with our people. They are required to manage the risks of the

business and operational activities for which they are responsible. We

maintain oversight of our risks through our various specialist risk

stewards and the collective accountability held by the Chief Risk

Officer ('CRO').

We have continued to strengthen the control environment and our

approach to the management of risk, as set out in our risk

management framework. Our ongoing focus is on helping to ensure

more effective oversight and better end-to-end identification and

management of financial and non-financial risks. This is overseen by

the Enterprise Risk Management function, headed by the HSBC UK

Head of Enterprise Risk Management.

We recognise that the primary role of risk management is to help

protect our customers, business, colleagues, shareholders and the

communities that we serve, while seeking to ensure that we are able

to support our strategy and provide sustainable growth. This is

supported through our three lines of defence model as described

below.

Three lines of defence

All our people are responsible for identifying and managing risk within

the scope of their roles. To create a robust control environment to

manage risks, we use an activity-based three lines of defence model.

This model delineates management accountabilities and

responsibilities for risk management and the control environment.

The model underpins our approach to risk management by clarifying

responsibility and encouraging collaboration, as well as enabling

efficient coordination of risk and control activities. The three lines of

defence are summarised below:

– The first line of defence owns the risks and is responsible

for identifying, recording, reporting and managing them in line

with risk appetite, and helping to ensure that the right controls and

assessments are in place to mitigate them.

– The second line of defence challenges the first line of defence on

effective risk management, and provides advice and guidance and

assurance of the first line of defence to help ensure it is managing

risk effectively.


HSBC UK Bank plc Annual Report and Accounts 2024	17

– The third line of defence is our Internal Audit function, which

provides independent assurance that our risk management

approach and processes are designed and operating effectively.

Risk appetite

We formally articulate our risk appetite through our Risk Appetite

Statement (‘RAS’), which is approved by the Board on the

recommendation of the Risk Committee. Setting out our risk appetite

helps ensure that we agree a suitable level of risk for our strategy. In

this way, risk appetite informs our financial planning process and

helps senior management to allocate capital to business activities,

services and products.

The RAS consists of qualitative statements and quantitative metrics,

covering financial and non-financial risks. It is fundamental to the

development of business line strategies, strategic and business

planning and senior management balanced scorecards. Performance

against the RAS is reported to the Risk Management Meeting

('RMM') to support targeted insight and discussion on breaches of

risk appetite and any associated mitigating actions. This reporting

allows risks to be promptly identified and mitigated, and informs risk-

adjusted remuneration to drive a strong risk culture.

Stress testing

Stress testing is an important tool for banks and regulators to assess

vulnerabilities in individual banks and/or the financial banking sector

under hypothetical adverse scenarios. The results of stress testing

are used to assess banks’ resilience and capital adequacy to a range

of adverse shocks.

A number of internal macroeconomic and event-driven stress

scenarios specific to the UK or the global economy were considered

and reported to senior management during the course of the year.

Multi-scenario capabilities have been successfully demonstrated with

two scenarios executed in parallel. These stress scenarios included

the impact of a lower interest rate environment and a higher interest

rate environment. HSBC UK also conducted a Reverse Stress Test.

This exercise required HSBC UK to assess scenarios and

circumstances that would render its business model non-viable,

thereby identifying potential business vulnerabilities.

Furthermore, HSBC UK is subject to regulatory stress testing. The

assessment by the regulators is on both a quantitative and qualitative

basis, the latter focusing on our portfolio quality, data provision,

stress testing capability and capital planning processes. There was no

BoE Annual Cyclical Stress exercise in 2024. The PRA ran a desk-

based stress test exercise, where the PRA ran its own models and

use of in-house expertise to test the resilience of participating banks.

The 2024 internal stress tests confirm that HSBC UK is well

positioned to withstand potential shocks.

Risk management

We recognise that the primary role of risk management is to protect

our customers, business, employees, shareholders and the

communities that we serve, while aiming to ensure that we are able

to support our strategy and provide sustainable growth. This is

supported through our three lines of defence model.

We use a comprehensive risk management framework across the

organisation and across all risk types, underpinned by the HSBC

Group’s culture and values. This outlines the key principles, policies

and practices that we employ in managing material risks, both

financial and non-financial.

The framework fosters continual monitoring, promotes risk

awareness and encourages sound operational and strategic decision

making. It also helps to ensure a consistent approach to identifying,

assessing, managing and reporting the risks we accept and incur in

our activities.

Internal control

We have:

– Established policies to help ensure compliance with the PRA

Rulebook for Ring-fenced bodies. These include an over-arching

Ring-fenced bodies policy, together with additional policies

covering Exceptions, Arm's Length Transactions and Distributions.

– Implemented the HSBC Group Risk Management Framework and

other HSBC Group policies and procedures. These are designed

to: safeguard assets against unauthorised use or disposal;

maintain proper accounting records; and help to ensure the

reliability and usefulness of financial information.

Policies and procedures are designed to provide effective internal

control within the group but can only provide reasonable assurance

against mitigating material misstatement, errors, losses or fraud.

The key risk management and internal control procedures, that have

been in place throughout the year ended 31 December 2024 and up

to the date of approval of this report, include:

– Global Principles: The HSBC Group's Global Principles set an

overarching standard for all other policies and procedures and are

fundamental to the Group’s risk management structure. They

inform and connect our purpose, values, strategy and risk

management principles, guiding us to do the right thing and treat

our customers and employees fairly at all times.

– The HSBC Group Risk Management Framework: see 'Our Risk

Management Framework' section of the report on page 16.

– Delegations of authority: Subject to certain matters reserved to

the Board, the Board has delegated powers and authority to

manage the day-to-day running of the Company within certain

limits to the CEO and its Executive Committee. The CEO is

permitted to sub-delegate such powers and authorities, within

those limits, as he sees fit.

– Strategic plans: The annual financial resource plan is informed by

detailed analysis of risk appetite, stress-testing exercises, and the

types and quantum of risk that the Company is prepared to take,

within the parameters set by the HSBC Group, to execute its

strategy. It also sets out the key business initiatives and the

financial impact of those initiatives in order to determine the most

appropriate use of the Company’s resources. This is approved by

the Company’s Board and progress against the Financial Resource

Plan is reported regularly to the Executive Committee, Board and

the HSBC Group Executive Committee.

The key risk management and internal control procedures over

financial reporting include the following:

– Financial reporting: The financial reporting process for preparing

the consolidated Annual Report and Accounts 2024 is controlled

using documented accounting policies and reporting formats,

supported by detailed instructions and guidance on reporting

requirements. These are issued by the HSBC Group to HSBC UK

and are cascaded to all reporting entities within the group in

advance of each reporting period end. The submission of the

Company's financial information is subject to certification by the

CFO, and analytical review procedures undertaken at reporting

entity and group levels.

– Disclosure Committee: The Disclosure Committee comprises

certain executive management and supports the discharge of the

Company’s obligations in relation to its debt securities traded on

the London Stock Exchange. In particular, it considers whether a

new event or circumstance constitutes inside information,

reviews all material disclosures and considers and advises upon

any requests and reports to be made by any subsidiaries or

affiliates of its group with regard to inside information.

– Audit Committee: The Board’s Audit Committee reviews the

internal financial controls and reporting disclosures for any

material errors, misstatements or omissions with regard to the

integrity of financial statements and disclosures and provides

oversight over internal financial controls. It is supported by

structures and processes within the group’s Finance and Risk


18	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

functions that provide analytical review of financial reporting and

the maintenance of accounting records, and seek the committee’s

support regarding material accounting policies and practices

before they are agreed with the External Auditors.

– Risk Committee: The Board’s Risk Committee provides oversight

over internal controls systems and the status of principal risks,

and considers whether the mitigating actions put in place are

appropriate. In addition, when unexpected losses have arisen or

incidents have occurred which indicate gaps in the control

framework or in adherence to policies, the committee reviews

reports prepared by management that analyse the cause of the

issue, any lessons learned and actions proposed to address the

issue.

During the year, the Risk Committee and Audit Committee kept

under review the effectiveness of this system of internal controls and

reported regularly to the Board. In carrying out their respective

reviews, the committees receive regular reports from: business and

operational risk assessments; heads of key risk functions covering all

internal controls, both financial and non-financial; internal audit

reports; external audit reports; prudential reviews; and regulatory

reports. More details on the committee’s responsibilities and

activities during the year are set out in the 'Board Committees'

section on page 74.

What are our principal risks and

uncertainties

Key developments in 2024

In 2024, we have continued to manage risks related to

macroeconomic and geopolitical uncertainties and develop risk

management capabilities through the continued enhancement of our

risk management framework. We also retained our focus on risk

transformation and financial crime and continued to assess our

operational resilience capability whilst prioritising the most significant

enterprise risks. We made progress with and continue to develop

capabilities to address key risks. More specifically, we sought to

enhance our risk management in the following areas:

– We are advancing on our multi-year comprehensive initiative

aimed at strengthening our regulatory reporting processes and

making them more sustainable. This multifaceted programme

includes enhancing data, consistency and controls.

– We have improved the quality of our strategic change investment

processes and associated control monitoring and are transitioning

to a more agile approach to the delivery of complex transformation

portfolios and initiatives.

– We continue to maintain a focus on our technology and

cybersecurity controls to improve the resilience and security of

our technology services in response to the heightened external

threat environment.

– We continue to enhance our model risk framework in response to

changes in regulation and external factors. AI and machine

learning models remain a key focus. Progress has been made in

enhancing governance activity in this area with particular focus on

generative AI due to the pace of technological change and

regulatory and wider interest in adoption and usage.

– We enhanced our processes, framework and controls to improve

the oversight of our material third parties. We have strengthened

our due diligence and monitoring capabilities, with respect to the

financial stability of our third parties to better manage our supply

chain and operational resilience. We will continue to assess and

manage our operational resilience.

– HSBC UK published its first entity-level Task Force on Climate-

Related Financial Disclosures report (https://www.hsbc.co.uk/

sustainability/) relating to discretionary investment products, in

June 2024. This external disclosure is required because the

discretionary portfolio management business is treated as an

asset management business by the FCA.

– Through our climate risk programme, we made progress on

embedding climate considerations throughout the organisation,

including through risk policy updates. We also developed risk

metrics to monitor and manage exposures, and develop portfolio

steering capabilities and revenue assessments. Aligned with the

HSBC Group, we further enhanced our Internal Climate Scenario

Analysis that focused on generating more granular insights which

we are using improve our understanding of our risk exposures for

use in risk management, business decision making, and to meet

ongoing regulatory expectations.

– We reviewed the effectiveness of our financial crime risk

management framework, which includes continued consideration

of the complex and dynamic nature of sanctions compliance and

export control compliance, and we continued to make progress

with several key financial crime risk management initiatives.

– We continued to embed our regulatory management systems

focusing on forward-looking analysis, regulatory mapping, and

regulatory content for our inventory.

– We continued to enhance our frameworks, policies and

governance processes to embed regulatory requirements.

Top and emerging risks

We use a top and emerging risks process to provide a forward-

looking view of issues with the potential to threaten the execution of

our strategy or operations over the medium to long term.

We proactively assess the internal and external risk environment, as

well as review the themes identified across HSBC UK businesses for

any risks that may require escalation. We update our top and

emerging risks as necessary.

Our current top and emerging risks are as follows.

Externally driven

Geopolitical and macroeconomic risk

Geopolitical and macroeconomic risk continues to be high. The UK

election delivered a decisive result with a subsequent change in

government. This has reduced uncertainty but also led to a shift in

domestic and foreign policy priorities. Many other countries saw

electoral change or political instability in 2024. The US in particular is

expected to bring about changes to economic and foreign policy that

will have broad economic and geopolitical implications.

Key economic and financial risks are monitored closely. The UK

economy continues to face a number of challenges. Inflation has

fallen across the year but still remains elevated and economic growth

remains at a low level. Interest rates have started to fall but many

customers continue to face an increase in their mortgage payments.

Consumer confidence remains relatively subdued.

The outlook for 2025 remains uncertain as the new US administration

intends to enact a significant change in economic and foreign policies

that could have an uncertain impact on global growth, inflation and

interest rates. In particular, the prospect of additional US tariffs and

retaliatory actions on trade has started to weigh on economic growth

forecasts and has raised future inflation expectations. Consequently,

markets now expect that major central banks, including the Bank of

England, will adopt a more cautious approach to lowering policy

interest rates during the course of 2025.

Challenges remain in the UK-EU relationship following the UK's

withdrawal from the EU. Over the medium to long term, the UK’s

withdrawal from the EU may continue to adversely impact the terms

of EU market access for our clients. This could increase the country’s

economic risk, which in turn could impact our profitability. We are

monitoring the situation closely, including the potential impacts on

our customers.

The Israel-Hamas conflict may resurge. While a 42-day ceasefire was

agreed in January 2025, the durability of the ceasefire remains

uncertain. The regional economic impact was relatively limited

throughout 2024. The US and UK imposed additional sanctions on


HSBC UK Bank plc Annual Report and Accounts 2024	19

Iran in 2024 in response to Iran’s activities and the increase in

tensions between Israel and Iran. Further sanctions may be imposed

and could increase the risk within our operations.

While supply chains have largely adapted to the Russia-Ukraine war

and the conflict in the Middle East, the disruption of key logistical

routes, particularly through the Red Sea continues to impact global

supply cost. Escalation or resurgence of, or other changes in, the

Russia-Ukraine war and the conflict in the Middle East and ongoing

geopolitical instability could have implications for HSBC UK and its

customers by impacting economic activity for a prolonged period

which, in turn, could have a material adverse effect on the HSBC

UK's business, financial condition, results of operations, prospects,

liquidity, capital position and credit ratings. HSBC UK actively

monitors and responds to financial sanctions and trade restrictions

that have been adopted in response to the conflicts.

The sanctions and trade restrictions imposed by the US, the UK, and

the EU, as well as and other countries, as a result of the Russia-

Ukraine war, remain complex, far-reaching and evolving. The US has

expanded the reach of its secondary sanctions regime, which

includes broad discretion to impose severe sanctions on non-US

banks that are knowingly or even unknowingly engaged in certain

transactions or services directly or indirectly involving Russia’s

military-industrial base, including certain third-party activities that are

difficult to detect or beyond our control. The imposition of such

sanctions against any non-US HSBC entity could result in significant

adverse commercial, operational and reputational consequences for

HSBC.

In response to such sanctions and trade restrictions, as well as asset

flight, Russia has implemented certain countermeasures, including

the expropriation of foreign assets.

The relationships between China and several other countries,

including the US and the UK, remain complex. To date, the US, the

UK, the EU and other countries have imposed various sanctions and

trade restrictions on Chinese persons and companies, and there is a

continued risk of additional sanctions and trade restrictions or tariffs

being imposed by the US and other governments in relation to,

among other things, alleged human rights abuses, or advances in

certain sensitive technologies. China, in turn, imposed a number of its

own sanctions and trade restrictions and these or other retaliatory

measures may continue to be imposed against certain countries,

businesses and individuals. Strategic competition with China has the

potential to impact the HSBC Group operations and global supply

chains remain vulnerable to a deterioration in the relationship

between China and other countries.

Existing and additional sanctions, trade restrictions, counter-sanctions

and other retaliatory measures relating to the foregoing or other

geopolitical tensions may adversely affect the group, its customers

and the market in which the group operates by creating regulatory,

reputational and market risks, including additional inflationary

pressures, and a more complex operating environment

Provisioning of assets against credit loss is conducted under the IFRS

9 ‘Financial Instruments’ calculations of ECL, which use forward-

looking scenarios that incorporate the economic and financial risks

detailed above.

Key considerations in our calculation of ECLs included inflationary

pressures, interest rates, changes to economic and financial policies.

In the fourth quarter of 2024, the Central scenario, which has the

highest probability weighting in our IFRS 9 ‘Financial Instruments’

calculations of ECL, incorporated more recent views on the economic

landscape, including evolving views on the effects of higher global

tariff rates through an adjustment to our macroeconomic scenarios.

Outer scenarios have incorporated more adverse tariff escalations

and the escalation of key geopolitical risks.

There remains uncertainty regarding the adequacy of our models to

reflect credit losses under emerging risks which are not captured

under the historical loss experience of our models, or to adequately

distinguish risks for specific sectors or portfolios.

The above risks could also have an impact on our customers and we

continue to closely monitor the potential impacts and offer support to

our customers in line with regulatory, government and wider

stakeholder expectations.

For further details of our Central and other scenarios, see ‘Measurement

uncertainty and sensitivity analysis of ECL estimates’ on page 33.

Mitigating actions

– We closely monitor geopolitical and economic developments and

undertake scenario analysis and stress testing where appropriate.

This helps us to take actions to manage our portfolios where

necessary, including seeking to ensure enhanced monitoring and

amending our risk appetite and/or reducing limits and exposures.

– We continue to monitor the UK's relationship with the EU, and

assess the potential impact on our people, operations and

portfolios.

– We apply management judgemental adjustments where modelled

ECL does not fully reflect the identified risks and related

uncertainty, or to capture significant late-breaking events.

– We continue to monitor our risk profile closely in the context of

the current geopolitical and macroeconomic situation, and given

the significant uncertainties, additional mitigating actions may be

required.

– We continue to seek to manage sanctions and trade restrictions

through the use of reasonably-designed policies, procedures and

controls, which are subject to ongoing testing and enhancements

Credit risk

Our Credit risk profile across our Retail and Corporate portfolios

remains stable in a challenging external environment. Ongoing

market conditions will also be shaped by government supported

growth plans for sectors such as net zero and UK infrastructure and

from government policy impacts on the level of UK unemployment.

The prospect of additional tariffs imposed by the US and the potential

resurgence of the conflict in the Middle East could drive a number of

second order risks including those linked to inflation, energy pricing

and increased supply chain costs. Industry sectors including

manufacturing, real estate and retail could be negatively impacted as

a result, with potentially adverse effects on our Wholesale credit

portfolio.

Mitigating actions

– Regular reviews of our customer affordability and credit scoring

models are undertaken to reflect changes in the macroeconomic

environment. We also continue to contact customers to advise of

the support tools that we offer to provide help with cost of living

challenges.

– Mortgage stress rates continue to be refreshed to reflect the

latest interest rate expectations.

– Reviews of key credit portfolios are undertaken regularly to help

ensure that individual customer or portfolio risks are understood

so that our risk appetite through the economic cycle remains

appropriate.

– We continue to closely monitor high risk wholesale industry

sectors closely through quarterly industry risk appetite reviews

and in 2024 we also undertook specific reviews of portfolios

showing vulnerability such as Agriculture, Automotives,

Commercial Real Estate, Construction and Building Materials,

Leveraged Finance, Retail and the UK utility sector including water

companies.

– Detailed performance monitoring is reviewed on a monthly basis,

which includes early warning indicators and a view of

concentration risks. Portfolio limits and exposures have been re-

assessed and reductions implemented where appropriate.

– We stress test portfolios of particular concern to help identify

sensitivity to loss under a range of scenarios, with management

actions being taken to help rebalance exposures and manage risk

appetite where necessary.


20	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Evolving regulatory environment risk

Financial service providers continue to face stringent regulatory and

supervisory requirements, particularly in the areas of capital and

liquidity management, conduct of business, financial crime, internal

control frameworks, the use of models, the integrity of financial

services delivery and financial and operational resilience.

We aim to keep abreast of the emerging Regulatory Compliance and

conduct risk agenda. Current focus areas include, but are not limited

to: Operational Resilience, ESG developments; helping ensure good

customer outcomes and addressing customer vulnerabilities;

enhancements to regulatory reporting controls; employee compliance

including the use of e-communication channels; and developments in

legal principles or conduct requirements (including in relation to the

risk of such developments in one part of the financial industry being

construed as applying to other parts of the financial industry, which

could lead to legal or regulatory proceedings).

We monitor regulatory developments closely and engage with

regulators as appropriate, to help ensure new regulatory

requirements are implemented effectively and in a timely way.

The competitive landscape in which HSBC UK operates may be

impacted by future regulatory changes and government intervention

including changes driven by the UK government adopting an agenda

particularly focused on economic growth.

Mitigating actions

– We continue to engage in the development of new and amended

regulations in the UK to help ensure that the implications have

been considered by regulators and the wider industry.

– We continue to work with the UK authorities and regulatory

bodies to discuss any impacts on customers and markets.

– We monitor regulatory developments with an aim to ensure that

we fully understand the evolving regulatory landscape and we

seek to implement any applicable change in a timely way.

Financial crime and fraud risk

Financial institutions remain under considerable regulatory scrutiny

regarding their ability to detect and prevent financial crime. In 2024,

these risks continued to be exacerbated by rising geopolitical

tensions and ongoing macroeconomic factors. These challenges

require managing conflicting laws and approaches to legal and

regulatory regimes, and implementing increasingly complex and less

predictable sanctions and trade restrictions.

Amid cost of living pressures, we continue to face increasing

regulatory expectations with respect to managing internal and

external fraud and protecting customers. In addition, the accessibility

and increasing sophistication of generative AI brings financial crime

risks. While there is potential for the technology to support financial

crime detection, there is also a risk that criminals use generative AI to

perpetrate fraud, particularly scams.

The digitisation of financial services continues to have an impact on

the payments ecosystem, with an increasing number of new market

entrants and payment mechanisms, not all of which are subject to

the same level of regulatory scrutiny or regulations as banks.

Developments around digital assets and currencies have continued at

pace, with an increasing regulatory and enforcement focus on the

financial crimes linked to these types of assets.

The intersection of ESG issues and financial crime continues to pose

risks related to potential ‘greenwashing’, human rights issues and

environmental crime, as our organisation, customers and suppliers

transition to net zero.

We also continue to face increasing challenges presented by national

data privacy requirements, which may affect our ability to manage

financial crime risks effectively.

Mitigating actions

– We continue to develop our fraud controls and invest in

capabilities to fight financial crime through the application of

advanced analytics and AI, while monitoring technological

developments and engaging with third parties.

– We continue to assess the impact of a rapidly changing payments

ecosystem, as well as risks associated with direct and indirect

exposure to digital assets and currencies, in an effort to maintain

appropriate financial crime controls.

– We regularly review our existing policies and control framework

so that developments relating to ESG are considered and the

related financial crime risks are mitigated to the extent possible.

– We engage with regulators, policymakers and relevant

international bodies, seeking to address data privacy challenges

through international standards, guidance and legislation.

Cyber threat and unauthorised access to

systems

We operate in an extensively interconnected and complex technology

landscape and an increasingly hostile cyber threat environment.

These threats include potential unauthorised access to systems,

including access to customer data, whether ours or that of our third-

party suppliers, and attacks on our systems or those of our third-party

suppliers. These threats require ongoing investment in business and

technical controls to remain resilient in order to support customers,

our colleagues and financial markets globally

Mitigating actions

– Our cyber intelligence and threat analysis team continually

evaluate threat levels for the most prevalent cyber-attack types

and their potential outcomes. To help protect HSBC UK and our

customers and to help ensure the safe expansion of our business

we continue to find ways to strengthen our controls to help

reduce the likelihood and impact of attacks including advanced

malware, data leakage, exposure through third parties and security

vulnerabilities.

– We continue to seek to enhance our cybersecurity capabilities,

including Cloud security, identity and access management,

metrics and data analytics, and third-party security reviews and to

invest in mitigating the potential threats of emerging technologies.

– We report and review cyber risk and control effectiveness metrics

and data analytics at executive and non-executive Board level. We

also report this management information across our businesses

and functions to help ensure appropriate visibility and governance

of the risk and its mitigating actions.

– We actively participate in and support industry body forums and

working groups to share knowledge of tactics employed by

cybercrime groups and to collaborate in defending against,

detecting and preventing cyber-attacks on financial organisations.

– An important part of our defence strategy is seeking to ensure

that our colleagues are aware of cybersecurity issues and know

how to identify and report incidents.

– We respond to attempts to compromise our cybersecurity in

accordance with our cybersecurity framework. To date, no attacks

have had a material impact on our business or operations.

Environmental, social and governance risk

We are subject to financial and non-financial risks associated with

ESG-related matters. Our current areas of focus include climate risk

alongside wider environmental, social, and reputational risks. These

can impact us both directly and indirectly through our business

activities and relationships.

Focus on climate-related risk continued to increase during 2024,

owing to the pace and volume of policy and regulatory changes on

climate risk management, stress testing and scenario analysis and

disclosures. If we fail to meet evolving regulatory expectations or

requirements on climate risk management, this could have regulatory

compliance and reputational impacts.

Climate change can have an impact across HSBC UK’s risk taxonomy

through both transition risk, arising from the move to a net-zero

economy, such as through policy, regulatory and technological

changes, and physical risk impacts due to the increasing severity and/


HSBC UK Bank plc Annual Report and Accounts 2024	21

or frequency of severe weather or other climatic events, such as

rising sea levels and flooding, and chronic shifts in weather patterns,

which could affect our ability to conduct our day-to-day operations.

Our assessment of climate risks covers three distinct time periods,

comprising: short term, which is up to 2026; medium term, which is

between 2027 and 2035; and long term, which is between 2036 and

2050.

We may face credit losses if climate-related regulatory, legislative or

technological developments impact customers’ business models or if

extreme weather events disrupt or interrupt customers’ operations,

resulting in financial difficulty for customers and/or stranded assets,

and impacting their ability to repay their debts. Our customers may

find that their business models fail to align to a net zero economy or

face disruption to their operations or deterioration to their assets as a

result of extreme weather.

There is also the risk that retail customers in our UK mortgage book

could face increasing physical climate risks such as flooding.

HSBC UK has climate risks relating to our employees’ UK pension

fund, and where we act as portfolio investment manager, or as funds

distributor, for our UK retail customers.

We may also be exposed to liquidity impacts in the form of deposit

outflows due to changes in customer behaviours driven by impacts to

profitability/wealth or due to reputational concerns relating to the

progress we make towards the HSBC Group's climate-related

ambitions and targets.

Operational risk may increase if extreme weather events impact

critical operations and premises.

Reputational, legal and regulatory compliance risks may increase if

we fail to:

– make sufficient progress towards the HSBC Group's ESG-related

ambitions and target;

– set adequate plans to execute those plans or adapt those plans to

changes in the external environment;

– manage the risks associated both with meeting and not meeting

the HSBC Group's ESG-related ambitions and targets; and

– meet evolving regulatory expectations and requirements on the

management of ESG risks.

We may be exposed to additional risks if we knowingly or

unknowingly make inaccurate, unclear, misleading, or

unsubstantiated claims regarding sustainability to our stakeholders.

Conduct risk may arise in association with the increasing demand for

"green" or "sustainable" products where there are differing and

developing standards or taxonomies.

We may also be exposed to reputational risks arising from how we

decide to support our customers in high-emitting sectors in their

transition to net zero, the preferences of different stakeholders in

relation to our approach to the transition to net zero, and if we make

insufficient progress in achieving the HSBC Group's climate-related

ambitions and targets.

Financial reporting risk may increase in relation to our climate-related

and ESG disclosures, as any data, methodologies, scenarios and

reporting standards we have used may evolve over time in line with

market practice, regulation or developments in science. We may also

face the risk of making reporting errors due to issues relating to the

availability, accuracy and verifiability of data, and system, process and

control challenges. Any changes and reporting errors could result in

revisions to our internal frameworks and reported data and could

mean that reported figures are not reconcilable or comparable year on

year. We may also have to re-evaluate our progress towards our

climate-related targets in the future.

We may also be exposed to the risk of greenwashing if we are

perceived to mislead stakeholders regarding the HSBC Group climate

strategy, the climate impact of a product or service, or regarding the

commitments of our customers, including within our marketing

material and campaigns.

We may face model risk, as the uncertain and evolving impacts of

climate change and data and methodology limitations present

challenges to creating reliable and accurate model outputs,

particularly with regards to measuring emissions and measuring the

impacts of climate change.

Climate and ESG-related litigation and regulatory enforcement risks

may arise, either directly if stakeholders think that we are not

adequately managing climate and broader ESG-related risks, or

indirectly, if our clients and customers are themselves the subject of

litigation, potentially resulting in the revaluation of their assets.

We may also be exposed to nature-related risks beyond climate

change. These risks arise when the provision of ecosystem services,

such as water availability, air quality and soil quality, is compromised

by human activity. Nature risk can manifest through macroeconomic,

market, credit, reputational, legal and regulatory risks, for both HSBC

UK and its customers.

Regulation and disclosure requirements in relation to human rights,

and human trafficking, are expected to increase. Businesses are

expected to be transparent about their efforts to identify and respond

to the risk of negative human rights impacts arising from their

business activities and relationships.

Mitigating actions

– Our HSBC UK climate risk programme continues to support the

development of our climate risk management capabilities across

four key pillars: governance and risk appetite, risk management,

stress testing and scenario analysis, and disclosures.

– We continue to enhance our approach and mitigation of the risk of

greenwashing.

– The Trustee of our employee pension plan, the HSBC UK section

of the HSBC Bank (UK) Pension Scheme, manages climate risk in

line with its fiduciary duties and local regulatory requirements,

with global corporate policy encouraging consideration of ESG

risks when selecting investments. The Taskforce on Climate-

Related Financial Disclosures (‘TCFD’) report issued by the

Pension Scheme is available using this link: https://

futurefocus.staff.hsbc.co.uk/-/media/project/futurefocus/

information-centre/deferred-dc/other-information/tcfd-

report-2023.pdf.

– In 2024, the HSBC Group focused on its approach to human rights

risk management relating to the services the HSBC Group

provides to business customers and the goods and services the

HSBC Group purchases from third parties.

– The scope of HSBC Group's financial reporting risk framework

includes oversight over the accuracy and completeness of climate-

related and ESG disclosures. Our risk appetite statement aligns to

the HSBC Group risk appetite statement and references our ESG

and climate-related disclosures. Our internal controls incorporate

requirements for addressing the risk of misstatement in climate-

related and broader ESG disclosures. To support this, we have

developed a framework to guide control implementation over

climate-related and broader ESG disclosures, which includes areas

such as process and data governance, and risk assessment.

– We are increasingly using the outputs from our scenario analysis

and stress testing to identify areas where physical risks could be

of concern in order to take any steps necessary to adapt.

– We continue to engage with our customers, investors and

regulators proactively on the management of climate-related and

broader ESG risks. The HSBC Group also engages with initiatives,

including the Climate Financial Risk Forum, Task Force on Climate-

related Financial Disclosures ('TCFD') and CDP (formerly the

Carbon Disclosure Project) to help drive best practice for climate

risk management.

– In June 2024 HSBC UK’s TCFD report was published. This relates

to the discretionary portfolio management business. https://

www.hsbc.co.uk/sustainability/


22	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Digital currencies and disintermediation risk

Digital currencies have, over the past few years, been a growing part

of the financial landscape bringing with them increased competition

and financial risk. Digital currencies, such as CBDCs, cryptocurrencies

and stable coins are the focus of disintermediation risk as such

currencies could result in a more direct linkage between currency

providers and payment participants. The pilots and issued CBDCs are

coalescing around leveraging existing banking networks and

infrastructure to support any CBDC initiative.

Crypto and other digital currencies facilitate peer-to-peer transactions

across borders as a common means of exchange which could reduce

the requirement for foreign exchange services and payment

intermediaries. The cryptocurrency markets remains subject to very

volatile prices with a risk of contagion to industry participants.

Mitigating actions

– We will continue to monitor progress and industry developments

in digital assets and other aspects of decentralised finance to

assess potential opportunities, risks and impacts on business

models, markets and customers.

– We will continue to take a holistic view of the potential impacts

across product and client segments, including important

considerations such as vulnerability and financial inclusion.

Internally driven

People risk

Our success in delivering our strategic priorities and good customer

outcomes, whilst proactively managing the regulatory and legislative

environment, depends on the attraction, development and retention

of our leadership and high-performing employees. A highly

competitive UK employment market will continue to test our ability to

attract and retain talent, however we continue our focus on driving a

high-performance culture and employee engagement.

Failure to manage people risks could also result in poor customer

outcomes or a breach of employment laws and regulations, which

may lead to regulatory sanctions or legal claims.

Mitigating actions

– We seek to promote an inclusive workforce and provide support

across a wide range of health and well-being activities. We

continue to build our speak-up culture through active campaigns.

– We monitor hiring activities and levels of employee attrition, with

each business and function putting in place plans to help ensure

effective workforce forecasting to meet business demands.

– We monitor people risks that could arise due to organisational

restructuring, including as a result of the reorganisation of HSBC

Group businesses announced in October 2024, to help ensure that

we enable our leaders to manage the transition effectively and

sensitively manage redundancies and support impacted

employees. We encourage our people leaders to focus on talent

retention at all levels, with an empathetic mindset and approach,

whilst aiming to ensure that the whole proposition of working at

HSBC UK is well understood. Our Future Skills curriculum

provides skills that are aimed at helping employees and HSBC UK

to be successful in the future.

– We develop succession plans for key management roles, with

oversight from the HSBC UK Executive Committee.

– Political legislative and regulatory challenges are closely monitored

to minimise any impact on our employment practices or the

attraction and retention of talent and key performers.

IT systems infrastructure and operational

resilience

HSBC UK’s IT systems infrastructure and operational resilience

architecture has grown and become more complex which increases

risks when making IT changes. More focus on change management

is required to minimise disruption and to help ensure continued

support and service for all our customers. HSBC UK has a number of

action plans in progress to modernise and simplify our system

infrastructure which is expected to help improve service resilience,

make the bank more efficient to operate as we seek to ensure that

new products and features aimed at meeting customer needs

becomes easier and safer to deliver.

Mitigating actions

– HSBC UK is implementing a multi-year IT strategy overseen by the

HSBC UK Board that will define the requirements of a simpler,

modern, and more resilient architecture. As with any strategic

transformation programme we will continually review and manage

the risks associated with this implementation.

– Change to be delivered through 2025 will include enhancing

resilience capabilities and controls across HSBC UK’s important

business services identified by our Operational Resilience

programme; improving our monitoring and alerting processes;

modernising our core banking capabilities; eliminating non-

strategic applications; continuing migration to cloud; simplifying

the data landscape and enhancing our cyber controls.

Model risk

Model risk arises whenever business decision making includes

reliance on models. We use models in both financial and non-financial

contexts, as well as in a range of business applications such as

customer selection, product pricing, financial crime transaction

monitoring, creditworthiness evaluation and financial reporting.

Model risk remains a key area of focus given the regulatory scrutiny

in this area, including the PRA’s supervisory statement SS1/23,

coming into effect, This provided detailed principles-based guidance

on how model risk should be managed in the UK.

We continued to prioritise the redevelopment of Internal ratings-

based ('IRB') models as part of the IRB repair and Basel 3.1

programmes. We have a key focus on enhancing the quality of data

used as model inputs and help to ensure that models adhere to both

the letter and spirit of the regulation.

Focus remains on AI and machine learning models where the pace of

technological advances, including the development of generative AI,

is driving significant changes in modelling techniques.

Mitigating actions

– We are investing in the redevelopment of our IRB models used in

our wholesale business to enhance our modelling capability and to

help ensure we fully meet regulatory expectations for the

adoption of Basel 3.1 requirements.

– We updated our Model Risk Management (‘MRM’) framework to

meet the requirements of the PRA’s SS1/23, and a programme of

work is in progress to implement these changes across our model

landscape.

– We completed a full review of Model Tiering across HSBC UK

assessing the materiality and complexity of all models and

assigning a new tier which will drive the level of oversight

required at model level.

– We introduced a new framework to govern and manage the risks

associated with Deterministic Quantitative Methods. These are

complex and material calculators, which although not technically

models, still present some similar risks.

– Model Risk Governance committees at HSBC UK, business and

functional levels continue to provide oversight of model risk.

– Model Risk Management works closely with businesses with an

aim to ensure that IRB/IFRS9/stress testing models in

development meet risk management, pricing, capital

management, and credit risk measurement needs.

– Additional assurance work is performed by the model risk

governance teams, which act as second lines of defence. The

teams test whether controls implemented by model users comply

with model risk policy and if model risk procedures are adequate.

– Models using AI or generative AI techniques are validated and

monitored to help ensure that risks that are determined by the

algorithms have adequate oversight and review. A framework to

manage the range of risks that are generated by these advanced

techniques and to recognise the multidisciplinary nature of these

risks has been developed.


HSBC UK Bank plc Annual Report and Accounts 2024	23

Conduct and customer detriment

Failure to manage our Conduct agenda appropriately may lead to poor

customer outcomes and potential reputational or compliance risks for

HSBC UK. Our conduct management approach focuses on the impact

we have for our customers and the financial markets in which we

operate. Good customer outcomes are at the heart of how we

operate, and we aim to act responsibly and with integrity. As part of

this we have carried out a number of activities during 2024.

Mitigating actions

– We understood and serviced our customer’s ongoing needs and

continued to champion a strong conduct and customer-focused

culture.

– We demonstrated this through delivery of the second phase of

the Consumer Duty in July 2024 which is closely linked to our

conduct agenda seeking to ensure customer outcomes within our

closed book of products.

– We continued to promote the visibility and conduct management

of our vulnerable customer base.

– We continued with the integration of climate risk into HSBC UK’s

wider risk management approach, recognising the importance of

strengthened controls and oversight to seek to deliver the right

conduct outcomes for our customers and for us.

– We continued to embed conduct within our business line

processes and through our Non- Financial and Financial Risk

Steward activities.

– We continued to deliver annual mandatory training to reinforce the

importance of conduct for all colleagues and delivered bespoke

and focussed conduct training and guidance to all of our risk

steward colleagues.

Data risk

We use multiple systems and growing quantities of data to support

our customers. Risk arises if data is incorrect, unavailable, misused,

or unprotected. We need to meet external regulatory obligations and

laws that cover data, such as the Basel Committee on Banking

Supervision’s 239 guidelines and the General Data Protection

Regulation.

Mitigating actions

– Through our global data management framework, we monitor the

quality, availability and security of data that supports our

customers and internal processes. We work towards resolving

any identified data issues in a timely manner.

– We continue to make improvements to our data policies and to

our control framework (which includes trusted sources, data flows

and data quality) in order to help enhance the end-to-end

management of data risk.

– We seek to protect customer data through our data privacy

framework, which establishes practices, design principles and

guidelines that enable us to demonstrate compliance with data

privacy laws and regulations.

– We continue to modernise our data and analytics infrastructure

through investments in Cloud technology, data visualisation,

machine learning and AI.

– We continue to educate our employees on data risk and data

management. We have delivered regular mandatory training on

how to protect and manage data appropriately.

Third-party risk

We use third party providers for a range of goods and services and it

is critical that we seek to ensure we have appropriate risk

management policies, processes and practices over the selection,

governance, and oversight of our third party providers and their

supply chain, particularly for key activities that could affect our

operational resilience. Any deficiency in the management of risks

associated with our third parties could affect our ability to support our

customers and meet regulatory expectations.

Mitigating actions

– We continue to monitor the effectiveness of the controls operated

by our third party providers and request control effectiveness

reporting where required.

– We continue to enhance the management of our intra-group

arrangements using the same control standards as we have for

external third-party arrangements.

– We have strengthened our due diligence and monitoring

capabilities in respect of the financial stability of our third parties.

– We continue to build an understanding of the emissions footprint

of third party providers in our supply chain.

– We have strengthened the way third party risk is overseen and

managed across all non-financial risks, and have sought to

enhance our processes, framework and reporting capabilities to

help improve the visibility of risk and enable more robust

management of our material providers.

– We are continuing to implement any changes required by our

regulators for the management of third party risk.

Execution risk

Continued investment in strategic change is required to support the

delivery of our strategic priorities and regulatory commitments. We

expect to increase investment funding in 2025 as we continue to

focus on our aim to ensure that change is executed safely and

efficiently across HSBC UK. This focus includes having the

organisational capacity to sustainably deliver change, and availability

of the resources required to meet HSBC’s stated commitments. In

addition, there is a risk that due to the complexity of structural

changes throughout the HSBC Group, arising as part of the

reorganisation of our businesses announced in October 2024, some

of the goals of such ongoing reorganisation will not be achieved,

impacting HSBC UK.

Mitigating actions

– Change execution risk is part of our risk taxonomy and control

library so that it is defined, assessed, managed, reported and

overseen in the same way as our other material risks. 2024 has

seen improvement in the control monitoring and oversight of our

change portfolio.

– The HSBC UK Transformation Oversight Committee oversees and

monitors the prioritisation and management of execution risk for

all material initiatives in HSBC UK.

– Executive sponsorship of ongoing change initiatives will be

realigned to the new HSBC Group organisational structure to help

ensure smooth transition and minimise any potential impact to

HSBC UK of the quality of deliverables and delivery timelines.


24	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Our material banking risks

The material risk types associated with our banking operations are described in the following tables.


Description of risks – banking operations
Risks	Arising from	Measurement, monitoring and management of risk
Credit risk (see page 25)
The risk of financial loss if a customer or counterparty fails to meet an obligation under a contract.	Credit risk arises principally from direct lending, trade finance and leasing business, but also from certain other products such as guarantees and derivatives.	Credit risk is: – measured as the amount that could be lost if a customer or counterparty fails to make repayments; – monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities; and – managed through a risk control framework that outlines clear and consistent policies, principles and guidance for risk managers; and by setting limits and appetite across our businesses, portfolios or sectors.
Treasury risk (see page 62)
The risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of adverse impact on earnings or capital due to structural foreign exchange exposures and changes in market interest rates, and including the financial risks arising from historic and current provision of pensions and other post-employment benefits to staff and their dependants.	Treasury risk arises from changes to the respective resources and risk profiles driven by customer behaviour, management decisions or the external environment.	Treasury risk is: – measured through risk appetite and more granular limits, set to provide an early warning of increasing risk, minimum ratios of relevant regulatory metrics, and metrics to monitor the key risk drivers impacting treasury resources; – monitored and projected through against appetites and by using an operating plan based on strategic objectives together with stress and scenario testing; and – managed through control of resources in conjunction with risk profiles, strategic objectives and cashflows.
Market risk (see page 68)
The risk of an adverse financial impact on trading activities arising from changes in market parameters such as interest rates, foreign exchange rates, asset prices and credit spreads.	Exposure to market risk is separated into two portfolios: – trading portfolios; and – non-trading portfolios.	Market risk is: – measured using sensitivities, value at risk('VaR') and stress testing, giving a detailed picture of potential gains and losses for a range of market movements and scenarios, as well as tail risks over specified time horizons; – monitored using VaR sensitivities, stress testing and other measures, including the sensitivity of net interest income and the sensitivity of structural foreign exchange; and – managed using risk limits approved by the RMM.
Climate risk (see page 69)
Climate risk relates to the financial and non-financial impacts that may arise as a result of climate change and the move to a net zero economy.	Climate risk can materialise through: – physical risk, which arises from the increased frequency and severity of weather events; – transition risk, which arises from the process of moving to a low-carbon economy; – the risk of greenwashing, which arises from the act of knowingly or unknowingly making inaccurate, unclear, misleading, or unsubstantiated claims regarding sustainability to stakeholders; and – net zero alignment risk may arise, impacting HSBC UK, where HSBC Group fails to meet its net zero- related ambitions and targets or to meet external expectations related to net zero.	Climate risk is: – measured using risk appetite metrics and scenario testing; – monitored using risk appetite statements; and – managed through adherence to risk appetite thresholds and through specific policies, enhancements to processes and the development of risk management tools including the development of product market controls to manage the risk of greenwashing.


HSBC UK Bank plc Annual Report and Accounts 2024	25


Description of risks – banking operations (continued)
Risks	Arising from	Measurement, monitoring and management of risk
Resilience risk (see page 69)
Resilience risk is the risk of sustained and significant business disruption from execution, delivery, physical security or safety events, causing the inability to provide critical services to our customers, affiliates, and counterparties.	Resilience risk arises from failures or inadequacies in processes, people, systems or external events.	Resilience risk is: – measured using a range of metrics and against our agreed risk appetite; – monitored through oversight of enterprise processes, risks, controls and strategic change programmes; and – managed by continuous monitoring and thematic reviews.
Regulatory compliance risk (see page 70)
Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct (including unauthorised trading) and breaching related financial services regulatory standards.	Regulatory Compliance risk arises from the failure to observe relevant laws, codes, rules and regulations and can manifest itself in poor market or customer outcomes and lead to fines, penalties and reputational damage to our business.	Regulatory compliance risk is: – measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement and assessment of our regulatory compliance teams; – monitored against the first line of defence risk and control assessments, the results of the monitoring and control assurance activities of the second line of defence functions, and – managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Financial crime risk (see page 71)
Financial crime risk is the risk that HSBC UK’s products and services will be exploited for criminal activity. This includes fraud, bribery and corruption, tax evasion, sanctions and export control violations, money laundering, terrorist financing and proliferation financing.	Financial crime risk arises from day-to- day banking operations involving customers, third parties and employees.	Financial crime risk is: – measured by reference to risk appetite, identified metrics, incident assessments, regulatory feedback and the judgement of, and assessment by, our compliance teams; – monitored against the first line of defence risk and control assessments, and the results of the monitoring and control assurance activities of the second line of defence functions; and – managed by establishing and communicating appropriate policies and procedures, training employees in them and monitoring activity to help ensure their observance. Proactive risk control and/or remediation work is undertaken where required.
Model risk (see page 71)
Model risk is the risk of the potential for adverse consequences from model errors or the inappropriate use of modelled outputs to inform business decisions.	Model risk arises in both financial and non-financial contexts whenever business decision making includes reliance on models.	Model risk is: – measured by reference to model performance tracking and the output of detailed technical reviews, with key metrics including model review statuses and findings; – monitored against model risk appetite statements, and insight from the independent validations completed by the model risk management team, and; – managed by creating and communicating appropriate policies, procedures and guidance, training employees in their application, and supervising their adoption to help ensure operational effectiveness.

Credit risk

Overview

Credit risk is the risk of financial loss if a customer or counterparty

fails to meet a payment obligation under a contract. Credit risk arises

principally from direct lending, trade finance and leasing business, but

also from other products such as guarantees and credit derivatives.

Credit risk management

(Audited)

The principal objectives of our credit risk management are:

– to maintain across HSBC UK a strong culture of responsible lending

and a robust risk policy and control framework;

– to both partner and challenge the businesses in defining,

implementing, and continually re-evaluating our risk appetite under

actual and scenario conditions; and

– to help ensure there is independent, expert scrutiny of credit risks,

their costs and their mitigation.

Within HSBC UK, the Credit Risk function is headed by the CRO who

reports to the Chief Executive Officer, with a functional reporting line

to the Group CRO.

Its responsibilities are:

– to formulate credit policy. Compliance, subject to approved

dispensations, is mandatory for all operating companies which

must develop local credit policies consistent with group policies

that closely reflect HSBC Group policy;

– to guide operating companies on the group’s appetite for credit

risk exposure to specified market sectors, activities and banking

products and controlling exposures to certain higher-risk sectors;

– to undertake an independent review and objective assessment of

risk. Credit risk assesses all credit facilities and exposures over

designated limits, prior to the facilities being committed to

customers or transactions being undertaken;

– to monitor the performance and management of portfolios across

the group;

– to control exposure to sovereign entities, banks and other financial

institutions, as well as debt securities which are not held solely for

the purpose of trading;


26	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

– to set policy on large credit exposures, to help ensure that

concentrations of exposure by counterparty, sector or geography

do not become excessive in relation to the group’s capital base,

and remain within internal and regulatory limits;

– to maintain and develop the risk rating framework, systems and

models through appropriate governance; and

– to report on retail portfolio performance, high risk portfolios, risk

concentrations, large impaired accounts, impairment allowances

and stress testing results and recommendations to HSBC UK's

RMM, Risk Committee and Board; and to act on behalf of the

group as the primary interface, for credit-related issues, with the

BoE, the PRA, the FCA, rating agencies, analysts and counterparts

in major banks and non-bank financial institutions.

Concentration of credit risk exposure

(Audited)

Concentrations of credit risk arise when a number of counterparties

or exposures have comparable economic characteristics, or are

engaged in similar activities, or operate in the same geographical

areas/industry sectors, so that their collective ability to meet

contractual obligations is similarly affected by changes in economic,

political or other conditions.

A number of controls and measures are used to minimise undue

concentration of exposure in the portfolios across industry, country

and customer groups. These include portfolio and counterparty limits,

approval and review controls, and stress testing.

Credit quality of financial instruments

(Audited)

Our risk rating system facilitates the internal ratings-based approach

under the Basel framework adopted by the group to support the

calculation of our minimum credit regulatory capital requirement.

The five credit quality classifications each encompass a range of

granular internal credit rating grades assigned to wholesale and retail

lending businesses, and the external ratings attributed by external

agencies to debt securities.

For debt securities and certain other financial instruments, external

ratings have been aligned to the five quality classifications based

upon the mapping of related Customer risk rating ('CRR') to external

credit rating.

Wholesale lending

The CRR 10-grade scale summarises a more granular underlying 23-

grade scale of obligor PD. All corporate customers are rated using the

10- or 23-grade scale, depending on the degree of sophistication of

the Basel approach adopted for the exposure. Each CRR band is

associated with an external rating grade by reference to long-run

default rates for that grade, represented by the average of issuer-

weighted historical default rates. This mapping between internal and

external ratings is indicative and may vary over time.

Retail lending

Retail lending credit quality is based on a 12-month point-in-time

probability-weighted PD.


Credit quality classification
	Debt securities and other bills	Wholesale lending		Retail lending
	External credit rating	Internal credit rating	12-month Basel probability of default %	Internal credit rating	12-month probability- weighted PD %
Quality classification1,2
Strong	A- and above	CRR1 to CRR2	0.000–0.169	Band 1 and 2	0.000–0.500
Good	BBB+ to BBB-	CRR3	0.170–0.740	Band 3	0.501–1.500
Satisfactory	BB+ to B and unrated	CRR4 to CRR5	0.741–4.914	Band 4 and 5	1.501–20.000
Sub-standard	B- to C	CRR6 to CRR8	4.915–99.999	Band 6	20.001–99.999
Credit-impaired	Default	CRR9 to CRR10	100.000	Band 7	100.000

1 Customer risk rating.

212-month point-in-time probability-weighted probability of default ('PD').

Quality classification definitions

– ‘Strong’ exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default.

– ‘Good’ exposures demonstrate a good capacity to meet financial commitments, with low default risk.

– ‘Satisfactory’ exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk.

– ‘Sub-standard’ exposures require varying degrees of special attention and default risk is of greater concern.

– ‘Credit-impaired’ exposures have been assessed as described on Note 1.2(g) on the financial statements.

Forborne loans and advances

(Audited)

Forbearance measures consist of concessions towards an obligor

that is experiencing or about to experience difficulties in meeting its

financial commitments.

We continue to classify loans as forborne when we modify the

contractual payment terms due to having significant concerns about

the borrowers’ ability to meet contractual payments when they were

due. Our definition of forborne captures non-payment-related

concessions, such as covenant waivers.

For details of our policy on forbearance, see Note 1.2(g) on the financial

statements.

Credit quality of forborne loans

For wholesale lending, where payment related forbearance measures

result in a diminished financial obligation or if there are other

indicators of impairment, the loan will be classified as credit impaired

if it is not already so classified. All facilities with a customer, including

loans that have not been modified, are considered credit impaired

following the identification of a payment related forborne loan. For

retail lending, where a material concession has been granted, the

loan will be classified as credit impaired if it is not already so

classified. In isolation, non-payment related forbearance measures

may not result in the loan being classified as credit impaired unless

combined with other indicators of credit impairment. These are

classed as performing forborne loans for both wholesale and retail

lending.


HSBC UK Bank plc Annual Report and Accounts 2024	27

Wholesale and retail lending forborne loans are classified as credit

impaired until there is sufficient evidence to demonstrate a significant

reduction in the risk of non-payment of future cash flows, observed

over a minimum one-year period, and there are no other indicators of

impairment. Any forborne loans not considered credit impaired will

remain forborne for a minimum of two years from the date that credit

impairment no longer applies. For wholesale and retail lending, any

forbearance measures granted on loan already classed as forborne

results in customer being classed as credit impaired.

Forborne loans and recognition of expected credit losses

(Audited)

Forborne loans expected credit loss assessments reflect the higher

rates of losses typically experienced with these types of loans such

that they are in stage 2 and stage 3. The higher rates are more

pronounced in unsecured retail lending requiring further

segmentation. For wholesale lending, forborne loans are typically

assessed individually. Credit risk ratings are intrinsic to the

impairment assessments. The individual impairment assessment

takes into account the higher risk of the future non-payment inherent

in forborne loans.

Refinance risk

Personal lending

Interest only mortgages incorporate bullet payments at the point of

final maturity. To reduce refinance risk, an initial on-boarding

assessment of customers’ affordability is made on a capital

repayment basis and every customer has a credible defined

repayment strategy. Additionally, the customer is contacted during

the mortgage term to check the status of the repayment strategy. In

situations where it is identified that a borrower is expected not to be

able to repay a bullet/balloon payment, the customer is offered advice

and options to help them repay the loan in accordance with their loan

agreement. In the event that this is not possible, the customer will

either default on the repayment or it is likely that the bank may need

to apply forbearance to the loan. In either circumstance this gives rise

to a credit impaired event.

Wholesale lending

Many types of wholesale lending incorporate bullet/balloon payments

at the point of final maturity; often, the intention or assumption is that

the borrower will take out a new loan to settle the existing debt.

Where this is true the term refinance risk refers generally to the

possibility that, at the point that such a repayment is due, a borrower

cannot refinance by borrowing to repay existing debt. In situations

where it is identified that a borrower is expected not to be able either

to repay a bullet/balloon payment or to be capable of refinancing their

existing debt on commercial terms then the customer will either

default on the repayment or it is likely that the bank may need to

refinance the loan on terms it would not normally offer in the ordinary

course of business. In either circumstance this gives rise to a loss

event and the loan will be considered credit impaired.

Impairment assessment

(Audited)

For details of our impairment policies on loans and advances and financial

investments, see Note 1.2(g) on the Financial Statements.

Write-off of loans and advances

(Audited)

For details of our policy on the write-off of loans and advances, see Note

1.2(g) on the Financial Statements.

Personal lending

Property collateral for residential mortgages is repossessed and sold

on behalf of the borrower only when the debt recovery procedures

have been unsuccessful. Any portion of the balance not covered

following the realisation of security is written-off. Unsecured personal

lending products are normally written off, when there is no realistic

prospect of full recovery.

Wholesale lending

Wholesale loans and advances are written off where normal

collection procedures have been unsuccessful to the extent that

there appears no realistic prospect of repayment. These procedures

may include a referral of the business relationship to a debt recovery

company. Debt reorganisation will be considered at all times and may

involve, in exceptional circumstances and in the absence of any viable

alternative, a partial write-off in exchange for a commitment to repay

the remaining balance.

In the event of bankruptcy or similar proceedings, write-off for both

personal and wholesale lending may occur earlier than at the periods

stated above. Collections procedures may continue after write-off.

Credit risk in 2024

Detailed analysis of ECL can be found on pages 33 to 61.

A summary of our current policies and practices regarding credit risk

is set out on pages 25 to 27.

Climate risk

Our climate scenarios

In 2024, we have considered four bespoke scenarios that were

designed to articulate our view of the range of potential outcomes for

global climate change. In our climate scenario analysis, we consider

separately: transition risk arising from the process of moving to a net

zero economy, including changes in policy, technology, consumer

behaviour and stakeholder perception, which will each impact

borrowers’ operating income, financing requirements and asset

values; and physical risk arising from the increased frequency and

severity of weather events, such as hurricanes and floods, or chronic

shifts in weather patterns, which will each impact property values,

repair costs and lead to business interruptions.

Our scenarios were:

– the Net Zero scenario, which is consistent with the Paris

Agreement. This assumes that there will be orderly but

considerable climate action, limiting global warming to no more

than 1.5°C by 2100, when compared with pre-industrial levels;

– the Current Commitments scenario, which assumes that climate

action is limited to current governmental committed policies,

including already implemented actions, leading to global

temperature rises of 2.4°C by 2100. This slow transition scenario

helps us to determine the actions we need to take to reach our

net zero ambition while operating in a world that is not net zero;

– the Delayed Transition Risk scenario, which assumes that climate

action is delayed until 2030 with a late disorderly transition to net

zero but stringent and rapid enough to limit global warming to

under 2°C by 2100. This scenario allows us to stress test severe

but plausible transition risk impacts;

– the Downside Physical Risk scenario, which assumes climate

action is limited to currently implemented governmental policies,

leading to extreme global warming with global temperatures

increasing by greater than 4°C by 2100. This scenario allows us to

assess physical risks associated with climate change.

We consider our Current Commitments scenario as the most likely

scenario to transpire over the next five years. Under the Current

Commitments scenario, we expect immaterial levels of losses

relating to transition risks. However, the rise in global warming will

lead to increasing levels of physical risk losses in later years. Based

on this scenario the potential impact on expected credit losses is not

considered material over the next five years, as the impacts of

climate risk will emerge later in the following decades.


28	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Summary of credit risk

The disclosure below presents the gross carrying/nominal amount of

financial instruments to which the impairment requirements in IFRS 9

are applied and the associated allowance for ECL.

The following table provides an overview of the group and bank's

credit risk exposure. As the majority of the group's financial

instruments are held by the bank, the remaining IFRS 7 credit

disclosures are provided on a group only basis.


Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
(Audited)
The group	At 31 Dec 2024		At 31 Dec 2023
	Gross carrying/ nominal amount	Allowance for ECL1	Gross carrying/ nominal amount	Allowance for ECL1
	£m	£m	£m	£m
Loans and advances to customers at amortised cost	219,092	(1,488)	213,591	(1,704)
– personal	147,266	(531)	143,315	(703)
– corporate and commercial	63,640	(913)	62,927	(949)
– non-bank financial institutions	8,186	(44)	7,349	(52)
Loans and advances to banks at amortised cost	7,265	(2)	7,982	(2)
Other financial assets measured at amortised cost	83,327	(8)	87,253	(10)
– cash and balances at central banks	52,276	—	65,719	—
– reverse repurchase agreements – non-trading	11,776	—	7,686	—
– financial investments	16,323	(1)	11,820	(1)
– prepayments, accrued income and other assets2	2,952	(7)	2,028	(9)
Total gross carrying amount on-balance sheet	309,684	(1,498)	308,826	(1,716)
Loans and other credit related commitments	74,475	(99)	70,381	(99)
– personal	40,795	(7)	41,180	(10)
– corporate and commercial	28,449	(90)	25,694	(87)
– non-bank financial institutions	5,231	(2)	3,507	(2)
Financial guarantees	1,046	(3)	1,121	(2)
– personal	313	—	312	—
– corporate and commercial	509	(3)	526	(2)
– non-bank financial institutions	224	—	283	—
Total nominal amount off-balance sheet3	75,521	(102)	71,502	(101)
	385,205	(1,600)	380,328	(1,817)

	Fair value	Memorandum allowance for ECL4	Fair value	Memorandum allowance for ECL4
	£m	£m	£m	£m
Debt instruments measured at 'FVOCI'	21,478	(1)	14,495	(1)

1The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which

case the ECL is recognised as a provision.

2Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other assets’ as

presented within the consolidated balance sheet on page 88 includes both financial and non-financial assets. It also includes ‘Items in the course of collection

from other banks’ which was presented separately in 2023.

3Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

4Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in

‘Change in expected credit losses and other credit impairment charges’ in the income statement.


HSBC UK Bank plc Annual Report and Accounts 2024	29


Summary of financial instruments to which the impairment requirements in IFRS 9 are applied (continued)
(Audited)
	At 31 Dec 2024		At 31 Dec 2023
	Gross carrying/ nominal amount	Allowance for ECL1	Gross carrying/ nominal amount	Allowance for ECL1
The bank	£m	£m	£m	£m
Loans and advances to customers at amortised cost	207,469	(1,282)	202,507	(1,493)
– personal	143,434	(441)	139,675	(593)
– corporate and commercial	52,605	(832)	52,498	(858)
– non-bank financial institutions	11,430	(9)	10,334	(42)
Loans and advances to banks at amortised cost	13,072	(2)	13,644	(2)
Other financial assets measured at amortised cost	83,236	(6)	86,882	(10)
– cash and balances at central banks	52,275	—	65,719	—
– reverse repurchase agreements – non-trading	11,776	—	7,686	—
– financial investments	16,119	(1)	11,609	(1)
– prepayments, accrued income and other assets2	3,066	(5)	1,868	(9)
Total gross carrying amount on-balance sheet	303,777	(1,290)	303,033	(1,505)
Loans and other credit related commitments	57,254	(94)	53,388	(93)
– personal	29,955	(6)	30,563	(9)
– corporate and commercial	24,760	(87)	21,739	(83)
– non-bank financial institutions	2,539	(1)	1,086	(1)
Financial guarantees	1,038	(3)	1,121	(2)
– personal	313	—	312	—
– corporate and commercial	509	(3)	526	(2)
– non-bank financial institutions	216	—	283	—
Total nominal amount off-balance sheet3	58,292	(97)	54,509	(95)
	362,069	(1,387)	357,542	(1,600)

	Fair value	Memorandum allowance for ECL4	Fair value	Memorandum allowance for ECL4
	£m	£m	£m	£m
Debt instruments measured at 'FVOCI'	21,478	(1)	14,495	(1)

1 The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in which

case the ECL is recognised as a provision.

2 Includes only those financial instruments that are subject to the impairment requirements of IFRS 9. 'Prepayments, accrued income and other assets' as

presented within the bank's balance sheet on page 91 includes both financial and non-financial assets. It also includes ‘Items in the course of collection from

other banks’ which was presented separately in 2023.

3 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

4 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is recognised in

‘Change in expected credit losses and other credit impairment charges’ in the income statement.

The following table provides an overview of the group’s credit risk by

stage and industry, and the associated ECL coverage. The financial

assets recorded in each stage have the following characteristics:

– Stage 1: These financial assets are unimpaired and without

significant increase in credit risk on which a 12-month allowance

for ECL is recognised.

– Stage 2: a significant increase in credit risk has been experienced

on these financial assets since initial recognition for which a

lifetime ECL is recognised.

– Stage 3: There is objective evidence of impairment, and the

financial assets are therefore considered to be in default or

otherwise credit-impaired on which a lifetime ECL is recognised.

– Purchased or originated credit impaired ('POCI'): Financial assets

that are purchased or originated credit impaired at a deep discount

are seen to reflect the incurred credit losses on which a lifetime

ECL is recognised.


30	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2024
(Audited)
	Gross carrying/nominal amount1				Allowance for ECL				ECL coverage %
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
Loans and advances to customers at amortised cost	180,408	35,152	3,532	219,092	(275)	(565)	(648)	(1,488)	0.2	1.6	18.3	0.7
– personal	121,438	24,971	857	147,266	(117)	(245)	(169)	(531)	0.1	1.0	19.7	0.4
– corporate and commercial	51,144	9,858	2,638	63,640	(150)	(315)	(448)	(913)	0.3	3.2	17.0	1.4
– non-bank financial institutions	7,826	323	37	8,186	(8)	(5)	(31)	(44)	0.1	1.5	83.8	0.5
Loans and advances to banks at amortised cost	7,263	—	2	7,265	—	—	(2)	(2)	—	—	100.0	—
Other financial assets measured at amortised cost	83,160	136	31	83,327	(4)	(2)	(2)	(8)	—	1.5	6.5	—
Loan and other credit-related commitments	70,280	3,810	385	74,475	(26)	(28)	(45)	(99)	—	0.7	11.7	0.1
– personal	40,412	345	38	40,795	(5)	—	(2)	(7)	—	—	5.3	—
– corporate and commercial	24,866	3,249	334	28,449	(20)	(28)	(42)	(90)	0.1	0.9	12.6	0.3
– financial	5,002	216	13	5,231	(1)	—	(1)	(2)	—	—	7.7	—
Financial guarantee and similar contracts	877	161	8	1,046	—	—	(3)	(3)	—	—	37.5	0.3
– personal	306	7	—	313	—	—	—	—	—	—	—	—
– corporate and commercial	380	121	8	509	—	—	(3)	(3)	—	—	37.5	0.6
– financial	191	33	—	224	—	—	—	—	—	—	—	—
31 Dec 2024	341,988	39,259	3,958	385,205	(305)	(595)	(700)	(1,600)	0.1	1.5	17.7	0.4

1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.

Unless identified at an earlier stage, all financial assets are deemed to

have suffered a significant increase in credit risk when they are 30

days past due ('DPD') and are transferred from Stage 1 to Stage 2.

The following disclosure presents the ageing of Stage 2 financial

assets by those less than 30 DPD and greater than 30 DPD and

therefore presents those financial assets classified as stage 2 due to

ageing (30 DPD) and those identified at an earlier stage (less than 30

DPD).



Stage 2 days past due analysis at 31 December 2024
(Audited)
	Gross carrying amount				Allowance for ECL				ECL coverage %
	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:
	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1
	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
Loans and advances to customers at amortised cost:	35,152	34,612	363	177	(565)	(509)	(30)	(26)	1.6	1.5	8.3	14.7
– personal	24,971	24,640	214	117	(245)	(201)	(23)	(21)	1.0	0.8	10.7	17.9
– corporate and commercial	9,858	9,649	149	60	(315)	(303)	(7)	(5)	3.2	3.1	4.7	8.3
– non-bank financial institutions	323	323	—	—	(5)	(5)	—	—	1.5	1.5	—	—
Other financial assets measured at amortised cost	136	136	—	—	(2)	(2)	—	—	1.5	1.5	—	—

1DPD amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.


HSBC UK Bank plc Annual Report and Accounts 2024	31


Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector at 31 December 2023 (continued)
(Audited)
	Gross carrying/nominal amount1				Allowance for ECL				ECL coverage %
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
Loans and advances to customers at amortised cost	167,396	42,286	3,909	213,591	(286)	(755)	(663)	(1,704)	0.2	1.8	17.0	0.8
– personal	114,765	27,595	955	143,315	(119)	(384)	(200)	(703)	0.1	1.4	20.9	0.5
– corporate and commercial	46,197	13,854	2,876	62,927	(156)	(365)	(428)	(949)	0.3	2.6	14.9	1.5
– non-bank financial institutions	6,434	837	78	7,349	(11)	(6)	(35)	(52)	0.2	0.7	44.9	0.7
Loans and advances to banks at amortised cost	7,980	—	2	7,982	—	—	(2)	(2)	—	—	100.0	—
Other financial assets measured at amortised cost	87,073	154	26	87,253	(7)	—	(3)	(10)	—	—	11.5	—
Loan and other credit-related commitments	65,257	4,794	330	70,381	(31)	(25)	(43)	(99)	—	0.5	13.0	0.1
– personal	40,543	568	69	41,180	(8)	—	(2)	(10)	—	—	2.9	—
– corporate and commercial	21,845	3,608	241	25,694	(22)	(24)	(41)	(87)	0.1	0.7	17.0	0.3
– financial	2,869	618	20	3,507	(1)	(1)	—	(2)	—	0.2	—	0.1
Financial guarantee and similar contracts	810	300	11	1,121	—	—	(2)	(2)	—	—	18.2	0.2
– personal	304	8	—	312	—	—	—	—	—	—	—	—
– corporate and commercial	409	106	11	526	—	—	(2)	(2)	—	—	18.2	0.4
– financial	97	186	—	283	—	—	—	—	—	—	—	—
At 31 Dec 2023	328,516	47,534	4,278	380,328	(324)	(780)	(713)	(1,817)	0.1	1.6	16.7	0.5

1Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.


Stage 2 days past due analysis at 31 December 2023 (continued)
(Audited)
	Gross carrying amount				Allowance for ECL				ECL coverage %
	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:	Stage 2	of which:	of which:	of which:
	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1	Stage 2	Up-to- date	1 to 29 DPD1	30 and > DPD1
	£m	£m	£m	£m	£m	£m	£m	£m	%	%	%	%
Loans and advances to customers at amortised cost:	42,286	41,584	465	237	(755)	(685)	(42)	(28)	1.8	1.6	9.0	11.8
– personal	27,595	27,299	190	106	(384)	(328)	(32)	(24)	1.4	1.2	16.8	22.6
– corporate and commercial	13,854	13,546	206	102	(365)	(351)	(10)	(4)	2.6	2.6	4.9	3.9
– non-bank financial institutions	837	739	69	29	(6)	(6)	—	—	0.7	0.8	—	—
Other financial assets measured at amortised cost	154	152	1	1	—	—	—	—	—	—	—	—

1DPD amounts presented above are on a contractual basis and include the benefit of any customer relief payment holidays granted.


32	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Stage 2 decomposition

The following disclosure presents the stage 2 decomposition of gross

carrying amount and associated allowances for ECL for loans and

advances to customers and banks. It also sets out the reasons that

caused the exposures to be classified as stage 2 and therefore

presented as a significant increase in credit risk at 31 December

2024.

The quantitative classification shows gross carrying amount and

allowances for ECL for which the applicable reporting date probability

of default ('PD') measure exceeds defined quantitative thresholds for

retail and wholesale exposures.

The qualitative classification primarily accounts for CRR deterioration,

watch-and-worry and retail management judgemental adjustments.

A summary of our current policies and practices for the significant increase

in credit risk is set out in ‘Summary of material policies’ on page 95.


Loans and advances to customers and banks1
	At 31 Dec 2024
	Loans and advances to customers						Loans and advances to banks at amortised cost	Total stage 2
	Personal	of which:			Corporate and commercial	Non-bank financial institutions
	Personal	first lien mortgage	credit cards	other personal lending	Corporate and commercial	Non-bank financial institutions
	£m	£m	£m	£m	£m	£m	£m	£m
Quantitative	23,222	21,991	615	616	7,320	304	—	30,846
Qualitative	1,748	1,690	29	29	2,479	19	—	4,246
of which: forbearance	65	10	28	27	184	3	—	252
30 DPD backstop	1	—	1	—	59	—	—	60
Total gross carrying amount	24,971	23,681	645	645	9,858	323	—	35,152

Quantitative	(239)	(38)	(136)	(65)	(240)	(5)	—	(484)
Qualitative	(6)	(4)	(1)	(1)	(71)	—	—	(77)
of which: forbearance	(1)	—	—	(1)	(4)	—	—	(5)
30 DPD backstop	—	—	—	—	(4)	—	—	(4)
Total allowance for ECL	(245)	(42)	(137)	(66)	(315)	(5)	—	(565)

ECL coverage %	1.0	0.2	21.2	10.2	3.2	1.5	—	1.6

	At 31 Dec 2023
Quantitative	22,512	21,422	494	596	10,731	795	—	34,038
Qualitative	5,081	3,923	625	533	3,024	13	—	8,118
of which: forbearance	49	7	24	18	381	—	—	430
30 DPD backstop	2	1	—	1	99	29	—	130
Total gross carrying amount	27,595	25,346	1,119	1,130	13,854	837	—	42,286

Quantitative	(284)	(57)	(126)	(101)	(293)	(6)	—	(583)
Qualitative	(100)	(25)	(41)	(34)	(69)	—	—	(169)
of which: forbearance	(1)	—	(1)	—	(5)	—	—	(6)
30 DPD backstop	—	—	—	—	(3)	—	—	(3)
Total allowance for ECL	(384)	(82)	(167)	(135)	(365)	(6)	—	(755)

ECL coverage %	1.4	0.3	14.9	11.9	2.6	0.7	—	1.8

1Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross carrying amount

and ECL have been assigned in order of categories presented.


HSBC UK Bank plc Annual Report and Accounts 2024	33

Credit exposure

Maximum exposure to credit risk

(Audited)

‘Maximum exposure to credit risk’ table

The following table presents our maximum exposure before taking account of

any collateral held or other credit enhancements (unless such enhancements

meet accounting offsetting requirements). The table excludes financial

instruments whose carrying amount best represents the net exposure to

credit risk; and it excludes equity securities as they are not subject to credit

risk. For the financial assets recognised on the balance sheet, the maximum

exposure to credit risk equals their carrying amount and is net of the

allowance for ECL; for financial guarantees and similar contracts granted, it is

the maximum amount that we would have to pay if the guarantees were

called upon. For loan commitments and other credit-related commitments, it

is generally the full amount of the committed facilities.

The offset in the table relates to amounts where there is a legally enforceable

right of offset in the event of counterparty default and where, as a result,

there is a net exposure for credit risk purposes. However, as there is no

intention to settle these balances on a net basis under normal circumstances,

they do not qualify for net presentation for accounting purposes. No offset has

been applied to off-balance sheet collateral. In the case of derivatives, the

offset column also includes collateral received in cash and other financial

assets.

The following table provides information on balance sheet items,

offsets, and loan and other credit-related commitments.

The offset on derivatives remains in line with the movements in

maximum exposure amounts.

Other credit risk mitigants

While not disclosed as an offset in the following ‘Maximum exposure

to credit risk’ table, other arrangements are in place which reduce our

maximum exposure to credit risk. These include a charge over

collateral on borrowers’ specific assets such as residential properties

and collateral held in the form of financial instruments that are not

held on balance sheet. See Note 22 for further details of collateral in

respect of certain loans and advances and derivatives.


Maximum exposure to credit risk
(Audited)	31 Dec 2024			31 Dec 2023
	Maximum exposure	Offset	Net	Maximum exposure	Offset	Net
The group	£m	£m	£m	£m	£m	£m
Loans and advances to customers held at amortised cost	217,604	(3,310)	214,294	211,887	(2,922)	208,965
– personal	146,735	—	146,735	142,612	—	142,612
– corporate and commercial	62,727	(3,231)	59,496	61,978	(2,886)	59,092
– non-bank financial institutions	8,142	(79)	8,063	7,297	(36)	7,261
Loans and advances to banks at amortised cost	7,263	—	7,263	7,980	—	7,980
Other financial assets held at amortised cost	83,458	—	83,458	87,369	—	87,369
– cash and balances at central banks	52,276	—	52,276	65,719	—	65,719
– reverse repurchase agreements – non-trading	11,776	—	11,776	7,686	—	7,686
– financial investments	16,322	—	16,322	11,819	—	11,819
– other assets	3,084	—	3,084	2,145	—	2,145
Derivatives	298	(295)	3	178	(165)	13
Total on-balance sheet exposure to credit risk	308,623	(3,605)	305,018	307,414	(3,087)	304,327
Total off-balance sheet	80,900	—	80,900	76,522	—	76,522
– financial guarantees and similar contracts	3,440	—	3,440	3,429	—	3,429
– loan and other credit-related commitments	77,460	—	77,460	73,093	—	73,093

Concentration of exposures

(Audited)

The diversification of our lending portfolio and our broad range of

businesses and products ensured that we did not overly depend on

any one business segment to generate growth in 2024.

Loans and advances to customers and banks held at

amortised cost

The table on page 30 analyses loans and advances by industry sector

to show any concentration of credit risk exposures.

Other financial assets held at amortised cost

Financial investments

Our holdings of government and government agency debt securities,

corporate debt securities, asset-backed securities and other

securities were spread across a range of issuers in 2024 with 94%

(2023: 93%) invested in government or government agency debt

securities.

Measurement uncertainty and

sensitivity analysis of ECL estimates

(Audited)

The recognition and measurement of ECL involves the use of

significant judgement and estimation. We form multiple economic

scenarios based on economic forecasts, apply these assumptions to

credit risk models to estimate future credit losses, and probability

weight the results to determine an unbiased ECL estimate.

Management assessed the current economic environment, reviewed

the latest economic forecasts and discussed key risks before

selecting the appropriate economic scenarios and their weightings.

The Central scenario is constructed to reflect the latest

macroeconomic expectations. Outer scenarios incorporate the

crystallisation of economic and geopolitical risks.

In the fourth quarter of 2024, four economic scenarios were modified

to reflect heightened policy uncertainty following the US election.

Due to the lagged nature of consensus estimates, a modelled

adjustment factor was applied to the standard scenarios, to reflect

the consequences of increased global tariffs. The effect was to lower

growth, and raise inflation and unemployment expectations.

Management judgemental adjustments are used where modelled

ECL does not fully reflect the identified risks and related uncertainty,

or to capture significant late-breaking events.

At 31 December 2024, there was an overall reduction in management

judgemental adjustments compared with 31 December 2023, as

modelled outcomes better reflected the key risks at 31 December

2024.

Methodology

At 31 December 2024, four economic scenarios are used to capture

the current economic environment and to articulate management’s

view of the range of risks and potential outcomes. Each scenario is

updated with the latest economic forecasts and distributional

estimates every quarter.


34	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Under the standard methodology, three of the scenarios, the Upside,

Central and Downside, are drawn from consensus forecasts, market

data and distributional estimates of the entire range of economic

outcomes. Consensus estimates are deployed as conditioning

variables in a proprietary expansion of the scenario variables.

The Central scenario is deemed the ‘most likely’ scenario, and usually

attracts the largest probability weighting. It is created using

consensus forecasts, which is the average of a panel of external

forecasters.

The outer scenarios represent the tails of the distribution, which are

less likely to occur. The Consensus Upside and Downside scenarios

are created with reference to forecast probability distributions that

capture forecasters' views of the entire range of economic

outcomes. In the later years of the scenarios, projections revert to

long-term consensus trend expectations. Reversion to trend

expectations is done with reference to historically observed quarterly

changes in the values of macroeconomic variables.

The fourth scenario, Downside 2, is designed to represent

management’s view of severe downside risks. It is a globally

consistent narrative-driven scenario that explores more extreme

economic outcomes than those captured by the consensus

scenarios. In this scenario, variables do not, by design, revert to long-

term trend expectations. They may instead explore alternative states

of equilibrium, where economic variables move permanently away

from past trends.

The consensus Downside and the consensus Upside scenarios are

each constructed to be consistent with a 10% probability. The

Downside 2 is constructed to a 5% probability. The Central Scenario

is assigned the remaining 75%. This weighting scheme is deemed

appropriate for the unbiased estimation of ECL in most

circumstances. However, management may depart from this

probability based scenario weighting approach when the economic

outlook is determined to be particularly uncertain and risks are

elevated.

For the fourth quarter of 2024, we assessed that consensus

forecasts and distributional estimates did not adequately reflect the

consequences of the US election on the global economic outlook.

Due to the lag in forecasts, there was increased uncertainty as to

how tariffs would be implemented and economic policy would

change. As such, scenarios have been constructed using the

standard methodology and an adjustment to account for policy

changes applied. The adjustment was based on a modelled update to

the Central scenario and incorporated a detailed narrative of US

economic policy proposals, including specific tariff rates. The

modelled results were then layered onto the Central Scenario, which

resulted in changes to most variables. Outer scenarios were adjusted

in parallel.

The scenario adjustment entailed no change in scenario probability

weights, which remained in-line with our Forward Economic Guidance

(‘FEG’) framework. Uncertainty relating to the policy outlook have been

addressed in the scenarios directly. Measures of dispersion and

uncertainty have remained low but may reflect lags in the consensus

economic forecasting process.

Scenarios produced to calculate ECL are aligned to HSBC’s top and

emerging risks.

Description of consensus economic scenarios

The economic assumptions presented in this section have been

formed by the HSBC Group with reference to external forecasts and

estimates, specifically for the purpose of calculating ECL.

Forecasts may change and remain subject to uncertainty and

variability. Outer scenarios are designed to encompass the potential

crystallisation of key macro-financial risks and alternative paths for

economic variables.

The Central scenario incorporates potential impacts from anticipated

changes to US economic and trade policy, including higher tariffs. The

overall effect of the adjustment is to lower GDP and raise inflation

and unemployment estimates, relative to the consensus.

Consequently, GDP growth and unemployment forecasts have

deteriorated in the fourth quarter of 2024, compared with the fourth

quarter of 2023. With regard to monetary policy, the expected path

for interest rates is based on market futures. Interest rate

expectations have increased relative to the fourth quarter of 2023,

with fewer rate cuts forecast.

At the end of 2024, risks to the economic outlook included a number

of significant geopolitical issues. Within our Downside scenarios, the

economic consequences from the crystallisation of those risks are

captured by higher commodity and goods prices, the re-acceleration

of inflation, a further rise in interest rates and recession.

The scenarios used to calculate ECL in the Annual Report and

Accounts 2024 are described below.

The consensus Central scenario

HSBC UK’s Central scenario reflects the expectation that UK growth

will remain weak, that inflation will be higher than the BoE target rate

through 2025 and that unemployment will slowly rise.

In 2025, the expectation of continued subdued GDP growth is

primarily driven by weak consumer and business confidence. In the

scenario, consumers are assumed to sustain a high savings rate,

while business investment and hiring is constrained by high

borrowing rates and increased employment costs.

The direct impact of US tariffs on UK growth is assumed to be limited

given that UK exports are expected to face only limited increases in

their aggregate tariff rate. However, amid a more uncertain policy

environment, the global growth backdrop is expected to be weaker

amid, reduced global investment and trade growth, in addition to a

stronger US dollar.

UK GDP is expected to increase by 1.2% in 2025 in the Central

scenario and the average rate of UK GDP growth is 1.5% over the

five-year forecast period.

The key features of our Central scenario are:

– GDP growth rates are projected to remain low in 2025 and 2026,

as weak consumer and business confidence persists, impeding

consumption and investment spending. Higher US tariffs exert

limited direct effects on the UK economy, but a more subdued

global growth backdrop, lower trade and investment, act as

headwinds. Furthermore, elevated interest rates, weak growth

and the persistence of inflation are anticipated to continue

exerting adverse effects on certain consumer and corporate

sectors.

– Unemployment rises moderately as economic activity slows, but

is set to remain low by historical standards.

– Higher energy prices and increases in other regulated prices are

expected to sustain higher inflation through 2025. Tariffs and sterling

depreciation, with respect to the US dollar also contribute to inflation

moderately. From 2026 onwards, inflation is in line with the BoE

target range.

– House price growth is forecast to remain subdued in 2025, but

strengthens from 2026 due to lower interest rates and continued low

housing supply.

– Challenging conditions are also forecast to continue in certain

segments of the commercial property sector. Structural changes

to demand in the office segment in particular have driven lower

valuations.

– Policy interest rates are forecast to continue their gradual decline

in 2025. In the longer term, they are expected to remain at a

higher level than in recent years.

– The Brent crude oil price is forecast to average around $69 per

barrel over the projection period.

The Central scenario was first created with forecasts available in late

November, and reviewed continually until the end of December 2024.


HSBC UK Bank plc Annual Report and Accounts 2024	35

The following table describes key macroeconomic variables in the

consensus Central scenario.


Central scenario
	Average 2025–20291	Average 2024–20281
	UK%	UK%
GDP growth rate (annual average growth rate, %)	1.5	1.3
Unemployment rate (%)	4.5	4.4
House price index (annual average growth rate, %)	3.2	0.8
Inflation rate (annual average growth rate, %)	2.1	2.4
Central bank policy rate (annual average, %)	3.9	4.1

1The five-year average is calculated over a projected period of 20 quarters

during the five-year period.

The graph compares the Central scenario at year end 2023 with

economic expectations at the end of 2024.

GDP growth: Comparison of Central

4Q23 Central 5Y Average: 1.3%

4Q24 Central 5Y Average: 1.5%

scenarios

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

The consensus Upside scenario

Compared with the consensus Central scenario, the consensus

Upside scenario features stronger recovery in economic activity in the

near term, before converging to long-run trend expectations. It also

incorporates a faster fall in the rate of inflation than incorporated in

the Central scenario.

The scenario is consistent with a number of key upside risk themes.

These include only limited increases in tariffs and a faster fall in the

rate of inflation that allows central banks to reduce interest rates

more quickly. The Upside scenario would also be consistent with a

de-escalation in geopolitical tensions, where the Russia-Ukraine war

moves quickly towards a conclusion, tensions in the Middle East

subside and US-China relations become more cordial.

The following table describes key macroeconomic variables in the

consensus Upside scenario.


Consensus Upside scenario best outcome
	2025 Q1- 2029 Q4	2024 Q1- 2028 Q4
GDP growth rate (%, start-to-peak)1	11.3 (4Q29)	10.8 (4Q28)
Unemployment rate (%, min)2	3.5 (3Q26)	3.1 (4Q24)
House price index (%, start-to-peak)1	24.2 (4Q29)	13.0 (4Q28)
Inflation rate (YoY % change, min)3	1.4 (1Q26)	1.3 (2Q25)
Central bank policy rate (%, min)2	3.6 (4Q25)	3.7 (3Q28)

1Cumulative change to the highest level of the series during the 20-quarter

projection.

2Lowest projected unemployment or policy interest rate in the scenario.

3Lowest projected Year-on-year(' YoY') percentage change in inflation in the

scenario.

Downside scenarios

Downside scenarios explore the intensification and crystallisation of a

number of key economic and financial risks. These include a more

material escalation of tariff policies and geopolitical tensions, which

disrupt key commodity and goods markets, causing inflation and

interest rates to rise, and creating a global recession.

The geopolitical environment remains volatile and complex, risks

include:

– an increase in protectionist policies, as countries increasingly

impose retaliatory tariffs. This lowers investment, complicates

international supply chains, and impedes trade flows;

– broader and more prolonged conflicts in the Middle East and

between Russia and Ukraine, which further disrupts energy,

fertiliser and food supplies; and

– continued differences between the US and other countries with

China, which could affect sentiment and restrict global goods

trade and supply chains for critical technologies.

High inflation and higher interest rates also remain key risks. Should

tariffs increase significantly and geopolitical tensions escalate, energy

and food prices could rise and increase pressure on household

budgets and firms' costs.

A wage-price spiral triggered by higher inflation and labour supply

shortages could put sustained pressure on household real incomes

and corporate margins. In turn, it raises the risk of a more forceful

policy response from the BoE, leading to significantly higher default

and ultimately, a deep economic recession.

The consensus Downside scenario

In the consensus Downside scenario, economic activity is

considerably weaker compared with the Central scenario. In this

scenario, GDP declines, unemployment rates rise and asset prices

fall. The scenario features an increase in tariffs over and above those

assumed in the Central scenario and escalation of geopolitical

tensions, which causes a surge in inflation as supply chain constraints

intensify and energy prices rise. The scenario also features a

temporary increase in interest rates above the Central scenario,

before the effects of weaker demand begin to dominate and

commodity prices and inflation fall.


36	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

The following table describes key macroeconomic variables in the

Consensus Downside scenario.


Consensus Downside scenario worst outcome
	2025 Q1- 2029 Q4	2024 Q1- 2028 Q4
GDP growth rate (%, start-to-trough)1	(1.0) (4Q26)	(1.0) (2Q25)
Unemployment rate (%, max)2	6.1 (4Q25)	6.4 (1Q25)
House price index (%, start-to-trough)1	(4.5) (1Q26)	(12.0) (2Q25)
Inflation rate (YoY % change, max)3	3.4 (4Q25)	4.1 (1Q24)
Central bank policy rate (%, max)2	5.0 (1Q25)	5.7 (1Q24)

1Cumulative change to the lowest level of the series during the 20-quarter

projection.

2The highest projected unemployment or policy interest rate in the scenario.

3The highest projected YoY percentage change in inflation in the scenario.

Downside 2 scenario

The Downside 2 scenario features a deep global recession and

reflects management's view of the tail of the economic distribution. It

incorporates the crystallisation of a number of risks simultaneously,

including significant increases in tariffs globally, and further escalation

of geopolitical crises, which creates severe supply disruptions to

goods and energy markets. In the scenario, as inflation surges and

central banks tighten monetary policy further, consumer and business

confidence falls. However, this impulse is expected to prove short

lived as recession takes hold, causing a fall in demand, leading

commodity prices to correct sharply and global price inflation to fall.

The table below describes key macroeconomic variables in the

Downside 2 scenario.


Downside 2 scenario worst outcome
	2025 Q1- 2029 Q4	2024 Q1- 2028 Q4
GDP growth rate (%, start-to-trough)1	(9.1) (2Q26)	(8.8) (2Q25)
Unemployment rate (%, max)2	8.4 (2Q26)	8.4 (2Q25)
House price index (%, start-to-trough)1	(27.2) (4Q26)	(30.2) (4Q25)
Inflation rate (YoY % change, max)3	10.1 (2Q25)	10.1 (2Q24)
Central bank policy rate (%, max)2	5.5 (1Q25)	6.0 (1Q24)

1Cumulative change to the lowest level of the series during the 20-quarter

projection.

2The highest projected unemployment or policy interest rate in the scenario.

3The highest projected YoY percentage change in inflation in the scenario.

Following graph shows the historical and forecasted GDP growth rate

for the various economic scenarios.

Scenario weighting

Scenarios are calibrated to probabilities that are determined with

reference to consensus probability distributions. Management may

choose to vary weights, where they assess that the calibration lags

more recent events, or does not reflect their view of the distribution

of economic and geopolitical risk. Management’s view of the

scenarios and the probability distribution takes into consideration the

relationship of the consensus scenarios to both internal and external

assessments of risks.

In reviewing the economic environment, the level of uncertainty and

risk, management has considered UK specific factors.

In the fourth quarter of 2024, key consideration around uncertainty

attached to the Central scenario projections focused on:

– The implications of the Budget and fiscal outlook on growth,

employment and inflation;

– the implications of changes to monetary policy expectations on

growth and employment;

– US import tariffs and bilateral tariff escalations globally and the

impact to trade and manufacturing supply chains;

– estimation and forecast uncertainty for UK unemployment given

ongoing methodology updates at the Office for National Statistics;

and

– risks of an asset price correction given already elevated valuations

across different asset classes;

Although these factors are significant, management assessed that

following the tariff-based adjustment, the adjusted Central scenario

reflected their most likely future economic outcome and that outer

scenarios were sufficiently well calibrated to address the

crystallisation of more severe risks.

This led management to assign scenario probabilities that are aligned

to the standard scenario probability calibration framework. The

Central scenario was assigned a 75% probability weighting. The

consensus Upside scenario was assigned a 10% weighting, and the

consensus Downside scenario was given 10%. The Downside 2 was

assigned a 5% weighting.

In support of the decision, it was noted that the tariffs have a small

direct impact on GDP growth forecasts, but indirect effects would be

larger through weaker trade and lower global growth. The outlook

also remains modest given the partially offsetting impacts from

measures announced in the Budget and elevated interest rates.


Scenario weights %
	4Q24	4Q23
Upside	10.0	10.0
Central	75.0	75.0
Downside	10.0	10.0
Downside 2	5.0	5.0

Critical estimates and judgements

The calculation of ECL under IFRS 9 involves significant judgements,

assumptions and estimates at 31 December 2024. These included:

– the selection and configuration of economic scenarios, given the

constant change in economic conditions and distribution of

economic risks; and

– estimating the economic effects of those scenarios on ECL,

where similar observable historical conditions cannot be captured

by the credit risk models.

How economic scenarios are reflected in ECL

calculations

Models are used to reflect economic scenarios in ECL estimates. As

described above, modelled assumptions and linkages based on

historical information could not alone produce relevant information

under the conditions experienced in 2024, and management

judgemental adjustments were still required to support modelled

outcomes.

HSBC Group have developed globally consistent methodologies for

the application of forward economic guidance into the calculation of

ECL for wholesale and retail credit risk. These standard approaches

are described below, followed by the management judgemental

adjustments made, including those to reflect the circumstances

experienced in 2024.


HSBC UK Bank plc Annual Report and Accounts 2024	37

For wholesale portfolios, a methodology is used for the estimation of

the term structure of PD and Loss given default ('LGD'). For PDs, we

consider the correlation of forward economic guidance to default

rates for a particular industry. For LGD calculations, we consider the

correlation of forward economic guidance to collateral values and

realisation rates for a particular industry. PDs and LGDs are estimated

for the entire term structure of each instrument.

For impaired loans, ECL estimates are derived based on discounted

cash flow (‘DCF’) calculations for internal forward-looking scenarios

specific to individual borrower circumstances, see page 45.

Probability-weighted outcomes are applied, and depending on

materiality and status of the borrower, the number of scenarios

considered will change. Where relevant for the case being assessed,

forward economic guidance is incorporated as part of these

scenarios. LGD-driven proxy and modelled estimates are used for

certain less material cases.

For retail portfolios, the models are predominantly based on historical

observations and correlations with default rates and collateral values.

For PD, the impact of economic scenarios is modelled for each

portfolio, leveraging historical relationships between default rates and

macroeconomic variables. These are included within IFRS 9 ECL

estimates using either economic response models or models which

contain internal, external and macroeconomic variables. The

macroeconomic impact on PD is modelled over the period equal to

the remaining maturity of the assets.

For LGD, the impact is modelled for mortgage portfolios by

forecasting future loan-to-value profiles for the remaining maturity of

the asset, leveraging national level house price index forecast and

applying the corresponding LGD expectation relative to the updated

forecast collateral values.

For unsecured portfolios historically observed recovery rates are

leveraged to measure loss. For both mortgages and unsecured, a

limited number of portfolios utilise a macroeconomic dependent

stressed LGD applied to the Downside 2 scenario.

Management judgemental adjustments are described below.

Management judgemental adjustments

In the context of IFRS 9, management judgemental adjustments are

short-term increases or decreases to the modelled ECL at either a

customer, segment or portfolio level where management believes

ECL results do not sufficiently reflect the credit risk/expected credit

loses at the reporting date. These can relate to risks or uncertainties

which are not reflected in the models and/or to any late-breaking

events with significant uncertainty, subject to management review

and challenge.

This includes refining model inputs and outputs and using

adjustments to ECL based on management judgement and

quantitative analysis for impacts that are difficult to model.

The effect of management judgemental adjustments are considered

for balances and ECL when determining whether or not a significant

increase in credit risk has occurred and are attributed or allocated to a

stage as appropriate. This is in accordance with the internal

adjustments framework.

Management judgemental adjustments are reviewed under the

governance process for IFRS 9 (as detailed in the section ‘Credit risk

management’ on page 25). Review and challenge focuses on the

rationale and quantum of the adjustments with a further review

carried out by the second line of defence where significant. For some

management judgemental adjustments, internal frameworks

establish the conditions under which these adjustments should no

longer be required and as such are considered as part of the

governance process. This internal governance process allows

management judgemental adjustments to be reviewed regularly and,

where possible, to reduce the reliance on these through model

recalibration or redevelopment, as appropriate.

The drivers of management judgemental adjustments continue to

evolve with the economic environment, and as new risks emerge.

In addition to management judgemental adjustments there are also

'Other adjustments', which are made to address process limitations

and data/model deficiencies and can also include, where appropriate,

the impact of new models where governance has sufficiently

progressed to allow an accurate estimate of ECL allowance to be

incorporated into the total reported ECL.

‘Management judgemental adjustments’ and ‘Other adjustments’

constitute the total value of adjustments to modelled ECL.

For the wholesale portfolio, defaulted exposures are assessed

individually and management judgemental adjustments are made only

to the performing portfolio.

Management judgemental adjustments made in estimating the

scenario-weighted reported ECL at 31 December 2024 are set out in

the following table.


Management judgemental adjustments to ECL at 31 December 20241
	Retail	Wholesale2	Total
	£m	£m	£m
Modelled ECL (A)3	582	512	1,094
Corporate lending adjustments	—	—	—
Inflation related adjustments	3	—	3
Other credit judgements	7	—	7
Total management judgemental adjustments (B)4	10	—	10
Other adjustments (C)5	(43)	14	(29)
Final ECL (A + B + C)6	549	526	1,075


Management judgemental adjustments to ECL at 31 December 20231
	Retail	Wholesale2	Total
	£m	£m	£m
Modelled ECL (A)3	523	488	1,011
Corporate lending adjustments	—	44	44
Inflation related adjustments	30	—	30
Other credit judgements	200	—	200
Total management judgemental adjustments (B)4	230	44	274
Other adjustments (C)5	(28)	50	22
Final ECL (A + B + C)6	725	582	1,307

1Management judgemental adjustments presented in the table reflect

increases or (decreases) to allowance for ECL, respectively.

2The wholesale portfolio corresponds to adjustments to the performing

portfolio (stage 1 and stage 2).

3(A) refers to probability-weighted allowance for ECL before any adjustments

are applied.

4(B) refers to adjustments that are applied where management believes

allowance for ECL does not sufficiently reflect the credit risk/expected

credit losses of any given portfolio at the reporting date. These can relate to

risks or uncertainties that are not reflected in the model and/or to any late-

breaking events.

5(C) refers to adjustments to allowance for ECL made to address process

limitations and data/model deficiencies and can also include where

appropriate, the impact of new models where governance has sufficiently

progressed to allow an accurate estimate of ECL allowance to be

incorporated into the total reported ECL.

6As presented within our internal credit risk governance.


38	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

At 31 December 2024, total adjustments of the Wholesale portfolio

to the modelled output were an ECL increase of £14m, comprising £6

relating to Corporate portfolios and £8m relating to Retail Small and

medium-sized enterprise ('SME') portfolios (31 December 2023:

£94m increase including £16m from Retail SME).

– The decrease in adjustments is attributed to crystallisation of

existing risks as at 31 December 2023 through downgrades, and

an improved reflection of emerging risks in macroeconomic

scenarios and modelled outcomes.

At 31 December 2024, total adjustments of the Retail portfolio to the

modelled output were an ECL decrease of £33m (31 December 2023:

£202m increase).

– Management judgemental adjustments relating to Other credit

judgements increased ECL by £7m (31 December 2023: £200m).

The decrease was primarily driven by unwind of the adjustment

capturing the potential delayed impact of economic scenarios on

unsecured portfolio defaults in light of continued portfolio

resilience.

– Management judgemental adjustments relating to inflation

increased ECL by £3m (31 December 2023: £30m). The reduction

was primarily due to the reduction in inflation related risk.

Economic scenarios sensitivity analysis of

ECL estimates

Management considered the sensitivity of the ECL outcome against

the economic forecasts as part of the ECL governance process by

recalculating the ECL under each scenario described above for

selected portfolios, applying a 100% weighting to each scenario in

turn. The weighting is reflected in both the determination of a

significant increase in credit risk and the measurement of the

resulting ECL.

The ECL calculated for the Upside and Downside scenarios should

not be taken to represent the upper and lower limits of possible ECL

outcomes. The impact of defaults that might occur in the future

under different economic scenarios is captured by recalculating ECL

for loans at the balance sheet date.

There is a particularly high degree of estimation uncertainty in

numbers representing more severe risk scenarios when assigned a

100% weighting.

For wholesale credit risk exposures, the sensitivity analysis excludes

ECL and financial instruments related to defaulted (stage 3) obligors.

The measurement of stage 3 ECL is relatively more sensitive to credit

factors specific to the obligor than future economic scenarios, and

therefore the effect of macroeconomic factors are not necessarily the

key consideration when performing individual assessments of ECL

for obligors in default. Loans to defaulted obligors are a small portion

of the overall wholesale lending exposure, even if representing the

majority of the allowance for ECL. Due to the range and specificity of

the credit factors to which the ECL is sensitive, it is not possible to

provide a meaningful alternative sensitivity analysis for a consistent

set of risks across all defaulted obligors.

For retail mortgage exposures, the sensitivity analysis includes ECL

for loans and advances to customers related to defaulted obligors.

This is because the retail ECL for secured mortgage portfolios,

including loans in all stages, is sensitive to macroeconomic variables.

Wholesale and retail sensitivity analysis

The wholesale and retail sensitivity tables present the 100%

weighted results. The results tables exclude small portfolios, and as

such cannot be directly compared to personal and wholesale lending

presented in other credit risk tables. Additionally, in both the

wholesale and retail analysis, the comparative period results for

Downside 2 scenarios are also not directly comparable to the current

period, because they reflect different risks relative to the Consensus

scenarios for the period end.

The wholesale and retail sensitivity analysis is stated inclusive of

management judgemental adjustments, as appropriate to each

scenario.

For both retail and wholesale portfolios, the gross carrying amount of

financial instruments are the same under each scenario. For

exposures with similar risk profile and product characteristics, the

sensitivity impact is therefore largely the result of changes in

macroeconomic assumptions.

Wholesale analysis


IFRS 9 ECL sensitivity to future economic conditions1,2,3
	2024	2023
	£m	£m
ECL of financial instruments subject to significant measurement uncertainty at 31 Dec1
Reported ECL	526	582
Consensus scenarios
Central scenario	491	542
Upside scenario	390	436
Downside scenario	620	736
Downside 2 scenario	1,599	1,692

1ECL sensitivity includes off-balance sheet financial instruments that are

subject to significant measurement uncertainty.

2Includes low credit-risk financial instruments such as debt instruments at

FVOCI, which have high carrying amounts but low ECL under all the above

scenarios.

3Excludes defaulted obligors. For a detailed breakdown of performing and

non-performing wholesale portfolio exposures, see page 46.

In the wholesale portfolio, off-balance sheet financial instruments

have a lower likelihood to be fully converted to a funded exposure at

the point of default, and consequently the sensitivity of ECL is lower

in relation to its nominal amount, when compared with an on-balance

sheet exposure with a similar risk profile.

Retail analysis


IFRS 9 ECL sensitivity to future economic conditions1
	2024	2023
	£m	£m
ECL of loans and advances to customers at 31 Dec
Reported ECL	516	685
Consensus scenarios
Central scenario	498	669
Upside scenario	470	586
Downside scenario	520	735
Downside 2 scenario	866	1,046

1ECL sensitivities exclude portfolios utilising less complex modelling

approaches.


HSBC UK Bank plc Annual Report and Accounts 2024	39

Mortgages reflected the lowest level of ECL sensitivity given the

significant levels of collateral relative to exposure values. Credit cards

and other unsecured lending across stage 1 and stage 2 are more

sensitive to economic forecasts and therefore reflected the highest

level of ECL sensitivity during 2024.

There was a reduction in the total sensitivity for ECL in all scenarios

compared with 31 December 2023, due to reduction of management

judgemental adjustments, model redevelopments and scenario

evolution.

There is limited sensitivity in credit cards and other unsecured lending

in stage 3 as levels of loss on defaulted exposures remain consistent

through various economic conditions. The Downside 2 scenario is

from the tail of the economic distribution where ECL is more

sensitive based on historical experience and includes a

macroeconomic dependent stressed LGD for a limited number of

portfolios.

The following disclosure provides a reconciliation by stage of the

HSBC UK’s gross carrying/nominal amount and allowances for loans

and advances to banks and customers, including loan commitments

and financial guarantees, reconciliation by stage of the HSBC UK’s

gross carrying amount and allowances for loans and advances to

banks and customers and Reconciliation by stage of the HSBC UK’s

nominal amount and allowances for loan commitments and financial

guarantees.

Movements are calculated on a quarterly basis and therefore fully

capture stage movements between quarters. If movements were

calculated on a year-to-date basis they would only reflect the opening

and closing position of the financial instrument.

The transfers of financial instruments represent the impact of stage

transfers upon the gross carrying/nominal amount and associated

allowance for ECL. The net remeasurement of ECL arising from stage

transfers represents the increase or decrease due to these transfers,

for example, moving from a 12-month (Stage 1) to a lifetime (Stage 2)

ECL measurement basis. Net remeasurement excludes the

underlying customer risk rating ('CRR')/PD movements of the

financial instruments transferring stage. This is captured, along with

other credit quality movements in the ‘changes in risk parameters –

credit quality’ line item.

Changes in Net new and further lending/repayments includes ‘New

financial assets originated or purchased’, ‘Assets derecognised

(including final repayments)’ and ‘Changes to risk parameters –

further lending/repayment’ represent the impact from volume

movements within the HSBC UK’s lending portfolio.



Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	240,631	(317)	47,362	(780)	4,252	(710)	—	—	292,245	(1,807)
Transfers of financial instruments	(3,927)	(290)	2,298	344	1,629	(54)	—	—	—	—
– transfers from Stage 1 to Stage 2	(37,934)	156	37,934	(156)	—	—	—	—	—	—
– transfers from Stage 2 to Stage 1	34,287	(417)	(34,287)	417	—	—	—	—	—	—
– transfers to Stage 3	(585)	5	(1,833)	145	2,418	(150)	—	—	—	—
– transfers from Stage 3	305	(34)	484	(62)	(789)	96	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	254	—	(158)	—	(8)	—	—	—	88
Net new and further lending/ repayments	19,372	(67)	(10,633)	231	(1,349)	298	—	—	7,390	462
Changes to risk parameters – credit quality	—	99	—	(235)	—	(811)	—	—	—	(947)
Changes to models used for ECL calculation	—	21	—	5	—	(18)	—	—	—	8
Assets written off	—	—	—	—	(605)	605	—	—	(605)	605
Foreign exchange	—	(1)	—	—	—	—	—	—	—	(1)
Others	46	—	—	—	—	—	—	—	46	—
At 31 Dec 2024	256,122	(301)	39,027	(593)	3,927	(698)	—	—	299,076	(1,592)
ECL income statement change for the period		307		(157)		(539)		—		(389)
Recoveries										74
Others										(4)
Total ECL income statement change for the period										(319)


40	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1 (continued)
(Audited)
	Non credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	223,956	(277)	51,572	(978)	4,784	(755)	23	(1)	280,335	(2,011)
Transfers of financial instruments:	(6,383)	(364)	4,508	493	1,875	(129)	—	—	—	—
– transfers from Stage 1 to Stage 2	(48,798)	158	48,798	(158)	—	—	—	—	—	—
– transfers from Stage 2 to Stage 1	42,905	(521)	(42,905)	521	—	—	—	—	—	—
– transfers to Stage 3	(697)	8	(1,891)	174	2,588	(182)	—	—	—	—
– transfers from Stage 3	207	(9)	506	(44)	(713)	53	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	334	—	(223)	—	(4)	—	—	—	107
Net new and further lending/ repayments	22,994	(96)	(8,718)	174	(1,745)	138	(23)	—	12,508	216
Changes to risk parameters – credit quality	—	88	—	(254)	—	(623)	—	1	—	(788)
Changes to models used for ECL calculation	—	(2)	—	8	—	1	—	—	—	7
Assets written off	—	—	—	—	(662)	662	—	—	(662)	662
Foreign exchange	—	—	—	—	—	—	—	—	—	—
Others	64	—	—	—	—	—	—	—	64	—
At 31 Dec 2023	240,631	(317)	47,362	(780)	4,252	(710)	—	—	292,245	(1,807)
ECL income statement change for the period		324		(295)		(488)		1		(458)
Recoveries										63
Others										(5)
Total ECL income statement change for the period										(400)

1The Reconciliation excludes loans and advances to other HSBC Group companies. As at 31 December 2024, these amounted to £1.2bn (2023: £0.5bn) and were

classified as Stage 1 with no ECL.


HSBC UK Bank plc Annual Report and Accounts 2024	41


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	174,984	(286)	42,286	(755)	3,911	(665)	—	—	221,181	(1,706)
Transfers of financial instruments:	(3,944)	(280)	2,488	328	1,456	(48)	—	—	—	—
– transfers from stage 1 to stage 2	(33,463)	150	33,463	(150)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	29,766	(401)	(29,766)	401	—	—	—	—	—	—
– transfers to stage 3	(482)	5	(1,647)	139	2,129	(144)	—	—	—	—
– transfers from stage 3	235	(34)	438	(62)	(673)	96	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	245	—	(148)	—	(8)	—	—	—	89
Net new and further lending/repayments	15,424	(70)	(9,622)	221	(1,228)	249	—	—	4,574	400
Changes to risk parameters – credit quality	—	96	—	(216)	—	(765)	—	—	—	(885)
Changes to models used for ECL calculation	—	21	—	5	—	(18)	—	—	—	8
Assets written off	—	—	—	—	(605)	605	—	—	(605)	605
Foreign exchange	—	(1)	—	—	—	—	—	—	—	(1)
Others	46	—	—	—	—	—	—	—	46	—
At 31 Dec 2024	186,510	(275)	35,152	(565)	3,534	(650)	—	—	225,196	(1,490)
ECL income statement change for the period		292		(138)	—	(542)		—		(388)
Recoveries										74
Others										(5)
Total ECL income statement change for the period										(319)


Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	160,644	(249)	46,693	(941)	4,526	(723)	23	(1)	211,886	(1,914)
Transfers of financial instruments:	(5,936)	(340)	4,186	467	1,750	(127)	—	—	—	—
– transfers from stage 1 to stage 2	(40,020)	152	40,020	(152)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	34,538	(491)	(34,538)	491	—	—	—	—	—	—
– transfers to stage 3	(622)	8	(1,782)	172	2,404	(180)	—	—	—	—
– transfers from stage 3	168	(9)	486	(44)	(654)	53	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	312	—	(205)	—	(4)	—	—	—	103
Net new and further lending/repayments	20,212	(98)	(8,593)	170	(1,703)	115	(23)	—	9,893	187
Changes to risk parameters – credit quality	—	91	—	(254)	—	(589)	—	1	—	(751)
Changes to models used for ECL calculation	—	(2)	—	8	—	1	—	—	—	7
Assets written off	—	—	—	—	(662)	662	—	—	(662)	662
Foreign exchange	—	—	—	—	—	—	—	—	—	—
Others	64	—	—	—	—	—	—	—	64	—
At 31 Dec 2023	174,984	(286)	42,286	(755)	3,911	(665)	—	—	221,181	(1,706)
ECL income statement change for the period		303		(281)	—	(477)		1		(454)
Recoveries										63
Others										(5)
Total ECL income statement change for the period										(396)


42	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Reconciliation of changes in gross carrying/nominal amount and allowances for loan commitments and financial guarantees
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	65,647	(31)	5,076	(25)	341	(45)	—	—	71,064	(101)
Transfers of financial instruments	17	(10)	(190)	16	173	(6)	—	—	—	—
– transfers from stage 1 to stage 2	(4,471)	6	4,471	(6)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	4,521	(16)	(4,521)	16	—	—	—	—	—	—
– transfers to stage 3	(103)	—	(186)	6	289	(6)	—	—	—	—
– transfers from stage 3	70	—	46	—	(116)	—	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	9	—	(10)	—	—	—	—	—	(1)
Net new and further lending/repayments	3,948	3	(1,011)	10	(121)	49	—	—	2,816	62
Changes to risk parameters – credit quality	—	3	—	(19)	—	(46)	—	—	—	(62)
At 31 Dec 2024	69,612	(26)	3,875	(28)	393	(48)	—	—	73,880	(102)
ECL income statement change for the period		15		(19)	—	3		—		(1)
Recoveries										—
Others										1
Total ECL income statement change for the period										—


At 1 Jan 2023	63,312	(28)	4,879	(37)	258	(32)	—	—	68,449	(97)
Transfers of financial instruments:	(447)	(24)	322	26	125	(2)	—	—	—	—
– transfers from stage 1 to stage 2	(8,778)	6	8,778	(6)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	8,367	(30)	(8,367)	30	—	—	—	—	—	—
– transfers to stage 3	(75)	—	(109)	2	184	(2)	—	—	—	—
– transfers from stage 3	39	—	20	—	(59)	—	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	22	—	(18)	—	—	—	—	—	4
Net new and further lending/repayments	2,782	2	(125)	4	(42)	23	—	—	2,615	29
Changes to risk parameters – credit quality	—	(3)	—	—	—	(34)	—	—	—	(37)
At 31 Dec 2023	65,647	(31)	5,076	(25)	341	(45)	—	—	71,064	(101)
ECL income statement change for the period		21		(14)	—	(11)		—		(4)
Recoveries										—
Others										—
Total ECL income statement change for the period										(4)

Credit quality of financial instruments

(Audited)

We assess the credit quality of all financial instruments that are

subject to credit risk. The credit quality of financial instruments is a-

point-in-time assessment of PD, whereas Stages 1 and 2 are

determined based on relative deterioration of credit quality since

initial recognition. Accordingly, for non-credit-impaired financial

instruments there is no direct relationship between the credit quality

assessment and Stages 1 and 2, though typically the lower credit

quality bands exhibit a higher proportion in Stage 2.

The five credit quality classifications defined above each encompass

a range of granular internal credit rating grades assigned to wholesale

and personal lending businesses and the external ratings attributed

by external agencies to debt securities, as shown in the table on page

26.


HSBC UK Bank plc Annual Report and Accounts 2024	43


Distribution of financial instruments by credit quality
(Audited)
	Gross carrying/notional amount						Allowance for ECL	Net
	Strong	Good	Satisfactory	Sub- standard	Credit impaired	Total	Allowance for ECL	Net
	£m	£m	£m	£m	£m	£m	£m	£m
In-scope for IFRS 9
Loans and advances to customers held at amortised cost	128,253	44,989	37,009	5,309	3,532	219,092	(1,488)	217,604
– personal	117,179	20,821	7,953	456	857	147,266	(531)	146,735
– corporate and commercial	8,719	21,727	25,780	4,776	2,638	63,640	(913)	62,727
– non-bank financial institutions	2,355	2,441	3,276	77	37	8,186	(44)	8,142
Loans and advances to banks held at amortised cost	7,263	—	—	—	2	7,265	(2)	7,263
Cash and balances at central banks	52,276	—	—	—	—	52,276	—	52,276
Reverse repurchase agreements – non-trading	11,776	—	—	—	—	11,776	—	11,776
Financial investments	16,323	—	—	—	—	16,323	(1)	16,322
Other assets	2,451	203	261	6	31	2,952	(7)	2,945
– endorsements and acceptances	3	28	6	4	—	41	(3)	38
– accrued income and other	2,448	175	255	2	31	2,911	(4)	2,907
Debt instruments measured at FVOCI1	22,263	—	—	—	—	22,263	(1)	22,262
Out-of-scope for IFRS 9 ECL
Derivatives	284	6	5	—	—	295	—	295
Total gross carrying amount on balance sheet	240,889	45,198	37,275	5,315	3,565	332,242	(1,499)	330,743
Percentage of total credit quality	72.5	13.6	11.2	1.6	1.1	100.0	—	—
Loan and other credit related commitments	45,768	14,077	13,135	1,110	385	74,475	(99)	74,376
Financial guarantees	490	228	240	80	8	1,046	(3)	1,043
In-scope: Irrecoverable loan commitments and financial guarantees	46,258	14,305	13,375	1,190	393	75,521	(102)	75,419
Loan and other credit related commitments	753	830	1,177	228	96	3,084	—	3,084
Performance and other guarantees	309	923	983	181	20	2,416	(19)	2,397
Out-of-scope: Revocable loan commitments and Non- financial guarantees	1,062	1,753	2,160	409	116	5,500	(19)	5,481
Total nominal amount off balance sheet	47,320	16,058	15,535	1,599	509	81,021	(121)	80,900
At 31 Dec 2024	288,209	61,256	52,810	6,914	4,074	413,263	(1,620)	411,643


In-scope for IFRS 9
Loans and advances to customers held at amortised cost	123,866	43,385	35,581	6,850	3,909	213,591	(1,704)	211,887
– personal	115,161	19,668	7,190	341	955	143,315	(703)	142,612
– corporate and commercial	7,426	20,465	25,845	6,315	2,876	62,927	(949)	61,978
– non-bank financial institutions	1,279	3,252	2,546	194	78	7,349	(52)	7,297
Loans and advances to banks held at amortised cost	7,980	—	—	—	2	7,982	(2)	7,980
Cash and balances at central banks	65,719	—	—	—	—	65,719	—	65,719
Reverse repurchase agreements – non-trading	7,686	—	—	—	—	7,686	—	7,686
Financial investments	11,820	—	—	—	—	11,820	(1)	11,819
Other assets	1,498	216	282	6	26	2,028	(9)	2,019
– endorsements and acceptances	3	25	9	—	2	39	(6)	33
– accrued income and other	1,495	191	273	6	24	1,989	(3)	1,986
Debt instruments measured at FVOCI1	15,020	—	—	—	—	15,020	(1)	15,019
Out-of-scope for IFRS 9
Derivatives	157	12	5	1	1	176	—	176
Total gross carrying amount on balance sheet	233,746	43,613	35,868	6,857	3,938	324,022	(1,717)	322,305
Percentage of total credit quality	72.1	13.5	11.1	2.1	1.2	100.0	—	—
Loan and other credit related commitments	43,062	14,181	11,906	902	330	70,381	(99)	70,282
Financial guarantees	600	224	215	71	11	1,121	(2)	1,119
In-scope: Irrecoverable loan commitments and financial guarantees	43,662	14,405	12,121	973	341	71,502	(101)	71,401
Loan and other credit related commitments	490	914	1,091	268	48	2,811	—	2,811
Performance and other guarantees	367	645	1,163	114	41	2,330	(20)	2,310
Out-of-scope: Revocable loan commitments and Non- financial guarantees	857	1,559	2,254	382	89	5,141	(20)	5,121
Total nominal amount off balance sheet	44,519	15,964	14,375	1,355	430	76,643	(121)	76,522
At 31 Dec 2023	278,265	59,577	50,243	8,212	4,368	400,665	(1,838)	398,827

1For the purposes of this disclosure gross carrying amount is defined as the amortised cost of a financial asset, before adjusting for any loss allowance. As such,

the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.


44	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
(Audited)
	Gross carrying/notional amount						Allowance for ECL	Net
	Strong	Good	Satisfactory	Sub- standard	Credit impaired	Total	Allowance for ECL	Net
	£m	£m	£m	£m	£m	£m	£m	£m
Loans and advances to customers at amortised cost	128,253	44,989	37,009	5,309	3,532	219,092	(1,488)	217,604
– Stage 1	117,139	32,452	29,282	1,535	—	180,408	(275)	180,133
– Stage 2	11,114	12,537	7,727	3,774	—	35,152	(565)	34,587
– Stage 3	—	—	—	—	3,532	3,532	(648)	2,884
	—	—	—	—	—	—	—	—
Loans and advances to banks at amortised cost	7,263	—	—	—	2	7,265	(2)	7,263
– Stage 1	7,263	—	—	—	—	7,263	—	7,263
– Stage 2	—	—	—	—	—	—	—	—
– Stage 3	—	—	—	—	2	2	(2)	—
– POCI	—	—	—	—	—	—	—	—
Other financial assets measured at amortised cost	82,826	203	261	6	31	83,327	(8)	83,319
– Stage 1	82,791	167	200	2	—	83,160	(4)	83,156
– Stage 2	35	36	61	4	—	136	(2)	134
– Stage 3	—	—	—	—	31	31	(2)	29
– POCI	—	—	—	—	—	—	—	—
Loan and other credit-related commitments	45,768	14,077	13,135	1,110	385	74,475	(99)	74,376
– Stage 1	45,482	12,877	11,527	394	—	70,280	(26)	70,254
– Stage 2	286	1,200	1,608	716	—	3,810	(28)	3,782
– Stage 3	—	—	—	—	385	385	(45)	340
– POCI	—	—	—	—	—	—	—	—
Financial guarantees	490	228	240	80	8	1,046	(3)	1,043
– Stage 1	490	217	167	3	—	877	—	877
– Stage 2	—	11	73	77	—	161	—	161
– Stage 3	—	—	—	—	8	8	(3)	5
– POCI	—	—	—	—	—	—	—	—
At 31 Dec 2024	264,600	59,497	50,645	6,505	3,958	385,205	(1,600)	383,605
Debt instruments at FVOCI1	22,263	—	—	—	—	22,263	(1)	22,262
– Stage 1	22,263	—	—	—	—	22,263	(1)	22,262
– Stage 2	—	—	—	—	—	—	—	—
– Stage 3	—	—	—	—	—	—	—	—
– POCI	—	—	—	—	—	—	—	—
At 31 Dec 2024	22,263	—	—	—	—	22,263	(1)	22,262


Loans and advances to customers at amortised cost	123,866	43,385	35,581	6,850	3,909	213,591	(1,704)	211,887
– stage 1	112,334	28,852	24,162	2,048	—	167,396	(286)	167,110
– stage 2	11,532	14,533	11,419	4,802	—	42,286	(755)	41,531
– stage 3	—	—	—	—	3,909	3,909	(663)	3,246
– POCI	—	—	—	—	—	—	—	—
Loans and advances to banks at amortised cost	7,980	—	—	—	2	7,982	(2)	7,980
– stage 1	7,980	—	—	—	—	7,980	—	7,980
– stage 2	—	—	—	—	—	—	—	—
– stage 3	—	—	—	—	2	2	(2)	—
– POCI	—	—	—	—	—	—	—	—
Other financial assets measured at amortised cost	86,723	216	282	6	26	87,253	(10)	87,243
– stage 1	86,695	170	203	5	—	87,073	(7)	87,066
– stage 2	28	46	79	1	—	154	—	154
– stage 3	—	—	—	—	26	26	(3)	23
– POCI	—	—	—	—	—	—	—	—
Loan and other credit-related commitments	43,062	14,181	11,906	902	330	70,381	(99)	70,282
– stage 1	42,606	12,838	9,492	321	—	65,257	(31)	65,226
– stage 2	456	1,343	2,414	581	—	4,794	(25)	4,769
– stage 3	—	—	—	—	330	330	(43)	287
– POCI	—	—	—	—	—	—	—	—
Financial guarantees	600	224	215	71	11	1,121	(2)	1,119
– stage 1	448	206	153	3	—	810	—	810
– stage 2	152	18	62	68	—	300	—	300
– stage 3	—	—	—	—	11	11	(2)	9
– POCI	—	—	—	—	—	—	—	—
At 31 Dec 2023	262,231	58,006	47,984	7,829	4,278	380,328	(1,817)	378,511
Debt instruments at FVOCI1	15,020	—	—	—	—	15,020	(1)	15,019
– stage 1	15,020	—	—	—	—	15,020	(1)	15,019
– stage 2	—	—	—	—	—	—	—	—
– stage 3	—	—	—	—	—	—	—	—
– POCI	—	—	—	—	—	—	—	—
At 31 Dec 2023	15,020	—	—	—	—	15,020	(1)	15,019

1For the purposes of this disclosure, gross carrying amount is defined as the amortised cost of a financial asset before adjusting for any loss allowance. As such,

the gross carrying amount of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes fair value gains and losses.


HSBC UK Bank plc Annual Report and Accounts 2024	45

Credit-impaired loans

(Audited)

We determine that a financial instrument is credit-impaired and in

Stage 3 by considering relevant objective evidence, primarily

whether:

– contractual payments of either principal or interest are past due

for more than 90 days;

– there are other indications that the borrower is unlikely to pay,

such as a concession has been granted to the borrower for

economic or legal reasons relating to the borrower’s financial

condition; and

– the loan is otherwise considered to be in default. If such

unlikeliness to pay is not identified at an earlier stage, it is deemed

to occur when an exposure is 90 DPD. Therefore, the definitions

of credit-impaired and default are aligned as far as possible so that

Stage 3 represents all loans which are considered defaulted or

otherwise credit-impaired.

Forbearance

The following table shows the gross carrying amounts of HSBC UK's

holdings of forborne loans and advances to customers by industry

sector and by stages. Mandatory and general offer loan modifications

that are not borrower-specific, for example market-wide customer

relief programmes, have not been classified as forborne loans.

A summary of our current policies and practices for forbearance is set out in

‘Credit risk management’ on page 25.



Forborne loans and advances to customers at amortised costs by stage allocation
Performing – Forborne		Non-Performing – Forborne		Total Forborne
	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m
Gross carrying amount
Personal	133	372	—	505
– first lien residential mortgages	21	234	—	255
– credit cards	52	52	—	104
– other personal lending which is unsecured	60	86	—	146
Wholesale	864	1,408	—	2,272
– corporate and commercial	861	1,405	—	2,266
– non-bank financial institutions	3	3	—	6
At 31 Dec 2024	997	1,780	—	2,777
Allowance for ECL
Personal	(12)	(93)	—	(105)
– first lien residential mortgages	—	(24)	—	(24)
– credit cards	(6)	(25)	—	(31)
– other personal lending which is unsecured	(6)	(44)	—	(50)
Wholesale	(68)	(221)	—	(289)
– corporate and commercial	(68)	(219)	—	(287)
– non-bank financial institutions	—	(2)	—	(2)
At 31 Dec 2024	(80)	(314)	—	(394)


Gross carrying amount
Personal	149	408	—	557
– first lien residential mortgages	24	258	—	282
– credit cards	64	41	—	105
– other personal lending which is unsecured	61	109	—	170
Wholesale	1,010	1,110	—	2,120
– corporate and commercial	1,010	1,099	—	2,109
– non-bank financial institutions	—	11	—	11
At 31 Dec 2023	1,159	1,518	—	2,677
Allowance for ECL
Personal	(19)	(101)	—	(120)
– first lien residential mortgages	—	(34)	—	(34)
– credit cards	(9)	(22)	—	(31)
– other personal lending which is unsecured	(10)	(45)	—	(55)
Wholesale	(40)	(125)	—	(165)
– corporate and commercial	(40)	(125)	—	(165)
– non-bank financial institutions	—	—	—	—
At 31 Dec 2023	(59)	(226)	—	(285)

Wholesale lending

This section provides further detail on the products in wholesale

loans and advances to customers and banks. Product granularity is

also provided by stage. Additionally, this section provides a

reconciliation of the opening 1 January 2024 to 31 December 2024

closing gross carrying/nominal amounts and the associated allowance

for ECL.

There was an increase in the Wholesale and retail trade portfolio in

stage 1 largely from new lending and decrease in stage 2 was from

repayments.


46	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Total wholesale lending for loans and advances to banks and customers by stage distribution
	Gross carrying amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	51,144	9,858	2,638	—	63,640	(150)	(315)	(448)	—	(913)
– agriculture, forestry and fishing	3,416	709	192	—	4,317	(9)	(22)	(24)	—	(55)
– mining and quarrying	423	178	1	—	602	(1)	(4)	—	—	(5)
– manufacturing	6,483	1,127	341	—	7,951	(13)	(33)	(65)	—	(111)
– electricity, gas, steam and air-conditioning supply	1,305	43	5	—	1,353	(2)	—	—	—	(2)
– water supply, sewerage, waste management and remediation	847	85	14	—	946	(1)	(2)	(2)	—	(5)
– real estate and construction	9,094	3,723	514	—	13,331	(29)	(95)	(83)	—	(207)
– wholesale and retail trade, repair of motor vehicles and motorcycles	8,222	1,383	508	—	10,113	(17)	(43)	(98)	—	(158)
– transportation and storage	1,794	294	67	—	2,155	(3)	(6)	(10)	—	(19)
– accommodation and food	4,659	664	390	—	5,713	(15)	(30)	(35)	—	(80)
– publishing, audiovisual and broadcasting	2,688	409	138	—	3,235	(22)	(27)	(29)	—	(78)
– professional, scientific and technical activities	3,867	330	129	—	4,326	(13)	(17)	(51)	—	(81)
– administrative and support services	4,588	383	58	—	5,029	(11)	(12)	(13)	—	(36)
– education	599	96	31	—	726	(2)	(5)	(12)	—	(19)
– health and care	1,405	297	99	—	1,801	(4)	(12)	(15)	—	(31)
– arts, entertainment and recreation	834	56	36	—	926	(2)	(3)	(3)	—	(8)
– other services	916	81	115	—	1,112	(6)	(4)	(8)	—	(18)
– activities of households	1	—	—	—	1	—	—	—	—	—
– government	3	—	—	—	3	—	—	—	—	—
Non-bank financial institutions	7,826	323	37	—	8,186	(8)	(5)	(31)	—	(44)
Loans and advances to banks	7,263	—	2	—	7,265	—	—	(2)	—	(2)
At 31 Dec 2024	66,233	10,181	2,677	—	79,091	(158)	(320)	(481)	—	(959)


Total wholesale credit-related commitments and financial guarantees by stage distribution
	Nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	25,246	3,370	342	—	28,958	(20)	(28)	(45)	—	(93)
Financial	5,193	249	13	—	5,455	(1)	—	(1)	—	(2)
At 31 Dec 2024	30,439	3,619	355	—	34,413	(21)	(28)	(46)	—	(95)


Total wholesale lending for loans and advances to banks and customers by stage distribution (continued)
	Gross carrying amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	46,197	13,854	2,876	—	62,927	(156)	(365)	(428)	—	(949)
– agriculture, forestry and fishing	2,895	1,159	190	—	4,244	(7)	(37)	(24)	—	(68)
– mining and quarrying	508	153	2	—	663	(1)	(4)	—	—	(5)
– manufacturing	4,732	2,472	426	—	7,630	(13)	(62)	(95)	—	(170)
– electricity, gas, steam and air-conditioning supply	727	17	2	—	746	(2)	(1)	(1)	—	(4)
– water supply, sewerage, waste management and remediation	836	145	9	—	990	(2)	(4)	(4)	—	(10)
– real estate and construction	10,055	2,759	564	—	13,378	(27)	(52)	(87)	—	(166)
– wholesale and retail trade, repair of motor vehicles and motorcycles	7,444	2,057	546	—	10,047	(21)	(42)	(84)	—	(147)
– transportation and storage	1,682	364	61	—	2,107	(4)	(9)	(4)	—	(17)
– accommodation and food	3,763	1,943	342	—	6,048	(15)	(37)	(33)	—	(85)
– publishing, audiovisual and broadcasting	2,313	641	110	—	3,064	(25)	(37)	(11)	—	(73)
– professional, scientific and technical activities	3,461	542	169	—	4,172	(13)	(28)	(34)	—	(75)
– administrative and support services	4,339	751	132	—	5,222	(12)	(24)	(13)	—	(49)
– education	522	131	33	—	686	(2)	(5)	(3)	—	(10)
– health and care	1,262	492	106	—	1,860	(5)	(14)	(10)	—	(29)
– arts, entertainment and recreation	874	63	53	—	990	(3)	(3)	(16)	—	(22)
– other services	773	165	131	—	1,069	(4)	(6)	(9)	—	(19)
– activities of households	1	—	—	—	1	—	—	—	—	—
– government	10	—	—	—	10	—	—	—	—	—
Non-bank financial institutions	6,434	837	78	—	7,349	(11)	(6)	(35)	—	(52)
Loans and advances to banks	7,980	—	2	—	7,982	—	—	(2)	—	(2)
At 31 Dec 2023	60,611	14,691	2,956	—	78,258	(167)	(371)	(465)	—	(1,003)


HSBC UK Bank plc Annual Report and Accounts 2024	47


Total wholesale credit-related commitments and financial guarantees by stage distribution (continued)
	Nominal amount					Allowance for ECL
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Corporate and commercial	22,254	3,714	252	—	26,220	(22)	(24)	(43)	—	(89)
Financial	2,966	804	20	—	3,790	(1)	(1)	—	—	(2)
At 31 Dec 2023	25,220	4,518	272	—	30,010	(23)	(25)	(43)	—	(91)


Wholesale lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including loan commitments and financial guarantees1
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		POCI		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	85,019	(190)	19,191	(396)	3,228	(508)	—	—	107,438	(1,094)
Transfers of financial instruments	(1,209)	(85)	(153)	145	1,362	(60)	—	—	—	—
– transfers from stage 1 to stage 2	(14,756)	91	14,756	(91)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	13,823	(171)	(13,823)	171	—	—	—	—	—	—
– transfers to stage 3	(351)	2	(1,358)	72	1,709	(74)	—	—	—	—
– transfers from stage 3	75	(7)	272	(7)	(347)	14	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	101	—	(97)	—	(2)	—	—	—	2
Net new and further lending/repayments	10,110	(41)	(5,334)	120	(1,228)	252	—	—	3,548	331
Changes to risk parameters – credit quality	—	11	—	(175)	—	(539)	—	—	—	(703)
Changes to models used for ECL calculation	—	26	—	55	—	—	—	—	—	81
Assets written off	—	—	—	—	(330)	330	—	—	(330)	330
Foreign exchange	—	(1)	—	—	—	—	—	—	—	(1)
Others	46	—	—	—	—	—	—	—	46	—
At 31 Dec 2024	93,966	(179)	13,704	(348)	3,032	(527)	—	—	110,702	(1,054)
ECL income statement change for the period		97		(97)		(289)		—		(289)
Recoveries										13
Others										(4)
Total ECL income statement change for the period										(280)


At 1 Jan 2023	75,262	(156)	20,166	(407)	3,857	(566)	23	(1)	99,308	(1,130)
Transfers of financial instruments	(5,492)	(187)	4,042	233	1,450	(46)	—	—	—	—
– transfers from stage 1 to stage 2	(19,937)	71	19,937	(71)	—	—	—	—	—	—
– transfers from stage 2 to stage 1	14,881	(260)	(14,881)	260	—	—	—	—	—	—
– transfers to stage 3	(598)	7	(1,434)	65	2,032	(72)	—	—	—	—
– transfers from stage 3	162	(5)	420	(21)	(582)	26	—	—	—	—
Net remeasurement of ECL arising from transfer of stage	—	146	—	(135)	—	(2)	—	—	—	9
Net new and further lending/repayments	15,185	(62)	(5,017)	72	(1,657)	128	(23)	—	8,488	138
Change to risk parameters – credit quality	—	69	—	(159)	—	(444)	—	1	—	(533)
Changes to models used for ECL calculation	—	—	—	—	—	—	—	—	—	—
Assets written off	—	—	—	—	(422)	422	—	—	(422)	422
Foreign exchange	—	—	—	—	—	—	—	—	—	—
Other	64	—	—	—	—	—	—	—	64	—
At 31 Dec 2023	85,019	(190)	19,191	(396)	3,228	(508)	—	—	107,438	(1,094)
ECL income statement change for the period		153		(222)		(318)		1		(386)
Recoveries										4
Others										(5)
Total ECL income statement change for the period										(387)

1The reconciliation excludes loans and advances to other HSBC Group companies. As at 31 December 2024, these amounted to £1.2bn (2023: £0.5bn) and were

classified as Stage 1 with no ECL.


48	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost
		Gross carrying amount					Allowance for ECL
	Basel one-year PD range	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total	ECL coverage	Mapped external rating
	%	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	%
Corporate and commercial		51,144	9,858	2,638	—	63,640	(150)	(315)	(448)	—	(913)	1.4
– CRR 1	0.000 to 0.053	520	—	—	—	520	—	(1)	—	—	(1)	0.2	AA- and above
– CRR 2	0.054 to 0.169	7,449	750	—	—	8,199	(6)	(8)	—	—	(14)	0.2	A+ to A-
– CRR 3	0.170 to 0.740	19,978	1,749	—	—	21,727	(26)	(29)	—	—	(55)	0.3	BBB+ to BBB-
– CRR 4	0.741 to 1.927	13,479	2,262	—	—	15,741	(45)	(34)	—	—	(79)	0.5	BB+ to BB-
– CRR 5	1.928 to 4.914	8,292	1,747	—	—	10,039	(62)	(45)	—	—	(107)	1.1	BB- to B
– CRR 6	4.915 to 8.860	644	1,158	—	—	1,802	(8)	(52)	—	—	(60)	3.3	B-
– CRR 7	8.861 to 15.000	590	1,420	—	—	2,010	(3)	(62)	—	—	(65)	3.2	CCC+
– CRR 8	15.001 to 99.999	192	772	—	—	964	—	(84)	—	—	(84)	8.7	CCC to C
– CRR 9/10	100.000	—	—	2,638	—	2,638	—	—	(448)	—	(448)	17.0	D
Non-bank financial institutions		7,826	323	37	—	8,186	(8)	(5)	(31)	—	(44)	0.5
– CRR 1	0.000 to 0.053	298	—	—	—	298	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	2,057	—	—	—	2,057	(1)	—	—	—	(1)	—	A+ to A-
– CRR 3	0.170 to 0.740	2,384	57	—	—	2,441	(1)	(2)	—	—	(3)	0.1	BBB+ to BBB-
– CRR 4	0.741 to 1.927	2,715	100	—	—	2,815	(3)	—	—	—	(3)	0.1	BB+ to BB-
– CRR 5	1.928 to 4.914	355	106	—	—	461	(3)	(3)	—	—	(6)	1.3	BB- to B
– CRR 6	4.915 to 8.860	6	57	—	—	63	—	—	—	—	—	—	B-
– CRR 7	8.861 to 15.000	10	3	—	—	13	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	1	—	—	—	1	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	37	—	37	—	—	(31)	—	(31)	83.8	D
Banks		7,263	—	2	—	7,265	—	—	(2)	—	(2)	—
– CRR 1	0.000 to 0.053	7,181	—	—	—	7,181	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	82	—	—	—	82	—	—	—	—	—	—	A+ to A-
– CRR 3	0.170 to 0.740	—	—	—	—	—	—	—	—	—	—	—	BBB+ to BBB-
– CRR 4	0.741 to 1.927	—	—	—	—	—	—	—	—	—	—	—	BB+ to BB-
– CRR 5	1.928 to 4.914	—	—	—	—	—	—	—	—	—	—	—	BB- to B
– CRR 6	4.915 to 8.860	—	—	—	—	—	—	—	—	—	—	—	B-
– CRR 7	8.861 to 15.000	—	—	—	—	—	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	—	—	—	—	—	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	2	—	2	—	—	(2)	—	(2)	100.0	D
At 31 Dec 2024		66,233	10,181	2,677	—	79,091	(158)	(320)	(481)	—	(959)	1.2


HSBC UK Bank plc Annual Report and Accounts 2024	49


Wholesale lending – credit risk profile by obligor grade for loans and advances at amortised cost (continued)
		Gross carrying amount					Allowance for ECL
	Basel one-year PD range	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total	ECL coverage	Mapped external rating
	%	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	%
Corporate and commercial 1		46,197	13,854	2,876	—	62,927	(156)	(365)	(428)	—	(949)	1.5
– CRR 1	0.000 to 0.053	392	1	—	—	393	—	(1)	—	—	(1)	0.3	AA- and above
– CRR 2	0.054 to 0.169	6,871	162	—	—	7,033	(5)	(2)	—	—	(7)	0.1	A+ to A-
– CRR 3	0.170 to 0.740	17,704	2,761	—	—	20,465	(26)	(40)	—	—	(66)	0.3	BBB+ to BBB-
– CRR 4	0.741 to 1.927	12,402	3,056	—	—	15,458	(44)	(42)	—	—	(86)	0.6	BB+ to BB-
– CRR 5	1.928 to 4.914	6,984	3,403	—	—	10,387	(59)	(93)	—	—	(152)	1.5	BB- to B
– CRR 6	4.915 to 8.860	844	1,644	—	—	2,488	(14)	(60)	—	—	(74)	3.0	B-
– CRR 7	8.861 to 15.000	343	1,903	—	—	2,246	(4)	(75)	—	—	(79)	3.5	CCC+
– CRR 8	15.001 to 99.999	657	924	—	—	1,581	(4)	(52)	—	—	(56)	3.5	CCC to C
– CRR 9/10	100.000	—	—	2,876	—	2,876	—	—	(428)	—	(428)	14.9	D
Non-bank financial institutions		6,434	837	78	—	7,349	(11)	(6)	(35)	—	(52)	0.7
– CRR 1	0.000 to 0.053	346	—	—	—	346	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	887	46	—	—	933	(1)	—	—	—	(1)	0.1	A+ to A-
– CRR 3	0.170 to 0.740	3,056	196	—	—	3,252	(1)	(1)	—	—	(2)	0.1	BBB+ to BBB-
– CRR 4	0.741 to 1.927	1,874	449	—	—	2,323	(3)	(1)	—	—	(4)	0.2	BB+ to BB-
– CRR 5	1.928 to 4.914	128	95	—	—	223	(1)	(4)	—	—	(5)	2.2	BB- to B
– CRR 6	4.915 to 8.860	130	46	—	—	176	(5)	—	—	—	(5)	2.8	B-
– CRR 7	8.861 to 15.000	8	2	—	—	10	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	5	3	—	—	8	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	78	—	78	—	—	(35)	—	(35)	44.9	D
Banks		7,980	—	2	—	7,982	—	—	(2)	—	(2)	—
– CRR 1	0.000 to 0.053	7,913	—	—	—	7,913	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	67	—	—	—	67	—	—	—	—	—	—	A+ to A-
– CRR 3	0.170 to 0.740	—	—	—	—	—	—	—	—	—	—	—	BBB+ to BBB-
– CRR 4	0.741 to 1.927	—	—	—	—	—	—	—	—	—	—	—	BB+ to BB-
– CRR 5	1.928 to 4.914	—	—	—	—	—	—	—	—	—	—	—	BB- to B
– CRR 6	4.915 to 8.860	—	—	—	—	—	—	—	—	—	—	—	B-
– CRR 7	8.861 to 15.000	—	—	—	—	—	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	—	—	—	—	—	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	2	—	2	—	—	(2)	—	(2)	100.0	D
At 31 Dec 2023		60,611	14,691	2,956	—	78,258	(167)	(371)	(465)	—	(1,003)	1.3

1Corporate and commercial lending reported in CRR8 for stage 1 includes £613m related to the UK Bounce Back Loans Scheme with immaterial allowance for

ECL.


50	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Wholesale lending – credit risk profile by obligor grade for loan and other credit-related commitments and financial guarantees
		Gross carrying amount					Allowance for ECL						Mapped external rating
	Basel one-year PD range	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total	ECL coverage
	%	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	%
Loan and other credit- related commitments		29,868	3,465	347	—	33,680	(21)	(28)	(43)	—	(92)	0.3
– CRR 1	0.000 to 0.053	2,545	—	—	—	2,545	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	7,048	241	—	—	7,289	(2)	(1)	—	—	(3)	—	A+ to A-
– CRR 3	0.170 to 0.740	10,667	1,196	—	—	11,863	(4)	(5)	—	—	(9)	0.1	BBB+ to BBB-
– CRR 4	0.741 to 1.927	6,180	594	—	—	6,774	(5)	(2)	—	—	(7)	0.1	BB+ to BB-
– CRR 5	1.928 to 4.914	3,080	756	—	—	3,836	(9)	(6)	—	—	(15)	0.4	BB- to B
– CRR 6	4.915 to 8.860	234	337	—	—	571	(1)	(3)	—	—	(4)	0.7	B-
– CRR 7	8.861 to 15.000	110	164	—	—	274	—	(3)	—	—	(3)	1.1	CCC+
– CRR 8	15.001 to 99.999	4	177	—	—	181	—	(8)	—	—	(8)	4.4	CCC to C
– CRR 9/10	100.000	—	—	347	—	347	—	—	(43)	—	(43)	12.4	D
Financial guarantees		571	154	8	—	733	—	—	(3)	—	(3)
– CRR 1	0.000 to 0.053	3	—	—	—	3	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	198	—	—	—	198	—	—	—	—	—	—	A+ to A-
– CRR 3	0.170 to 0.740	203	11	—	—	214	—	—	—	—	—	—	BBB+ to BBB-
– CRR 4	0.741 to 1.927	97	41	—	—	138	—	—	—	—	—	—	BB+ to BB-
– CRR 5	1.928 to 4.914	67	24	—	—	91	—	—	—	—	—	—	BB- to B
– CRR 6	4.915 to 8.860	1	32	—	—	33	—	—	—	—	—	—	B-
– CRR 7	8.861 to 15.000	2	33	—	—	35	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	—	13	—	—	13	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	8	—	8	—	—	(3)	—	(3)	37.5	D
At 31 Dec 2024		30,439	3,619	355	—	34,413	(21)	(28)	(46)	—	(95)	0.3


Loan and other credit- related commitments		24,714	4,226	261	—	29,201	(23)	(25)	(41)	—	(89)	0.3
– CRR 1	0.000 to 0.053	840	103	—	—	943	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	5,920	304	—	—	6,224	(1)	(1)	—	—	(2)	—	A+ to A-
– CRR 3	0.170 to 0.740	10,210	1,320	—	—	11,530	(4)	(5)	—	—	(9)	0.1	BBB+ to BBB-
– CRR 4	0.741 to 1.927	5,359	893	—	—	6,252	(5)	(3)	—	—	(8)	0.1	BB+ to BB-
– CRR 5	1.928 to 4.914	2,102	1,062	—	—	3,164	(11)	(9)	—	—	(20)	0.6	BB- to B
– CRR 6	4.915 to 8.860	254	204	—	—	458	(2)	(3)	—	—	(5)	1.1	B-
– CRR 7	8.861 to 15.000	20	205	—	—	225	—	(3)	—	—	(3)	1.3	CCC+
– CRR 8	15.001 to 99.999	9	135	—	—	144	—	(1)	—	—	(1)	0.7	CCC to C
– CRR 9/10	100.000	—	—	261	—	261	—	—	(41)	—	(41)	15.7	D
Financial guarantees		506	292	11	—	809	—	—	(2)	—	(2)
– CRR 1	0.000 to 0.053	55	—	—	—	55	—	—	—	—	—	—	AA- and above
– CRR 2	0.054 to 0.169	103	152	—	—	255	—	—	—	—	—	—	A+ to A-
– CRR 3	0.170 to 0.740	193	18	—	—	211	—	—	—	—	—	—	BBB+ to BBB-
– CRR 4	0.741 to 1.927	89	15	—	—	104	—	—	—	—	—	—	BB+ to BB-
– CRR 5	1.928 to 4.914	62	39	—	—	101	—	—	—	—	—	—	BB- to B
– CRR 6	4.915 to 8.860	3	56	—	—	59	—	—	—	—	—	—	B-
– CRR 7	8.861 to 15.000	1	10	—	—	11	—	—	—	—	—	—	CCC+
– CRR 8	15.001 to 99.999	—	2	—	—	2	—	—	—	—	—	—	CCC to C
– CRR 9/10	100.000	—	—	11	—	11	—	—	(2)	—	(2)	18.2	D
At 31 Dec 2023		25,220	4,518	272	—	30,010	(23)	(25)	(43)	—	(91)	0.3


HSBC UK Bank plc Annual Report and Accounts 2024	51

Commercial real estate

Commercial real estate lending includes the financing of corporate,

institutional and high net worth customers who are investing primarily

in income-producing assets and, to a lesser extent, in their

construction and development. Our exposure mainly comprises the

financing of investment assets, the redevelopment of existing stock

and the augmentation of both commercial and residential markets to

support economic growth.


Commercial real estate lending
	2024	2023
	£m	£m
Gross loans and advances
Stage 1	7,489	8,080
Stage 2	3,230	2,558
Stage 3	392	348
POCI	—	—
At 31 Dec	11,111	10,986
– of which: forborne loans	400	361
Allowance for ECL	(162)	(116)

Refinance risk in commercial real estate

Commercial real estate lending tends to require the repayment of a

significant proportion of the principal at maturity. Typically, a

customer will arrange repayment through the acquisition of a new

loan to settle the existing debt. Refinance risk is the risk that a

customer, being unable to repay the debt on maturity, fails to

refinance it at commercial rates. We monitor our commercial real

estate portfolio closely, assessing indicators for signs of potential

issues with refinancing.


Commercial real estate gross loans and advances maturity analysis
	2024	2023
	£m	£m
< 1 year	2,780	2,784
1-2 years	2,633	3,540
2-5 years	5,289	4,244
> 5 years	409	418
At 31 Dec	11,111	10,986

Collateral and other credit enhancement held

(Audited)

Although collateral can be an important mitigant of credit risk, it is

HSBC UK's practice to lend on the basis of the customer’s ability to

meet their obligations out of their cash flow resources rather than

placing primarily reliance on the collateral and other credit risk

enhancements. Depending on the customer’s standing and the type

of product, facilities may be provided unsecured.

For other lending, a charge over collateral is obtained and considered

in determining the credit decision and pricing. In the event of a

default, HSBC UK may utilise the collateral as a source of repayment.

Depending on its form, collateral can have a significant financial effect

in mitigating exposure to credit risk. Where there is sufficient

collateral, an expected credit loss is not recognised. This is the case

for reverse repurchase agreements and for certain loans and

advances to customers where the loan to value ('LTV') is very low.

Mitigants may include a charge on borrowers' specific assets, such

as real estate or financial instruments. Risk may also be managed by

employing other types of collateral and credit risk enhancements,

such as second charges, other liens and unsupported guarantees.

Collateral on loans and advances

Collateral held is analysed separately for commercial real estate and

for other corporate and commercial and financial (non-bank) lending.

The following tables include off-balance sheet loan commitments,

primarily undrawn credit lines.

The collateral measured in the following tables consists of fixed first

charges on real estate, and charges over cash and marketable

financial instruments. The values in the tables represent the expected

market value on an open market basis, actual values realised are a

function of market conditions. No adjustment has been made to the

collateral for any expected costs of recovery. Marketable securities

are measured at their fair value.

Other types of collateral such as unsupported guarantees and floating

charges over the assets of a customer’s business are not measured

in the following tables. While such mitigants have value, often

providing rights in insolvency, their assignable value is not sufficiently

certain and they are therefore assigned no value for disclosure

purposes.

The LTV ratios presented are calculated by directly associating loans

and advances with the collateral that individually and uniquely

supports each facility. When collateral assets are shared by multiple

loans and advances, whether specifically or, more generally, by way

of an all monies charge, the collateral value is pro-rated across

the loans and advances protected by the collateral.

For credit-impaired loans, the collateral values cannot be directly

compared with impairment allowances recognised. The LTV figures

use open market values with no adjustments, actual values realised

are a function of market conditions. Impairment allowances are

calculated on a different basis, by considering other cash flows and

adjusting collateral values for costs of realising collateral as explained

further on page 97.

Commercial real estate loans and advances

The value of commercial real estate collateral is determined by using

a combination of external and internal valuations and physical

inspections.

Facilities of a working capital nature are generally not secured by a

first fixed charge, and are therefore disclosed as not collateralised.


52	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Wholesale lending: commercial real estate loans and advances including loan commitments by level of collateral (by stage)
(Audited)
	Gross carrying/nominal amount					ECL coverage
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	%	%	%	%	%
Non Collateralised	3,410	1,462	102	—	4,974	0.4	3.7	27.7	—	2.0
Fully collateralised by LTV ratio	7,016	2,524	243	—	9,783	0.2	1.1	8.1	—	0.6
– less than 50%	2,167	585	127	—	2,879	0.2	1.5	8.0	—	0.8
– 51% to 75%	3,273	1,350	56	—	4,679	0.2	1.2	11.5	—	0.6
– 76% to 90%	935	583	19	—	1,537	0.1	0.3	10.3	—	0.3
– 91% to 100%	641	6	41	—	688	0.1	7.8	2.7	—	0.3
Partially collateralised (A): LTV > 100%	387	449	95	—	931	0.3	2.9	21.1	—	3.7
– collateral value on A	223	278	55	—	556
Total at 31 Dec 2024	10,813	4,435	440	—	15,688	0.2	2.1	15.4	—	1.2

Non Collateralised	3,511	970	77	—	4,558	0.4	2.0	12.3	—	0.9
Fully collateralised by LTV ratio	6,981	1,970	210	—	9,161	0.1	1.3	9.4	—	0.6
– less than 50%	2,287	397	40	—	2,724	0.2	1.9	21.6	—	0.7
– 51% to 75%	3,715	1,113	59	—	4,887	0.1	1.1	1.5	—	0.3
– 76% to 90%	496	229	63	—	788	0.1	1.3	14.8	—	1.6
– 91% to 100%	483	231	48	—	762	0.1	1.6	1.9	—	0.7
Partially collateralised (A): LTV > 100%	1,239	187	64	—	1,490	0.1	1.1	34.4	—	1.7
– collateral value on A	411	134	49	—	594
Total at 31 Dec 2023	11,731	3,127	351	—	15,209	0.2	1.5	14.6	—	0.8

Other corporate, commercial and financial (non-bank) loans and advances

Other corporate, commercial and financial (non-bank) loans are

analysed separately in the following table. For financing activities in

other corporate and commercial lending that are not predominantly

commercial real estate-oriented, collateral value is not strongly

correlated to principal repayment performance.

Collateral values are generally refreshed when an obligor’s general

credit performance deteriorates and HSBC UK have to assess the

likely performance of secondary sources of repayment should it prove

necessary to rely on them.


Wholesale lending: other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level of collateral (by stage)
(Audited)
	Gross carrying/nominal amount					ECL coverage
	Stage 1	Stage 2	Stage 3	POCI	Total	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m	%	%	%	%	%
Non Collateralised	59,272	6,313	1,577	—	67,162	0.2	2.9	24.0	—	1.0
Fully collateralised by LTV ratio	14,734	2,258	769	—	17,761	0.1	2.5	5.6	—	0.7
– less than 50%	5,800	947	377	—	7,124	0.1	2.3	2.7	—	0.6
– 51% to 75%	5,119	881	194	—	6,194	0.2	3.0	7.2	—	0.8
– 76% to 90%	1,843	292	103	—	2,238	0.2	2.4	15.3	—	1.2
– 91% to 100%	1,972	138	95	—	2,205	0.2	2.1	3.5	—	0.4
Partially collateralised (A): LTV > 100%	5,481	839	310	—	6,630	0.2	1.3	10.6	—	0.8
– collateral value on A	2,979	463	200	—	3,642
Total at 31 Dec 2024	79,487	9,410	2,656	—	91,553	0.2	2.7	17.1	—	0.9

Non Collateralised	50,581	10,097	2,062	—	62,740	0.3	2.5	18.5	—	1.2
Fully collateralised by LTV ratio	12,571	4,468	898	—	17,937	0.2	1.7	3.4	—	0.7
– less than 50%	4,858	1,716	465	—	7,039	0.2	1.3	1.1	—	0.5
– 51% to 75%	4,324	1,750	335	—	6,409	0.2	1.8	3.6	—	0.8
– 76% to 90%	1,736	635	81	—	2,452	0.2	2.5	13.9	—	1.2
– 91% to 100%	1,653	367	17	—	2,037	0.2	2.1	14.5	—	0.6
Partially collateralised (A): LTV > 100%	4,739	1,338	227	—	6,304	0.2	1.8	17.9	—	1.2
– collateral value on A	2,602	847	135	—	3,584
Total at 31 Dec 2023	67,891	15,903	3,187	—	86,981	0.2	2.2	14.2	—	1.1


HSBC UK Bank plc Annual Report and Accounts 2024	53

Other credit risk exposures

(Audited)

In addition to collateralised lending, other credit enhancements are

employed and methods used to mitigate credit risk arising from

financial assets. These are described in more detail below:

– Some securities issued by governments, banks and other financial

institutions benefit from additional credit enhancement provided

by government guarantees that cover the assets;

– Debt securities issued by banks and financial institutions include

asset-backed securities and similar instruments which are

supported by underlying pools of financial assets; and

– HSBC UK’s maximum exposure to credit risk includes financial

guarantees and similar contracts granted, as well as loan and

other credit-related commitments. Depending on the terms of the

arrangement, we may use additional credit mitigation if a

guarantee is called upon or a loan commitment is drawn and

subsequently defaults.

Personal lending

We provide a broad range of secured and unsecured personal lending

products to meet customer needs. Personal lending includes

advances to customers for asset purchases such as residential

property where the loans are secured by the assets being acquired.

We also offer unsecured lending products such as overdrafts, credit

cards and personal loans.

The following table shows the levels of personal lending products in the various portfolios.


Total personal lending for loans and advances to customers at amortised costs by stage distribution
	Gross carrying amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m
By portfolio
First lien residential mortgages	108,649	23,681	564	132,894	(15)	(42)	(48)	(105)
– of which: interest only (including offset)	16,009	1,759	44	17,812	(2)	(7)	(3)	(12)
Other personal lending	12,789	1,290	293	14,372	(102)	(203)	(121)	(426)
– other	7,215	645	188	8,048	(60)	(66)	(75)	(201)
– credit cards	5,574	645	105	6,324	(42)	(137)	(46)	(225)
At 31 Dec 2024	121,438	24,971	857	147,266	(117)	(245)	(169)	(531)


Total personal credit-related commitments and financial guarantees by stage distribution
	Nominal amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 31 Dec 2024	40,718	352	38	41,108	(5)	—	(2)	(7)


Total personal lending for loans and advances to customers at amortised costs by stage distribution
	Gross carrying amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m
By portfolio
First lien residential mortgages	103,352	25,346	594	129,292	(19)	(82)	(60)	(161)
– of which: interest only (including offset)	16,181	1,989	69	18,239	(3)	(20)	(9)	(32)
Other personal lending	11,413	2,249	361	14,023	(100)	(302)	(140)	(542)
– other	6,417	1,130	223	7,770	(57)	(135)	(86)	(278)
– credit cards	4,996	1,119	138	6,253	(43)	(167)	(54)	(264)
At 31 Dec 2023	114,765	27,595	955	143,315	(119)	(384)	(200)	(703)


Total personal credit-related commitments and financial guarantees by stage distribution
	Nominal amount				Allowance for ECL
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 31 Dec 2023	40,847	576	69	41,492	(8)	—	(2)	(10)


54	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Mortgage lending

We offer a wide range of mortgage products designed to meet

customer needs, including capital repayment, interest-only and offset

mortgages. Internal credit policies prescribe the range of acceptable

residential property LTV thresholds with the maximum upper limit for

new loans set between 50% and 95%, depending on the product

type and loan amount.

We have continued to see net growth in our Mortgage business of

£3.7bn in 2024. We have maintained strong presence in the market

through 2024 while, where appropriate, strengthening our

affordability controls and credit policy to reflect the more uncertain

economic outlook.

The quality of our mortgage book remained strong, with low levels of

impairment allowances. The average LTV ratio on new lending was

69%, compared with an estimated 53% for the overall mortgage

portfolio.

Exposure to interest-only mortgage loans

The following information is presented for the bank’s HSBC branded

interest-only mortgage loans. This excludes offset mortgages in first

direct and private banking mortgages. At the end of 2024, the

average LTV ratio of the interest-only mortgage loans was 44%, and

99% had a LTV ratio of 75% or less.

Of the interest-only mortgage loans that expired in 2022, 82% were

repaid within 12 months of expiry with a total of 97% being repaid

within 24 months of expiry. For those expired during 2023, 83% were

repaid within 12 months of expiry.

The exposure of interest-only mortgage loans at the end of 2024 is

£12bn and the maturity profile is as follows:


HSBC interest-only mortgage loans
	£m
Expired interest-only mortgage loans1	102
Interest-only mortgage loans by maturity
– 2025	131
– 2026	197
– 2027	291
– 2028	411
– 2029–2033	2,175
– post 2033	8,849
At 31 Dec 2024	12,156

1Includes interest-only mortgages which have reached their contractual maturity date, but were unsettled at the end of 2024.

Exposure to offset mortgage in first direct

The offset mortgage in first direct is no longer on sale and is only

available for existing offset mortgage customers. It works by

grouping together the customer’s mortgage, savings and current

accounts to offset their credit and debit balances against their

mortgage exposure which at the end of 2024 was £3.3bn with an

average LTV ratio of 28%.


HSBC UK Bank plc Annual Report and Accounts 2024	55


Personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
(Audited)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	155,612	(127)	28,171	(384)	1,024	(202)	184,807	(713)
Transfers of financial instruments	(2,718)	(205)	2,451	199	267	6	—	—
– transfers from stage 1 to stage 2	(23,178)	65	23,178	(65)	—	—	—	—
– transfers from stage 2 to stage 1	20,464	(246)	(20,464)	246	—	—	—	—
– transfers to stage 3	(234)	3	(475)	73	709	(76)	—	—
– transfers from stage 3	230	(27)	212	(55)	(442)	82	—	—
Net remeasurement of ECL arising from transfer of stage	—	153	—	(61)	—	(6)	—	86
Net new and further lending/repayments	9,262	(26)	(5,299)	111	(121)	46	3,842	131
Changes to risk parameters – credit quality	—	88	—	(60)	—	(272)	—	(244)
Changes to models used for ECL calculation	—	(5)	—	(50)	—	(18)	—	(73)
Assets written off	—	—	—	—	(275)	275	(275)	275
At 31 Dec 2024	162,156	(122)	25,323	(245)	895	(171)	188,374	(538)
ECL income statement change for the period		210		(60)		(250)		(100)
Recoveries								61
Others								—
Total ECL income statement change for the period								(39)


At 1 Jan 2023	148,694	(121)	31,406	(571)	927	(189)	181,027	(881)
Transfers of financial instruments	(891)	(177)	466	260	425	(83)	—	—
– transfers from stage 1 to stage 2	(28,861)	87	28,861	(87)	—	—	—	—
– transfers from stage 2 to stage 1	28,024	(261)	(28,024)	261	—	—	—	—
– transfers to stage 3	(99)	1	(457)	109	556	(110)	—	—
– transfers from stage 3	45	(4)	86	(23)	(131)	27	—	—
Net remeasurement of ECL arising from transfer of stage	—	188	—	(88)	—	(2)	—	98
Net new and further lending/repayments	7,809	(34)	(3,701)	102	(88)	10	4,020	78
Change to risk parameters – credit quality	—	19	—	(95)	—	(179)	—	(255)
Changes to models used for ECL calculation	—	(2)	—	8	—	1	—	7
Assets written off	—	—	—	—	(240)	240	(240)	240
At 31 Dec 2023	155,612	(127)	28,171	(384)	1,024	(202)	184,807	(713)
ECL income statement change for the period		171		(73)		(170)		(72)
Recoveries								59
Others								—
Total ECL income statement change for the period								(13)


56	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


First lien residential mortgages – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	113,303	(19)	25,510	(82)	605	(60)	139,418	(161)
Transfers of financial instruments	(3,073)	(44)	2,946	43	127	1	—	—
– transfers from stage 1 to stage 2	(21,016)	7	21,016	(7)	—	—	—	—
– transfers from stage 2 to stage 1	17,954	(47)	(17,954)	47	—	—	—	—
– transfers to stage 3	(61)	—	(170)	7	231	(7)	—	—
– transfers from stage 3	50	(4)	54	(4)	(104)	8	—	—
Net remeasurement of ECL arising from transfer of stage	—	16	—	(13)	—	—	—	3
Net new and further lending/repayments	7,761	(4)	(4,655)	7	(157)	7	2,949	10
Change to risk parameters – credit quality	—	34	—	(1)	—	1	—	34
Changes to models used for ECL calculation	—	—	—	4	—	—	—	4
Assets written off	—	—	—	—	(4)	4	(4)	4
At 31 Dec 2024	117,991	(17)	23,801	(42)	571	(47)	142,363	(106)
ECL income statement change for the period		46		(3)		8		51
Recoveries								—
Others								—
Total ECL income statement change for the period								51


First lien residential mortgages – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees (continued)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	109,157	(10)	28,285	(113)	561	(62)	138,003	(185)
Transfers of financial instruments	(435)	(44)	246	58	189	(14)	—	—
– transfers from stage 1 to stage 2	(25,875)	7	25,875	(7)	—	—	—	—
– transfers from stage 2 to stage 1	25,462	(50)	(25,462)	50	—	—	—	—
– transfers to stage 3	(42)	—	(203)	17	245	(17)	—	—
– transfers from stage 3	20	(1)	36	(2)	(56)	3	—	—
Net remeasurement of ECL arising from transfer of stage	—	19	—	(10)	—	—	—	9
Net new and further lending/repayments	4,581	(1)	(3,021)	12	(144)	3	1,416	14
Change to risk parameters – credit quality	—	19	—	(52)	—	12	—	(21)
Changes to models used for ECL calculation	—	(2)	—	23	—	—	—	21
Assets written off	—	—	—	—	(1)	1	(1)	1
At 31 Dec 2023	113,303	(19)	25,510	(82)	605	(60)	139,418	(161)
ECL income statement change for the period		35		(27)		15		23
Recoveries								—
Others								—
Total ECL income statement change for the period								23


HSBC UK Bank plc Annual Report and Accounts 2024	57


Credit cards – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	29,045	(49)	1,448	(166)	170	(55)	30,663	(270)
Transfers of financial instruments	265	(89)	(323)	94	58	(5)	—	—
– transfers from stage 1 to stage 2	(949)	31	949	(31)	—	—	—	—
– transfers from stage 2 to stage 1	1,211	(112)	(1,211)	112	—	—	—	—
– transfers to stage 3	(106)	1	(131)	31	237	(32)	—	—
– transfers from stage 3	109	(9)	70	(18)	(179)	27	—	—
Net remeasurement of ECL arising from transfer of stage	—	75	—	(36)	—	(5)	—	34
Net new and further lending/repayments	873	(12)	(317)	62	22	23	578	73
Change to risk parameters – credit quality	—	22	—	(41)	—	(129)	—	(148)
Changes to models used for ECL calculation	—	6	—	(49)	—	—	—	(43)
Assets written off	—	—	—	—	(125)	125	(125)	125
At 31 Dec 2024	30,183	(47)	808	(136)	125	(46)	31,116	(229)
ECL income statement change for the period		91		(64)		(111)		(84)
Recoveries								32
Others								—
Total ECL income statement change for the period								(52)


Credit cards – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees (continued)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	27,303	(53)	1,387	(271)	138	(54)	28,828	(378)
Transfers of financial instruments	(246)	(80)	121	110	125	(30)	—	—
– transfers from stage 1 to stage 2	(1,449)	33	1,449	(33)	—	—	—	—
– transfers from stage 2 to stage 1	1,231	(111)	(1,231)	111	—	—	—	—
– transfers to stage 3	(33)	—	(109)	39	142	(39)	—	—
– transfers from stage 3	5	(2)	12	(7)	(17)	9	—	—
Net remeasurement of ECL arising from transfer of stage	—	69	—	(53)	—	(2)	—	14
Net new and further lending/repayments	1,988	(13)	(60)	60	13	2	1,941	49
Change to risk parameters – credit quality	—	28	—	(12)	—	(78)	—	(62)
Changes to models used for ECL calculation	—	—	—	—	—	1	—	1
Assets written off	—	—	—	—	(106)	106	(106)	106
At 31 Dec 2023	29,045	(49)	1,448	(166)	170	(55)	30,663	(270)
ECL income statement change for the period		84		(5)		(77)		2
Recoveries								30
Others								(1)
Total ECL income statement change for the period								31


58	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Other personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	13,264	(59)	1,213	(136)	249	(87)	14,726	(282)
Transfers of financial instruments	90	(72)	(172)	62	82	10	—	—
– transfers from stage 1 to stage 2	(1,213)	27	1,213	(27)	—	—	—	—
– transfers from stage 2 to stage 1	1,299	(87)	(1,299)	87	—	—	—	—
– transfers to stage 3	(67)	2	(174)	35	241	(37)	—	—
– transfers from stage 3	71	(14)	88	(33)	(159)	47	—	—
Net remeasurement of ECL arising from transfer of stage	—	62	—	(12)	—	(1)	—	49
Net new and further lending/repayments	628	(10)	(327)	42	14	16	315	48
Change to risk parameters – credit quality	—	32	—	(18)	—	(144)	—	(130)
Changes to models used for ECL calculation	—	(11)	—	(5)	—	(18)	—	(34)
Assets written off	—	—	—	—	(146)	146	(146)	146
At 31 Dec 2024	13,982	(58)	714	(67)	199	(78)	14,895	(203)
ECL income statement change for the period		73		7		(147)		(67)
Recoveries								29
Others								—
Total ECL income statement change for the period								(38)


Other personal lending – reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to customers including loan commitments and financial guarantees (continued)
	Non-credit impaired				Credit impaired
	Stage 1		Stage 2		Stage 3		Total
	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL	Gross carrying/ nominal amount	Allow- ance for ECL
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2023	12,234	(58)	1,734	(187)	228	(73)	14,196	(318)
Transfers of financial instruments	(210)	(53)	99	92	111	(39)	—	—
– transfers from stage 1 to stage 2	(1,537)	47	1,537	(47)	—	—	—	—
– transfers from stage 2 to stage 1	1,331	(100)	(1,331)	100	—	—	—	—
– transfers to stage 3	(24)	1	(145)	53	169	(54)	—	—
– transfers from stage 3	20	(1)	38	(14)	(58)	15	—	—
Net remeasurement of ECL arising from transfer of stage	—	100	—	(25)	—	—	—	75
Net new and further lending/repayments	1,240	(20)	(620)	30	43	5	663	15
Change to risk parameters – credit quality	—	(28)	—	(31)	—	(113)	—	(172)
Changes to models used for ECL calculation	—	—	—	(15)	—	—	—	(15)
Assets written off	—	—	—	—	(133)	133	(133)	133
At 31 Dec 2023	13,264	(59)	1,213	(136)	249	(87)	14,726	(282)
ECL income statement change for the period		52		(41)		(108)		(97)
Recoveries								29
Others								1
Total ECL income statement change for the period								(67)


HSBC UK Bank plc Annual Report and Accounts 2024	59


Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost
		Gross carrying amount				Allowance for ECL
	PD range1	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	ECL coverage
	%	£m	£m	£m	£m	£m	£m	£m	£m	%
First lien residential mortgages2		108,649	23,681	564	132,894	(15)	(42)	(48)	(105)	0.1
– Band 1	0.000 to 0.250	65,282	1,174	—	66,456	(6)	(2)	—	(8)	—
– Band 2	0.251 to 0.500	36,307	9,189	—	45,496	(6)	(8)	—	(14)	—
– Band 3	0.501 to 1.500	6,379	10,720	—	17,099	(2)	(17)	—	(19)	0.1
– Band 4	1.501 to 5.000	518	1,985	—	2,503	—	(8)	—	(8)	0.3
– Band 5	5.001 to 20.000	75	421	—	496	—	(3)	—	(3)	0.6
– Band 6	20.001 to 99.999	88	192	—	280	(1)	(4)	—	(5)	1.8
– Band 7	100.00	—	—	564	564	—	—	(48)	(48)	8.5
Credit cards		5,574	645	105	6,324	(42)	(137)	(46)	(225)	3.6
– Band 1	0.000 to 0.250	2,395	—	—	2,395	(3)	—	—	(3)	0.1
– Band 2	0.251 to 0.500	777	—	—	777	(3)	—	—	(3)	0.4
– Band 3	0.501 to 1.500	1,156	—	—	1,156	(10)	—	—	(10)	0.9
– Band 4	1.501 to 5.000	1,246	—	—	1,246	(26)	—	—	(26)	2.1
– Band 5	5.001 to 20.000	—	600	—	600	—	(118)	—	(118)	19.7
– Band 6	20.001 to 99.999	—	45	—	45	—	(19)	—	(19)	42.2
– Band 7	100.00	—	—	105	105	—	—	(46)	(46)	43.8
Other personal lending (excluding credit cards)		7,215	645	188	8,048	(60)	(66)	(75)	(201)	2.5
– Band 1	0.000 to 0.250	1,184	1	—	1,185	(1)	—	—	(1)	0.1
– Band 2	0.251 to 0.500	870	—	—	870	(1)	—	—	(1)	0.1
– Band 3	0.501 to 1.500	2,555	11	—	2,566	(14)	—	—	(14)	0.5
– Band 4	1.501 to 5.000	2,228	190	—	2,418	(29)	(7)	—	(36)	1.5
– Band 5	5.001 to 20.000	373	317	—	690	(14)	(30)	—	(44)	6.4
– Band 6	20.001 to 99.999	5	126	—	131	(1)	(29)	—	(30)	22.9
– Band 7	100.00	—	—	188	188	—	—	(75)	(75)	39.9
At 31 Dec 2024		121,438	24,971	857	147,266	(117)	(245)	(169)	(531)	0.4


Personal lending – credit risk profile by internal PD band for loans and advances to customers at amortised cost (continued)
		Gross carrying amount				Allowance for ECL
	PD range1	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	ECL coverage
	%	£m	£m	£m	£m	£m	£m	£m	£m	%
First lien residential mortgages2		103,352	25,346	594	129,292	(19)	(82)	(60)	(161)	0.1
– Band 1	0.000 to 0.250	67,862	1,923	—	69,785	(9)	(6)	—	(15)	—
– Band 2	0.251 to 0.500	31,004	9,400	—	40,404	(7)	(13)	—	(20)	—
– Band 3	0.501 to 1.500	4,051	11,546	—	15,597	(2)	(35)	—	(37)	0.2
– Band 4	1.501 to 5.000	310	1,920	—	2,230	—	(17)	—	(17)	0.8
– Band 5	5.001 to 20.000	70	390	—	460	—	(5)	—	(5)	1.1
– Band 6	20.001 to 99.999	55	167	—	222	(1)	(6)	—	(7)	3.2
– Band 7	100.00	—	—	594	594	—	—	(60)	(60)	10.1
Credit cards		4,996	1,119	138	6,253	(43)	(167)	(54)	(264)	4.2
– Band 1	0.000 to 0.250	2,198	—	—	2,198	(3)	—	—	(3)	0.1
– Band 2	0.251 to 0.500	604	—	—	604	(3)	—	—	(3)	0.5
– Band 3	0.501 to 1.500	1,312	12	—	1,324	(16)	—	—	(16)	1.2
– Band 4	1.501 to 5.000	882	536	—	1,418	(21)	(35)	—	(56)	3.9
– Band 5	5.001 to 20.000	—	533	—	533	—	(112)	—	(112)	21.0
– Band 6	20.001 to 99.999	—	38	—	38	—	(20)	—	(20)	52.6
– Band 7	100.00	—	—	138	138	—	—	(54)	(54)	39.1
Other personal lending (excluding credit cards)		6,417	1,130	223	7,770	(57)	(135)	(86)	(278)	3.6
– Band 1	0.000 to 0.250	1,308	—	—	1,308	(4)	—	—	(4)	0.3
– Band 2	0.251 to 0.500	863	—	—	863	(2)	—	—	(2)	0.2
– Band 3	0.501 to 1.500	2,729	17	—	2,746	(22)	—	—	(22)	0.8
– Band 4	1.501 to 5.000	1,431	429	—	1,860	(26)	(19)	—	(45)	2.4
– Band 5	5.001 to 20.000	81	608	—	689	(3)	(79)	—	(82)	11.9
– Band 6	20.001 to 99.999	5	76	—	81	—	(37)	—	(37)	45.7
– Band 7	100.00	—	—	223	223	—	—	(86)	(86)	38.6
At 31 Dec 2023		114,765	27,595	955	143,315	(119)	(384)	(200)	(703)	0.5

112-month point in time adjusted for multiple economic scenarios.

2PD bands do not consider the impact of any management judgemental adjustments on stage or allowances for ECL including the impact of new models not yet

formally implemented. For a list of management judgemental adjustments see pages 37 to 38.


60	HSBC UK Bank plc Annual Report and Accounts 2024

Risk


Personal lending – credit risk profile by internal PD band for loan and other credit-related commitments and financial guarantees
		Nominal amount				Allowance for ECL
	PD range1	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	ECL coverage
	%	£m	£m	£m	£m	£m	£m	£m	£m	%
Loan and other credit- related commitments		40,412	345	38	40,795	(5)	—	(2)	(7)	—
– Band 1	0.000 to 0.250	33,780	44	—	33,824	(4)	—	—	(4)	—
– Band 2	0.251 to 0.500	2,109	1	—	2,110	(1)	—	—	(1)	—
– Band 3	0.501 to 1.500	2,210	4	—	2,214	—	—	—	—	—
– Band 4	1.501 to 5.000	2,051	51	—	2,102	—	—	—	—	—
– Band 5	5.001 to 20.000	216	207	—	423	—	—	—	—	—
– Band 6	20.001 to 99.999	46	38	—	84	—	—	—	—	—
– Band 7	100.000	—	—	38	38	—	—	(2)	(2)	5.3
Financial guarantees		306	7	—	313	—	—	—	—	—
– Band 1	0.000 to 0.250	—	—	—	—	—	—	—	—	—
– Band 2	0.251 to 0.500	290	—	—	290	—	—	—	—	—
– Band 3	0.501 to 1.500	14	—	—	14	—	—	—	—	—
– Band 4	1.501 to 5.000	—	—	—	—	—	—	—	—	—
– Band 5	5.001 to 20.000	2	7	—	9	—	—	—	—	—
– Band 6	20.001 to 99.999	—	—	—	—	—	—	—	—	—
– Band 7	100.000	—	—	—	—	—	—	—	—	—
At 31 Dec 2024		40,718	352	38	41,108	(5)	—	(2)	(7)	—


Personal lending – credit risk profile by internal PD band for loan and other credit-related commitments and financial guarantees (continued)
		Nominal amount				Allowance for ECL
	PD range1	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total	ECL coverage
	%	£m	£m	£m	£m	£m	£m	£m	£m	%
Loan and other credit- related commitments		40,543	568	69	41,180	(8)	—	(2)	(10)	—
– Band 1	0.000 to 0.250	33,636	48	—	33,684	(8)	—	—	(8)	—
– Band 2	0.251 to 0.500	2,209	1	—	2,210	—	—	—	—	—
– Band 3	0.501 to 1.500	2,628	24	—	2,652	—	—	—	—	—
– Band 4	1.501 to 5.000	1,902	251	—	2,153	—	—	—	—	—
– Band 5	5.001 to 20.000	130	208	—	338	—	—	—	—	—
– Band 6	20.001 to 99.999	38	36	—	74	—	—	—	—	—
– Band 7	100.000	—	—	69	69	—	—	(2)	(2)	2.9
Financial guarantees		304	8	—	312	—	—	—	—	—
– Band 1	0.000 to 0.250	—	—	—	—	—	—	—	—	—
– Band 2	0.251 to 0.500	289	—	—	289	—	—	—	—	—
– Band 3	0.501 to 1.500	14	—	—	14	—	—	—	—	—
– Band 4	1.501 to 5.000	—	—	—	—	—	—	—	—	—
– Band 5	5.001 to 20.000	1	8	—	9	—	—	—	—	—
– Band 6	20.001 to 99.999	—	—	—	—	—	—	—	—	—
– Band 7	100.000	—	—	—	—	—	—	—	—	—
At 31 Dec 2023		40,847	576	69	41,492	(8)	—	(2)	(10)	—

112-month point in time adjusted for multiple economic scenarios.


HSBC UK Bank plc Annual Report and Accounts 2024	61

Collateral on loans and advances

(Audited)

The following table provides a quantification of the value of fixed

charges HSBC UK holds over specific assets where it has a history of

enforcing, and is able to enforce, collateral in satisfying a debt in the

event of the borrower failing to meet its contractual obligations, and

where the collateral is cash or can be realised by sale in an

established market. The collateral valuation excludes any adjustments

for obtaining and selling the collateral and, in particular, loans shown

as not collateralised or partially collateralised may also benefit from

other forms of credit mitigants.


Personal lending: residential mortgage loans including loan commitments by level of collateral
(Audited)
	Gross carrying/nominal amount				ECL coverage
	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
	£m	£m	£m	£m	%	%	%	%
Fully collateralised by LTV ratio	117,879	23,789	567	142,235	—	0.2	8.3	0.1
– less than 50%	48,999	12,995	340	62,334	—	0.1	7.1	0.1
– 51% to 70%	39,117	8,126	151	47,394	—	0.2	9.3	0.1
– 71% to 80%	15,943	1,888	50	17,881	—	0.4	12.0	0.1
– 81% to 90%	12,554	730	18	13,302	—	0.5	11.1	0.1
– 91% to 100%	1,266	50	8	1,324	—	—	12.5	0.2
Partially collateralised (A): LTV > 100%	112	12	4	128	—	—	25.0	0.8
– collateral value on A	87	9	3	99
Total at 31 Dec 2024	117,991	23,801	571	142,363	—	0.2	8.4	0.1

Fully collateralised by LTV ratio	113,064	25,495	585	139,144	—	0.3	9.6	0.1
– less than 50%	46,502	13,470	350	60,322	—	0.2	8.0	0.1
– 51% to 70%	38,356	8,489	161	47,006	—	0.4	9.3	0.1
– 71% to 80%	15,734	2,472	48	18,254	—	0.6	12.5	0.1
– 81% to 90%	10,050	862	14	10,926	—	0.8	14.3	0.1
– 91% to 100%	2,422	202	12	2,636	—	1.0	41.7	0.3
Partially collateralised (A): LTV > 100%	239	15	20	274	—	—	15.0	1.5
– collateral value on A	188	11	17	216	—
Total at 31 Dec 2023	113,303	25,510	605	139,418	—	0.3	10.1	0.1


62	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Treasury risk

Overview

Treasury risk is the risk of having insufficient capital, liquidity or

funding resources to meet financial obligations and satisfy regulatory

requirements, including the risk of adverse impact on earnings or

capital due to structural and transactional foreign exchange

exposures, as well as changes in market interest rates, together with

pension risk and insurance risk.

Treasury risk arises from changes to the respective resources and

risk profiles driven by customer behaviour, management decisions or

the external environment.

Approach and Policy

(Audited)

Our objective in the management of treasury risk is to maintain

appropriate levels of capital, liquidity, funding, foreign exchange and

market risk to support our business strategy, and meet our regulatory

and stress testing-related requirements.

Our approach to treasury management is driven by our strategic and

organisational requirements, and considers the regulatory, economic

and commercial environment. We aim to maintain a strong capital

and liquidity base to support the risks inherent in our business and

invest in accordance with our strategy, meeting regulatory

requirements at all times.

Our policy is underpinned by our risk management framework. The

risk management framework incorporates a number of measures

aligned to our assessment of risks for both internal and regulatory

purposes. These risks include credit, market, operational, pensions,

structural and transactional foreign exchange risk, and interest rate

risk in the banking book.

For further details, refer to our Pillar 3 Disclosures at 31 December 2024.

Treasury Risk Management

Key developments in 2024

– Completion of the latest Actuarial Valuation of HSBC UK's pension

plan concluded in April 2024 and illustrated a strong funding

position on all valuation measures. Following this, we have

supported refinements to the investment strategy of the defined

benefit plan to seek to protect this position.

– The bank continues its delivery efforts against regulatory

commitments, including enhancements to regulatory reporting

and the implementation of prudential policy changes. We continue

to assess the impact of Basel 3.1 following the PRA

announcement to delay the implementation until 1 January 2027.

– We have made significant progress in improving our recovery and

resolution capabilities in line with the Group’s preferred resolution

strategy and regulatory expectations, including the BoE

Resolvability Assessment Framework (‘RAF’).

– We further stabilised our banking net interest income through

increasing both the size and duration of our structural hedge.

For quantitative disclosures on capital ratios, own funds and RWAs, see

pages 66 to 67. For quantitative disclosures on liquidity and funding metrics,

see page 67.

Governance and structure

The CRO is the accountable risk steward, and the Chief Financial

Officer is the risk owner, for all treasury risks.

Capital risk, liquidity risk, interest rate risk in the banking book,

structural foreign exchange risk and transactional foreign exchange

risk are the responsibility of the Executive Committee and the Risk

Committee. Treasury actively manages these risks on an ongoing

basis, supported by the HSBC UK Asset and Liability Management

Committee (‘ALCO’), overseen by Treasury Risk Management.

Pension risk is overseen by a Pensions RMM chaired by the

accountable risk steward.

Capital, liquidity and funding risk

management

Assessment and risk appetite

Our capital management approach is underpinned by a Global Capital

Risk Policy and supporting frameworks for Resolution Planning and

Stress Testing. The policy sets out our approach to determining key

capital risk appetites including CET1, total capital, minimum

requirements for own funds and eligible liabilities (‘MREL’), and the

leverage ratio. Our internal capital adequacy assessment process

(‘ICAAP’) is an assessment of the group’s capital position, outlining

both regulatory and internal capital resources and requirements

resulting from our business model, strategy, risk profile and

management, performance and planning, risks to capital, and the

implications of stress testing. Our assessment of capital adequacy is

driven by an assessment of risks. These risks include credit, market,

operational, pensions, insurance, structural foreign exchange, interest

rate risk in the banking book and group risk. Climate risk is also

considered as part of the ICAAP, and we are continuing to develop

our approach. The ICAAP supports the determination of the

consolidated capital risk appetite and target ratios, as well as enables

the assessment and determination of capital requirements by

regulators.

HSBC Holdings provides our MREL, including equity and non-equity

capital. These investments are funded by HSBC Holdings’ own equity

capital and MREL-eligible debt. MREL includes own funds and

liabilities that can be written down or converted into capital resources

in order to absorb losses or recapitalise a bank in the event of its

failure. In line with our existing structure and business model, HSBC

has three resolution groups – the European resolution group (of

which HSBC UK forms part), the Asian resolution group and the US

resolution group.

We aim to ensure that management has oversight of our liquidity and

funding risks at Group and entity level through governance

engagements, in line with our risk management framework. We

manage liquidity and funding risk in accordance with globally

consistent policies, procedures and reporting standards.

We are required to meet internal minimum requirements and any

applicable regulatory requirements at all times. These requirements

are assessed through our internal liquidity adequacy assessment

process (‘ILAAP’), which helps to ensure that we have strategies,

policies, processes and systems for the identification, measurement,

management and monitoring of liquidity risk over an appropriate set

of time horizons, including intra-day. The ILAAP informs the setting of

risk appetite. It also assesses our capability to manage liquidity and

funding effectively. These metrics are set and managed locally but

are subject to global review and challenge to help ensure consistency

of approach and application of the Group’s policies and controls.

Planning and performance

Capital and Risk-weighted asset ('RWA') plans form part of the annual

financial resource plan that is approved by the Board. Capital and

RWA forecasts are submitted to the ALCO on a monthly basis, and

capital and RWAs are monitored and managed against the plan. The

responsibility for global capital allocation principles rests with the

Group Chief Financial Officer, supported by the Group Capital

Management Meeting. This is a specialist forum addressing capital

management, reporting into Holdings ALCO.

Through our internal governance processes, we seek to strengthen

discipline over our investment and capital allocation decisions, and to

ensure that returns on investment meet management’s objectives.

The Group allocates financial resources to businesses and entities to

support the execution of our strategy and to meet their regulatory

and economic capital needs. We evaluate and manage business

returns by using a ROTE measure and a related economic profit

measure.


HSBC UK Bank plc Annual Report and Accounts 2024	63

Funding and liquidity plans also form part of the financial resource

plan. The Board-level appetite measures are the LCR and net stable

funding ratio (‘NSFR’), together with an internal liquidity metric. In

addition, we use a wider set of measures to manage an appropriate

funding and liquidity profile, including legal entity depositor

concentration limits, intra-day liquidity, forward-looking funding

assessments and other key measures.

Risks to capital and liquidity

Outside the stress testing framework, other risks may be identified

that have the potential to affect our RWAs, capital and/or liquidity

position. Downside and Upside scenarios are assessed against our

management objectives, and mitigating actions are assigned as

necessary. We closely monitor future regulatory developments and

continue to evaluate the impact of these upon our capital and liquidity

requirements, particularly those related to the UK’s implementation

of the outstanding measures to be implemented from the Basel III

reforms (‘Basel 3.1‘).

Regulatory developments

The PRA published the second part of its near-final rules on the UK’s

implementation of Basel 3.1 on 12 September 2024. On 17 January

2025, the PRA revised the implementation date to 1 January 2027 to

allow greater clarity regarding implementation in the United States.

The RWA output floor is now subject to a three-year transitional

provision, helping ensure that the date for full implementation

remains 1 January 2030. We continue to assess the impact of Basel

3.1 standards on our capital, including the recent release of more

beneficial PRA near-final rules, developments in the US and

associated implementation challenges (including data provision).

Further details can be found in the ‘Regulatory developments’ section of

the HSBC UK’s Pillar 3 Disclosures at 31 December 2024.

Regulatory reporting processes and controls

We are advancing on our multi-year comprehensive initiative aimed at

strengthening our global reporting processes and making them more

sustainable. This multifaceted programme includes enhancing data,

consistency and controls. This remains a top priority for both HSBC

management and regulatory authorities.

While this programme continues, there may be further impacts on

some of our regulatory ratios, such as the CET1, LCR and NSFR, as

we implement recommended changes and continue to enhance our

controls across the process.

Stress testing and recovery planning

We use stress testing to inform management of the capital and

liquidity needed to withstand internal and external shocks, including a

global economic downturn or a systems failure. Stress testing results

are also used to inform risk mitigation actions, input into global

business performance through tangible equity allocation, and

recovery and resolution planning, as well as to re-evaluate business

plans where analysis shows capital, liquidity and/or returns do not

meet their target.

In addition to a range of internal stress tests, we are subject to

supervisory stress testing by the PRA and the Bank of England. The

results of regulatory stress testing and our internal stress tests are

used when assessing our internal capital and liquidity requirements

through the ICAAP and ILAAP. The outcomes of stress testing

exercises carried out by the PRA and the Bank of England may inform

the setting of regulatory minimum ratios and buffers.

We maintain a recovery plan which sets out potential options

management could take in a range of stress scenarios that could

result in a breach of capital or liquidity buffers. It sets out the

framework and governance arrangements to support restoring HSBC

UK to a stable and viable position, and so lowering the probability of

failure from either idiosyncratic company-specific stress or systemic

market-wide issues. Our recovery plan also provides detailed actions

that management would consider taking in a stress scenario should

our position deteriorate and threaten to breach risk appetite and

regulatory minimum levels. This is to help ensure that we can

stabilise our financial position and recover from financial losses in a

stress environment.

The HSBC Group, including HSBC UK Bank plc, also has capabilities,

resources and arrangements in place to address the unlikely event

that HSBC might not be recoverable and would therefore need to be

resolved by regulators. In August 2024, the Group and the BoE

publicly disclosed the status of HSBC’s progress against the BoE’s

RAF. The BoE acknowledged the significant progress made by HSBC

in enhancing its resolvability capabilities.

Overall, HSBC’s recovery and resolution planning helps safeguard the

Group’s financial and operational stability. HSBC has a programme of

continuous improvement to maintain and enhance its recovery and

resolution capabilities, designed to meet the BoE’s expectations and

RAF requirements.

Measurement of interest rate risk in the

banking book processes

Assessment and risk appetite

Interest rate risk in the banking book ('IRRBB') is the risk of an

adverse impact to earnings or capital due to changes in market

interest rates or changes in expected interest rate repricing of client

products that impact banking book positions. It is generated by our

non-traded assets and liabilities, specifically loans, deposits and

financial instruments that are not held for trading intent or in order to

hedge positions held with trading intent.

Our Global IRRBB Risk Management Framework is designed with an

aim to ensure that all material sources of IRRBB are identified,

measured, managed, and monitored with policies and frameworks in

place.

Our Interest rate risk in the banking book is measured and managed

using a combination of economic value and earnings-based measures

to help ensure that the balance between stabilising earnings and

generating value sensitivity is managed appropriately. These metrics

measure IRRBB risks across the banking book, to support the overall

monitoring against risk appetite, including:

– Banking Net Interest Income ('BNII') Sensitivity;

– Economic Value of Equity ('EVE') Sensitivity.

Banking net interest income sensitivity

BNII sensitivity captures the risk to earnings generated from the

Banking Book from changes in market implied interest rates over a

12-month period using a static rolling balance sheet assumption.

The static rolling balance sheet assumption is in place to help ensure

that IRRBB management actions are focused on risks which can be

managed within Treasury. A notable exception to this is related to the

price sensitivity of certain interest bearing non-maturity deposits,

where we apply dynamic assumptions to help ensuring we capture

any potential margin widening or compression over the

corresponding shock horizon and rate scenario.

As at 31 December 2024, the 12 month BNII sensitivity for the bank

to an immediate 100bps parallel shock to interest rates is £207m for

an upwards shock (31 December 2023: £438m), and £(298)m for a

downwards shock (31 December 2023: £(524)m). This assessment is

based on a static balance sheet with no management actions from

Treasury, a 50% pass-on assumption on certain interest bearing

deposits and excludes pensions.

Economic value of equity sensitivity

EVE measures the present value of our banking book assets and

liabilities excluding equity, based on a run-off balance sheet. EVE

sensitivity measures the impact to EVE from a movement in interest

rates, including the assumed term profile of non-maturing deposits

having adjusted for stability and price sensitivity. It is measured and

reported as part of our internal risk metrics, regulatory rules (including

the Supervisory Outlier Test) and external Pillar 3 disclosures.

Further details of HSBC UK's risk management of interest rate risk in the

banking book can be found in the HSBC UK's Pillar 3 Disclosures as at

December 2024.


64	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Non-trading portfolios

Non-trading portfolios comprise positions that primarily arise from the

interest rate management of our retail and commercial banking

assets and liabilities, financial investments measured at fair value

through other comprehensive income (‘FVOCI’) or at amortised cost,

debt instruments measured at amortised cost, and certain exposures

arising from our insurance operations.

The following table summarises the main risk types where non-

trading market risks reside, and the market risk measures used to

monitor and limit exposures.


	Non-Trading risk
Risk types	– Interest rates – Credit spreads
Risk measure	Value at risk \| Sensitivity \| Stress testing

Value at Risk of the non-trading portfolios

(Audited)

Value at risk (‘VaR’) of non-trading portfolios is a technique for

estimating potential losses on risk positions as a result of movements

in market rates and prices over a specified time horizon and to a

given level of confidence. The use of VaR is integrated into the

market risk management of non-trading portfolios to have a complete

picture of risk, complementing risk sensitivity analysis.

Our models are predominantly based on historical simulation that

incorporates the following features:

– historical market rates and prices, which are calculated with

reference to interest rates, credit spreads and the associated

volatilities;

– potential market movements that are calculated with reference to

data from the past two years; and

– calculations to a 99% confidence level and using a 10-day holding

period.

Although a valuable guide to risk, VaR is used for non-trading

portfolios with awareness of its limitations. For example:

– The use of historical data as a proxy for estimating future market

moves may not encompass all potential market events,

particularly those that are extreme in nature. As the model is

calibrated on the last 500 business days, it does not adjust

instantaneously to a change in market regime.

– The use of a 10-day holding period for risk management purposes

of non-trading books is only an indication of exposure and not

indicative of the time period required to hedge or liquidate

positions.

– The use of a 99% confidence level by definition does not take into

account losses that might occur beyond this level of confidence.

Non-trading VaR includes non-trading financial instruments held in

portfolios managed by Treasury.

The non-trading VaR as at 31 December 2024 was £118.6m,

predominately driven by interest rate risk in the banking book arising

from Markets Treasury and ALCM book positions. The non-trading

VaR increased during the year, fluctuating between £87.7m and

£170.6m with a 2024 average of £124.8m. Markets remained volatile

driven by continued geopolitical events and the shifting of the path of

central bank interest rate expectations driven by changes to

economic growth and inflation outlooks.

The persistent inflation resulted in a higher rate environment by 2Q24

than previously perceived and the Markets Treasury business took

advantage of higher yield environment increasing the outright bond

holdings on expectations of a turn in the interest rate cycle which

began in 3Q24. The Markets Treasury business continued to actively

manage their risk throughout the remainder of 2024 with VaR initially

reducing in 3Q24 as volatile scenarios from 2022 dropped from the

time series before increasing steadily as risk was added in 4Q24.

From 1Q24, we adopted a methodology change to measure non-trading

VaR over a 10 day holding period as opposed to 1 day in order to better

reflect longer average time horizons in the management of non-trading

portfolios compared with trading portfolios. Comparative data at 31

December 2023 has been restated on a 10 day basis accordingly, using a

scalar approach that results in restated numbers being approximately three

times higher than previously reported 1 day basis numbers.

The daily levels of total non-trading VaR over the last year are set out in the graph below.

Daily VaR (non-trading portfolios), 99% 10 day (£m)

Dec-23

Jan-24

Feb-24

Mar-24

April-24

May-24

Jun-24

Jul-24

Aug-24

Sep-24

Oct-24

Nov-24

Dec-24


HSBC UK Bank plc Annual Report and Accounts 2024	65

The HSBC UK's non-trading VaR for the year is shown in the table below.


Non-trading VaR, 99% 10 day
(Audited)
	Credit spread	Interest Rates	Portfolio Diversification1	Total2
	£m	£m	£m	£m
Balance at 31 Dec 2024	7.2	114.4	(3.1)	118.6
Average	6.4	122.3	(3.9)	124.8
Maximum	7.9	168.4		170.6
Minimum	5.2	86.3		87.7


Balance at 31 Dec 2023	7.1	207.7	(2.2)	212.7
Average	5.9	178.8	(2.6)	182.0
Maximum	8.6	228.2		234.8
Minimum	4.1	132.7		133.4

1Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic

market risk that occurs when combining a number of different risk types, for example, interest rate and credit risk together in one portfolio. It is measured as the

difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of portfolio diversification.

As the maximum occurs on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for this measure.

2The total VaR is non-additive across risk types due to diversification effects.

Other risks

Non-trading book foreign exchange

exposures

Structural foreign exchange exposures

Structural foreign exchange exposures arise from capital invested or

net assets in a foreign operation. A foreign operation is defined as a

subsidiary, associate, joint arrangement or branch where the activities

are conducted in a currency other than that of the reporting entity. An

entity’s functional reporting currency is normally that of the primary

economic environment in which the entity operates.

HSBC UK has no such foreign operations.

Transactional foreign exchange exposures

Transactional foreign exchange risk arises primarily from day-to-day

transactions in the banking book generating profit and loss or fair

value through other comprehensive income (‘FVOCI’) reserves in a

currency other than the reporting currency of the operating entity.

Transactional foreign exchange exposure generated through profit

and loss is periodically transferred to Markets and Securities Services

and managed within limits, with the exception of limited residual

foreign exchange exposure arising from timing differences or for

other reasons. Transactional foreign exchange exposure generated

through other comprehensive income ('OCI') reserves is managed by

Markets Treasury within approved appetite.

Pension risk management process

In the UK, all future pension benefits are provided on a defined

contribution basis. A defined benefit pension plan remains in respect

of past service. The defined benefit pension plan is sectionalised

seeking to ensure no entities outside the ring-fence participate in the

same section as HSBC UK. In the defined contribution pension plan,

the contributions that HSBC UK is required to make are known, while

the ultimate pension benefit will vary, typically with investment

returns achieved by investment choices made by the employee.

While the market risk to HSBC UK of the defined contribution plan is

low, the bank is still exposed to operational and reputational risk.

In the defined benefit pension plan, the level of pension benefit is

known. Therefore, the level of contributions required by HSBC UK

will vary due to a number of risks, including:

– investments delivering a return below that required to provide the

projected plan benefits;

– the prevailing economic environment leading to corporate failures,

thus triggering write-downs in asset values (both equity and debt);

– a change in either interest rates or inflation, causing an increase in

the value of the plan liabilities; and

– plan members living longer than expected (known as longevity

risk).

Pension risk is assessed using an economic capital model that takes

into account potential variations in these factors. The impact of these

variations on both pension assets and pension liabilities is assessed

using a one-in-200-year stress test. Scenario analysis and other stress

tests are also used to support pension risk management.

To fund the benefits associated with HSBC UK’s defined benefit plan,

HSBC UK makes contributions in accordance with advice from

actuaries and in consultation with the plan’s trustees where relevant.

Contributions are required when the plan's assets are considered

insufficient to cover the existing pension liabilities. Contributions are

typically reviewed once every three years.

The defined benefit plan invests contributions in a range of

investments designed to limit the risk of assets failing to meet the

plan’s liabilities. Any changes in expected returns from the

investments may also change future contribution requirements. In

pursuit of these long-term objectives, an overall target allocation is

established for asset classes of the defined benefit plan. Bonds and

derivatives are allocated to match expected benefit outflows so as to

reduce interest, inflation and currency risk. Each permitted asset

class has its own benchmarks, such as property valuation indices or

liability characteristics. The benchmarks are reviewed on a manager

by manager basis at least once every three to five years and more

frequently if required by circumstances. The process takes account of

changes in the plan's liabilities. The most significant benchmark is the

interest rate and inflation hedging programme and this was last

reviewed during 2024. The assets are invested in a diverse range of

asset classes to reduce any concentration of risk.

In addition, the defined benefit plan holds longevity swap contracts.

These arrangements provide long term protection to the defined

benefit plan against costs resulting from pensioners or their

dependants living longer than initially expected and as at

31 December 2024 cover approximately 50% of the pensioner

liabilities.


66	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Capital Risk in 2024

Capital overview


Capital adequacy metrics1
	At 31 Dec
	2024	2023
Available capital (£m)
Common equity tier 1 capital	15,059	14,224
Tier 1 capital	17,307	16,479
Total regulatory capital	20,500	19,772
Risk-weighted assets (£m)
Credit risk	94,418	87,503
Counterparty credit risk	243	236
Market risk	173	132
Operational risk	15,589	13,607
Total risk-weighted assets	110,423	101,478
Capital ratios (%)
Common equity tier 1	13.6	14.0
Total tier 1	15.7	16.2
Total capital	18.6	19.5
Leverage ratio
Total leverage ratio exposure measure (£m)	297,157	270,907
Leverage ratio (%)	5.8	6.1

1Unless otherwise stated, regulatory capital ratios and requirements are

based on the transitional arrangements of the Capital Requirements

Regulation (CRR II) as implemented in the UK. Leverage ratios are reported

in accordance with the UK leverage rules.

References to EU regulations and directives (including technical

standards) should, as applicable, be read as references to the UK’s

version of such regulation or directive, as onshored into UK law under

the EU (Withdrawal) Act 2018, and as may be subsequently amended

under UK law.

Regulatory transitional arrangements for IFRS

9 'Financial Instruments'

We have adopted the regulatory transitional arrangements in CRR II

for IFRS 9, including paragraph four of article 473a. Our capital and

ratios are presented under these arrangements throughout the table

above, including in the end point figures. Without their application,

our CET1 ratio would be 13.6%.The IFRS 9 regulatory transitional

arrangements allow banks to add back to their capital base a

proportion of the impact that IFRS 9 has upon their loan loss

allowances during the first five years of use. The impact is defined as:

– the increase in loan loss allowances on day one of IFRS 9

adoption; and

– any subsequent increase in ECL in the non-credit-impaired book

thereafter.

Any add-back must be tax affected and accompanied by a

recalculation of capital deduction thresholds, exposure and RWAs.

The impact is calculated separately for portfolios using the

Standardised Approach ('STD') and IRB approaches. For IRB

portfolios, there is no add-back to capital unless loan loss allowances

exceed regulatory 12-month expected losses.

In the current period, the add-back to the capital base amounted to

£11m under the STD approach. At 31 December 2023, the add-back

to the capital base was £30m under the STD approach.

Own funds

At 31 December 2024, our CET1 capital ratio decreased to 13.6%

from 14.0% at 31 December 2023.

The key drivers for the decrease in the CET1 capital ratio were:

– a decrease of 1.2% driven by higher RWAs of £8.9bn mainly from

growth in lending, increase in operational risk RWAs due to higher

average revenue and changes in underlying portfolio mix.

– an increase of 0.8% from £1.4bn of capital generation through

profit net of dividends. This was partly offset by £0.6bn increase in

capital deductions mainly from excess regulatory expected loss.

Our Pillar 2A requirement at 31 December 2024, as per the PRA’s

Individual Capital Requirement based on a point-in-time assessment,

was 3.80% of RWAs, of which 2.1% was required to be met by

CET1. Throughout 2024, we complied with the PRA’s regulatory

capital adequacy requirements.


Own funds disclosure
(Audited)		At
		31 Dec 2024	31 Dec 2023
Ref*		£m	£m
	CET1 capital: instruments and reserves
1	Capital instruments and the related share premium accounts1	—	9,015
	– ordinary shares1	—	9,015
2	Retained earnings1,2	20,154	4,198
3	Accumulated other comprehensive income (and other reserves)1,2	1,580	7,227
5a	Independently reviewed net profits net of any foreseeable charge or dividend	1,387	1,963
6	CET1 capital before regulatory adjustments	23,121	22,403
28	Total regulatory adjustments to common equity tier 1	(8,062)	(8,179)
29	CET1 capital	15,059	14,224
36	Additional tier 1 capital before regulatory adjustments	2,248	2,255
44	Additional tier 1 capital	2,248	2,255
45	Tier 1 Capital (T1 = CET1 + AT1)	17,307	16,479
51	Tier 2 capital before regulatory adjustments	3,193	3,293
58	Tier 2 capital	3,193	3,293
59	Total capital	20,500	19,772

*The references identify the lines prescribed in the PRA template, which are applicable and where there is a value.

1During Q4'24, HSBC UK Bank plc converted its Share premium account (£9bn) into Retained earnings; and capitalised its Group Reorganisation Reserve (£5.2bn)

via a bonus issue of ordinary shares which were subsequently cancelled and converted into Retained earnings.The authorised and paid ordinary share capital of

the bank at 31 December 2024 was £50,002 (2023: £50,002) ordinary shares of £1.00 each.

2We have updated the classification between components of shareholders’ equity to present ‘Retained earnings’ in Row 2 and ‘Accumulated other

comprehensive income (and other reserves)' in Row 3. The comparatives have been aligned.


HSBC UK Bank plc Annual Report and Accounts 2024	67

Risk-weighted assets


RWA movement by business by key driver
	Credit risk, counterparty credit risk and operational risk				Market risk	Total RWAs
	WPB	CMB	GBM	Corporate Centre	Market risk	Total RWAs
	£m	£m	£m	£m	£m	£m
RWAs at 1 Jan 2024	34,991	64,695	533	1,127	132	101,478
Acquisitions and disposals	—	—	—	—	—	—
Asset size	1,248	6,216	48	507	38	8,057
Asset quality	695	853	—	—	—	1,548
Model updates	—	95	—	1	—	96
– new/updated models	—	95	—	1	—	96
Methodology and policy	(578)	(74)	(12)	71	—	(593)
– internal updates	(578)	(74)	(12)	71	—	(593)
Foreign exchange movement	(4)	(181)	5	14	3	(163)
Total RWA movement	1,361	6,909	41	593	41	8,945
RWAs at 31 Dec 2024	36,352	71,604	574	1,720	173	110,423

Excluding a decrease in RWAs of £0.2bn due to foreign currency

translation differences, RWAs increased by £9.1bn during the period,

primarily due to lending growth, increase in operational risk RWAs

and changes in asset quality. This was partly offset by reduction from

methodology and policy.

Asset size:

Increase in RWAs by £8.1bn mainly in CMB and WPB driven by

growth in corporate lending and retail mortgages combined with

operational risk RWAs due to higher average revenue.

Asset Quality:

Increase in RWAs of £1.5bn mainly due to credit migrations and

changes in the underlying portfolio mix.

Methodology and Policy:

Decrease in RWAs in WPB by £0.6bn is mainly due to data quality

improvements and risk parameter refinements.

Leverage ratio

At 31 December2024, our leverage ratio decreased to 5.8% from

6.1% at 31 December 2023.

The key drivers for the decrease in the leverage ratio were:

– a 0.6% decrease due to an increase in exposure of £26bn mainly

due to growth in corporate and retail lending combined with

increase in financial investments and reverse repurchase

agreements as part of balance sheet and interest rate risk

management activities.

– a 0.3% increase from £1.4bn of capital generation through profits

net of dividend partly offset by £0.6bn increase in capital

deductions mainly from excess regulatory expected loss.

Pillar 3 disclosure requirements

Pillar 3 of the Basel regulatory framework is related to market

discipline and aims to make financial services firms more transparent

by requiring publication of wide-ranging information on their risks,

capital and management. Our Pillar 3 Disclosures at 31 December

2024 is published on HSBC Group’s website, www.hsbc.com, under

‘Investors’.

Liquidity and funding risk in 2024

Liquidity metrics

During 2024, we were above regulatory minimum levels. We

maintain sufficient unencumbered liquid assets to comply with

regulatory requirements.

We maintain sufficient stable funding relative to the required stable

funding assessed using the NSFR.

Our liquidity and funding position for 2024 is analysed in the following

sections. The LCR and NSFR ratios presented in the below table are

based on average values. The LCR is the average of the preceding 12

months and the NSFR is the average of the preceding four quarters.


HSBC UK liquidity group1
	Average for
	2024	2023
LCR (%)	190	201
High-quality liquid assets (£m)	91,348	94,765
Net outflows (£m)	48,057	47,234
NSFR (%)	154	158

1HSBC UK liquidity group comprises: HSBC UK Bank plc, Marks and Spencer

Financial Services plc, HSBC Trust Company (UK) Limited, HSBC Private

Bank (UK) Limited and HSBC Innovation Bank Limited. It is managed as a

single operating entity, in line with the application of UK liquidity regulation

as agreed with the PRA.

At 31 December 2024, HSBC UK's LCR was above the regulatory

minimum. The 2024 average LCR of 190% continues to reflect a

strong liquidity position.

Liquid assets

We had an average total of £91.3bn of highly liquid unencumbered

LCR eligible liquid assets (2023 average: £94.8bn) held in a range of

asset classes and currencies. Of these, 97% were eligible as level 1

(2023: 98%).


68	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

The below tables reflects the composition of the average liquidity

pool by asset type and currency for 2024 and 2023:


	Liquidity pool	Cash	Level 1	Level 2
	£m	£m	£m	£m
Cash and balance at central bank	54,033	54,033	—	—
Central and local government bonds	33,114	—	31,901	1,213
Regional government public sector entities	237	—	237	—
International organisation and multilateral developments banks	1,815	—	1,815	—
Covered bonds	1,983	—	814	1,169
Other	166	—	—	166
Average Total for 2024	91,348	54,033	34,767	2,548
Average Total for 2023	94,765	76,238	16,756	1,771


	£	$	€	Other	Total
	£m	£m	£m	£m	£m
Average Liquidity Pool for 2024	77,403	8,034	3,365	2,546	91,348
Average Liquidity Pool for 2023	85,857	6,445	1,297	1,166	94,765

Sources of funding

Our primary sources of funding are customer current accounts and

customer savings deposits payable on demand or at short notice. The

following ‘Funding sources and uses’ table provides a consolidated

view of how our balance sheet is funded, and should be read in light

of the Liquidity and Funding Risk management Framework ('LFRF'),

which requires we manage liquidity and funding risk on a stand-alone

basis.

The table analyses our consolidated balance sheet according to the

assets that primarily arise from operating activities and the sources of

funding primarily supporting these activities. In 2024, the level of

customer accounts exceeded the level of loans and advances to

customers. The positive funding gap was predominantly deployed in

liquid assets, cash and balances with central banks and financial

investments, as required by the LFRF.


Funding Sources
(Audited)	2024	2023
	£m	£m
Sources
Customer accounts	280,366	268,345
Deposits by banks	11,144	10,843
Repurchase agreements – non-trading	420	4,652
Debt securities in issue	2,044	1,988
Cash collateral, margin, settlement accounts and items in the course of transmission to other banks	449	678
Subordinated liabilities	15,686	14,598
Total equity	25,971	26,070
Other balance sheet liabilities	4,797	5,702
At 31 Dec	340,877	332,876


Funding Uses
(Audited)	2024	2023
	£m	£m
Uses
Loans and advances to customers	217,604	211,887
Loans and advances to banks	7,263	7,980
Reverse repurchase agreements – non-trading	11,776	7,686
Cash collateral, margin, settlement and items in the course of collection from other banks accounts	1,196	396
Financial investments	37,801	26,315
Cash and balances with Central banks	52,276	65,719
Other balance sheet assets	12,961	12,893
At 31 Dec	340,877	332,876

Market risk

Overview

Market risk is the risk of adverse financial impact on trading activities

arising from changes in market parameters such as interest rates and

foreign exchange rates.

Market risk management

Key developments in 2024

There were no material changes to our policies and practices for the

management of market risk in 2024.

Market risk governance

(Audited)

The following table summarises the market risk measures used to

monitor and limit exposures within HSBC UK. Trading portfolio

market risk exposures within the entity are not material, primarily

because customer facing trades within Markets business are hedged

on a one for one basis and trading book within Markets Treasury

business is limited to short dated cash management.


	Trading risk
Risk types	– Foreign exchange – Interest rates
Risk measure	VaR \| Sensitivity \| Stress testing

Market risk is managed and controlled through limits approved by the

Group CRO for HSBC Holdings plc. These limits are allocated across

business lines and to the Group’s legal entities, including HSBC UK.

The level of limits set is based on the overall risk appetite for HSBC

UK being cascaded down to the individual entities and the limits

required for the individual desks to be able to execute their stated

business strategy under the HSBC UK ring-fencing Exceptions Policy.

The market risk limits are endorsed by HSBC UK RMM. HSBC UK

has an independent market risk management and control sub-

function, which is responsible for measuring, monitoring and

reporting market risk exposures against limits on a daily basis. The

Traded Risk function enforces the controls around trading in

permissible instruments approved for HSBC UK as well as following

completion of the new product approval process.

Key Risk Management processes

Monitoring and limiting market risk

exposures

Our objective is to manage and control market risk exposures while

maintaining a market profile consistent with HSBC UK strategy and

risk appetite as well as operating within the HSBC Group’s risk

appetite for the entity. We use a range of tools to monitor and limit

market risk exposures including sensitivity analysis, VaR, and stress

testing.

VaR is a technique that estimates the potential losses on market risk

positions as a result of movements in market rates and prices over a

specified time horizon and to a given level of confidence. The use of

VaR is integrated into market risk management and is calculated for

all trading positions. HSBC UK does not have a market risk internal

model approval and therefore, VaR is not used for any regulatory

return but only used for internal management information.

Trading book VaR is not used for calculating capital requirements

arising from market risk within HSBC UK. Therefore there is no back

testing of trading book VaR.

Defined benefit pension scheme

Market risk also arises within HSBC UK's defined benefit pension

plan to the extent that the obligations of the plan are not fully

matched by assets with determinable cash flows. Refer to Pension

risk section on page 65 for additional information.


HSBC UK Bank plc Annual Report and Accounts 2024	69

Climate risk

Overview

Climate risks have the potential to cause both financial and non-

financial impacts for HSBC UK. Financial impacts could materialise,

for example, through greater transactional losses and/or increased

capital requirements. Non-financial impacts could materialise if our

own assets or operations are impacted by extreme weather or

chronic changes in weather patterns, or as a result of business

decisions to help achieve the HSBC Group’s ESG-related ambitions

and targets.

Our approach to managing climate risk in HSBC UK is aligned to the

HSBC Group’s risk management framework, climate risk approach,

and three lines of defence model, which sets out how we identify,

assess, and manage our risks, and we continue to integrate climate

risk within the risk management framework through policies and

controls for traditional risks where appropriate.

We have adopted the HSBC Group's ESG-related ambitions and

targets to align its financed emissions to net zero by 2050.

Key Developments.

– HSBC UK's risk appetite statement was approved by the HSBC

UK Board and includes the measures we intend to take to meet

HSBC Group's ambitions, targets and commitments. In HSBC UK,

our measures are focused on the oversight and management of

climate risks in the commercial and retail portfolios.

– We completed our 2024 Internal Scenario Analysis exercise and

applied an enhanced internal climate stress testing methodology

which focussed on generating more granular insights which we

are using to improve our understanding of our risk exposures for

use in risk management, business decision making, and to meet

ongoing regulatory expectations.

Governance and structure

The HSBC UK Board takes overall responsibility for our climate

strategy, overseeing executive management in developing the

approach, execution, and associated reporting.

Our CRO is responsible for climate financial risks under the UK Senior

Managers Regime. The CRO attends HSBC UK Board meetings and

is a member of the Executive Committee and, where appropriate,

provides verbal or written updates on climate risk.

The HSBC UK RMM and the HSBC UK Risk Committee receive

updates on our climate risk profile and progress of our HSBC UK

climate risk programme.

Key risk management processes

We continue to integrate climate risk into the policies, processes and

controls across many areas of our organisation, and will update these

as our climate risk management capabilities mature over time.

Challenges

Whilst we have continued to develop our climate risk framework, our

remaining challenges include:

– The diverse range of data sources and data structures needed for

climate-related reporting creates data accuracy and reliability risks.

– Physical risk assessments are limited by the availability of high-

quality data on customer assets and supply chains, and there are

also methodology gaps.

– Transition risk assessments are limited by data gaps on customer

emissions and transition plan and methodology gaps.

– Our management of net zero alignment risk is limited by known

and unknown factors, including the accuracy and reliability of data,

merging methodologies, and the need to develop new tools to

better inform decision making.

We have taken initial steps to develop our capabilities to monitor our

exposure and set risk appetites. Operationalising the HSBC Group’s

ambition is dependent on data and methodologies maturing over time

and requires us to continue developing our internal processes and

tools.

Resilience risk

Overview

Resilience risk is the risk of sustained and significant business

disruption from execution, delivery, physical security, or safety

events, causing the inability to provide critical services to our

customers, affiliates, and counterparties. Resilience risk arises from

failures or inadequacies in processes, people, systems, or external

events.

Resilience Risk management

Resilience risk is the risk of sustained and significant business

disruption from execution, delivery, physical security or safety events,

causing the inability to provide critical services to our customers,

affiliates and counterparties. Resilience risk arises from failures or

inadequacies in processes, people, systems or external events.

Key developments in 2024

During the year, we conducted several initiatives to keep pace with

geopolitical, regulatory and technology changes and strengthened the

management of resilience risk:

– We provided analysis and easy-to-access risk and control

information and metrics to enable management to focus on non-

financial risks in their decision making and appetite setting.

– We further strengthened our non-financial risk governance and

senior leadership.

– We have acted on the findings of an independent review report

covering our operational and technology resilience that was

presented to the HSBC UK Board in 1Q24.

– We have formed a HSBC UK CAP to oversee Resilience Risk

activity across HSBC UK. The UK CAP is governed by the HSBC

UK Resilience Oversight Committee ('ROC'). The ROC meets

monthly and is accountable for HSBC UK resilience and funding

prioritisation with escalation of issues through the HSBC UK RMM

and Audit Committee. ROC membership includes the HSBC UK

ExCo and the UK COO who chairs the committee.

– We prioritised our efforts on material risks and areas undergoing

growth, aligning our strategic priorities to this need.

– We continued to recognise that our customers were impacted by

service disruptions, responded to these urgently and aimed to

recover with minimum delay. We continued to initiate post-

incident review processes to prevent recurrence. Where we

identify that investment is required to further enhance HSBC UK

operational resilience capabilities, findings are fed into our financial

resource planning process, helping to ensure we continue to meet

the expectations of our customers and our regulators. The volume

of HSBC UK service disruption incidents has reduced in 2024,

compared to 2023.

Governance and structure

The Enterprise Risk Management target operating model provides a

globally consistent view across resilience risks, strengthening our risk

management oversight while operating effectively as part of a

simplified non-financial risk structure. We view resilience risk across

seven sub-risk types related to: third party risk; technology and cyber

security risk; transaction processing risk; business interruption and

incident risk; data risk; change execution risk; and facilities availability,

safety and security risk.

Performance against risk appetite and key escalations for resilience

risk are reported to the HSBC UK RMM (chaired by the HSBC UK

CRO) and further escalated to the Non-Financial Risk Management

Board (chaired by the Group Chief Risk and Compliance Officer) as

required, with a further escalation path to the Group RMM and the

Group Risk Committee.


70	HSBC UK Bank plc Annual Report and Accounts 2024

Risk

Key risk management process

Operational resilience is our ability to anticipate, prevent, adapt,

respond to, recover, and learn from internal or external disruption,

continuing to provide important business services to customers and

clients, and minimising any impact on the wider financial system

when, not if, disruption occurs. It is key that we remain within impact

tolerance for each important business service in the event of a severe

but plausible disruption to our operations.

Business operations continuity

We continue to monitor the Russia-Ukraine war and the conflict in the

Middle East and remain ready to take measures to help ensure

business continuity, should the need require. There have been no

significant disruptions to our services in HSBC UK as a result of these

conflicts. We will continually review plans and responses to minimise

any potential impact.

Regulatory compliance risk

Overview

Regulatory Compliance risk is the risk associated with breaching our

duty to clients and other counterparties, inappropriate market conduct

(including unauthorised trading) and breaching related financial

services regulatory standards. Regulatory Compliance risk arises from

the failure to observe relevant laws, codes, rules and regulations and

can manifest itself in poor market or customer outcomes and lead to

fines, penalties and reputational damage to our business.

Regulatory compliance risk management

Key developments in 2024

We continued to make progress with several key regulatory

compliance risk management initiatives, including:

– Enhancing our processes, framework and governance capabilities

to improve the control and oversight of Consumer Duty outcomes

in the UK.

– Refreshing our operating model to move from event driven

technology to incorporate Cloud and analytics capability to

enhance our oversight abilities in areas such as surveillance.

Regulatory developments

Financial service providers continue to operate to stringent regulatory

and supervisory requirements, particularly in the areas of capital and

liquidity management, conduct of business, financial crime, internal

control frameworks, the use of models and the integrity of financial

services delivery.

Within this intense and complex regulatory agenda, there continues

to be ongoing focus by regulators to improve outcomes for banks’

customers, particularly vulnerable ones, as well as ensuring market

integrity and promoting effective competition. The following are areas

of particular focus:

– Higher levels of consumer protection in retail financial markets,

following implementation of the Consumer Duty.

– Developments in legal principles or conduct requirements

(including in relation to the risk of such developments in one part

of the financial industry being construed as applying to other parts

of the financial industry, which could lead to legal or regulatory

proceedings).

– Seeking to ensure fair treatment of vulnerable customers,

including supporting those in financial difficulties.

– Continuing the focus on improving the ring-fencing regime to seek

to better serve customers and address future risks.

– Significant initiatives being carried out by government and

regulators intended to open up competition, innovation, and

access to cash deposit and withdrawal services, which includes

reform of the regulations that underpin payment services.

– A number of measures which are being taken to reduce the levels

of fraud and tackle fraudulent marketing.

– Continued focus on climate change and other environmental,

social and governance concerns, including proposals relating to

diversity and inclusion in financial services and implementation of

rules relating to disclosures and anti-greenwashing guidance.

The competitive landscape in which HSBC UK operates may be

impacted by future regulatory changes and government intervention.

We continue to engage in the development of new and amended

regulations in the UK to help ensure that the implications have been

fully considered by regulators and the wider industry. We also

continue to work with the UK authorities and regulatory bodies to

discuss any impacts on customers and markets.

Conduct of business

At HSBC UK our conduct management approach focuses on the

impact we have on our customers and the financial markets in which

we operate. Customer outcome is at the heart of how we operate,

and we aim to act responsibly and with integrity. As part of this we

have carried out a number of activities during 2024:

– We sought to understand and address our customers’ ongoing

needs and continued to champion a strong conduct and customer-

focused culture.

– Our customer-focused agenda is demonstrated through the

delivery of the Consumer Duty Programme, which is closely linked

to our conduct agenda. The second phase of the Programme was

implemented in July 2024 and focussed to help ensure good

customer outcomes within our closed book of products.

– The third phase of the Consumer Duty Programme is focussed on

improving our MI capabilities and will enable HSBC UK to

consistently use agreed key customer outcome based indicators

in their day-to-day activities, to proactively identify issues and take

timely action to deliver good outcomes.

– Conduct management of our vulnerable customer base is high on

the regulatory agenda and continues to be an area of focus for the

banking industry.

– We implemented the new anti-greenwashing rules applicable

across all in-scope products, and the new sustainability disclosure

requirements in relation to our in-scope wealth and investment

products.

– We continued to embed conduct within our business line

processes and through our Non- Financial and Financial Risk

Steward activities.

– We focussed on the effectiveness of HSBC UK Conduct

Governance, to promote visibility and read across of Conduct

issues in all business lines and the efficient, consistent escalation

of issues.

– We delivered our latest annual global mandatory training course

on conduct to reinforce the importance of conduct for all

colleagues and delivered bespoke and focussed conduct training

and guidance to all of our risk steward colleagues.

The HSBC UK Board continues to maintain oversight of conduct

matters through the Risk Committee.


HSBC UK Bank plc Annual Report and Accounts 2024	71

Financial crime risk

Overview

Financial crime risk is the risk that HSBC’s products and services will

be exploited for criminal activity. This includes fraud, bribery and

corruption, tax evasion, sanctions and export control violations,

money laundering, terrorist financing and proliferation financing.

Financial crime risk arises from day-to-day banking operations

involving customers, third parties and employees.

Financial Crime Risk Management

Key developments in 2024

We regularly review the effectiveness of our financial crime risk

management framework, which includes continued consideration of

the complex and dynamic nature of sanctions compliance and export

control risk. We continued to make progress with several key

financial crime risk management initiatives, including:

– We continued to respond to the financial sanctions and trade

restrictions that have been imposed on Russia, including methods

used to limit sanctions evasion.

– We took the decision to stop processing payments from Russia

and Belarus for all personal banking customers and commenced

the closure of accounts for residents of Russia and Belarus.

– We further enhanced our screening and non-screening controls to

aid in the identification of potential sanctions risk related to Russia

and Belarus, as well as risk arising from export control restrictions.

– Our intelligence-led, Dynamic Risk Assessment ('DRA') tool in

HSBC UK continues to perform strongly with a substantially better

alert-to-Suspicious Activity Reports (‘SAR’) conversion rate than

the previous system. It seeks to provide more useful information

to law enforcement and seeks to improve customer outcomes by

substantially reducing unnecessary requests for information.

– We implemented controls and processes to comply with new

requirements from the PSR to reimburse victims of authorised

payment fraud, with liability shared between sending and

receiving firms.

– We made further enhancements to our controls to help identify

potential money mule activity and intercept suspected payments

in near “real-time” in both WPB and CMB.

– We continued to enhance our fraud technologies whilst

maintaining minimum customer friction, replacing our core fraud

analytics system, which has led to improved fraud detection.

– We enhanced our surveillance capabilities through the deployment

of a proactive internal fraud detection tool which flags unusual

staff behaviour for investigation, with appropriate action being

taken on cases where internal fraud is substantiated.

– We made enhancements in response to the rapidly evolving and

complex global payments landscape and refined our digital assets

and currencies strategy.

Key risk management processes

We will not tolerate knowingly conducting business with individuals

or entities believed to be engaged in criminal activity. We require

everybody in HSBC UK to play their role in maintaining effective

systems and controls to prevent and detect financial crime. Where

we believe we have identified suspected criminal activity or

vulnerabilities in our control framework, we will take appropriate

mitigating action.

We manage financial crime risk because it is the right thing to do to

protect our customers, shareholders, staff, the communities in which

we operate, as well as the integrity of the financial system on which

we all rely. We operate in a highly regulated industry in which the

same policy goals are codified in law and regulation.

We are committed to complying with the laws and regulations of all

the markets in which we operate and applying a consistently high

financial crime standard globally.

We continued to invest in enhancing our operational control

capabilities and technology solutions to deter and detect criminal

activity. We further strengthened our financial crime risk taxonomy

and control libraries and our monitoring capabilities through

technology deployments. We developed more targeted metrics, and

continued to seek to enhance our governance and reporting.

We are committed to working in partnership with the wider industry

and the public sector in managing financial crime risk and we

participate in numerous public-private partnerships and information

sharing initiatives.

In 2024, our focus remained on measures to improve the overall

effectiveness of the global financial crime framework, notably by

providing input into legislative and regulatory reform activities in the

UK. We did this by contributing to the development of responses to

consultation papers focused on how financial crime risk management

frameworks can deliver more effective outcomes in detecting and

deterring criminal activity.

The HSBC UK Risk Committee provides oversight of financial crime

risk matters on behalf of the HSBC UK Board, including matters

relating to anti-money laundering, fraud, sanctions, terrorist financing

and proliferation financing.

Model risk

Overview

Model risk is the risk of inappropriate or incorrect business decisions

arising from the use of models that have been inadequately designed,

implemented or used, or from models that do not perform in line with

expectations and predictions.

Model risk arises in both financial and non-financial contexts

whenever business decision making includes reliance on models.

Key developments in 2024

In 2024, we continued to make improvements in our model risk

management processes amid regulatory changes in model

requirements.

Initiatives during the year included:

– We updated our 'Model Risk Management Framework to meet

the requirements of the PRA ‘Model Risk Management principles

for banks’ which came into force in May 2024. A programme of

work is in progress to implement these changes across our model

landscape. Key initiatives included in the plan for compliance were

achieved in 2024 such as completing a full review of Model

Tiering and introducing a new framework to govern and manage

the risks associated with Deterministic Quantitative Methods.

– We enhanced our frameworks and controls as climate risk and AI

and machine learning models become more embedded in

business processes.

– We introduced a new procedure with an aim to ensure any new

tool developed using Generative AI would require validation by

Model Risk Management before its use.

– Our businesses and functions continued to be more involved in

the development and management of models. They continued

with an enhanced focus on key model risk drivers such as data

quality and model methodology.

– Working with the businesses and functions, Model Risk Control

Assessments were refreshed to help ensure they continue to

appropriately reflect the Model Risk landscape.

– We further embedded the model risk appetite measures, which

are expected to help our businesses and functions manage model

risk more effectively.


72	HSBC UK Bank plc Annual Report and Accounts 2024

Corporate Governance Report

– We continued the transformation of the Model Risk Management

team, with further updates to the model validation processes,

including systems and process enhancements. We also made

further changes to the model inventory system to provide

businesses and functions with improved functionality and more

detailed information related to model risk.

Governance and structure

The HSBC UK Model Risk Committee is chaired by the CRO and

provides oversight of model risk. The committee includes senior

leaders and risk owners across the lines of business, functions and

Risk and focuses on model-related concerns and key model risk

metrics.

Key risk management processes

We use a variety of modelling approaches, including regression,

simulation, sampling, machine learning and judgmental scorecards for

a range of business applications. These activities include customer

selection, product pricing, financial crime transaction monitoring,

creditworthiness evaluation and financial reporting. Responsibility for

managing model risk is delegated from the RMM to the HSBC UK

Model Risk Committee, which is chaired by the CRO. This committee

regularly reviews our model risk management policies and

procedures, and requires the first line of defence to demonstrate

comprehensive and effective controls based on a library of model risk

controls provided by Model Risk Management. Model Risk

Management also reports on model risk to senior management on a

regular basis through the use of risk management information, risk

appetite metrics and top and emerging risks.

We regularly review the effectiveness of these processes, including

the model oversight forum structure, to help ensure appropriate

understanding and ownership of model risk is embedded in the

businesses and functions.

Corporate Governance Report

Corporate governance statement

The Company, together with the wider Group, is committed to high

standards of corporate governance. The Group has a comprehensive

range of principles, policies and procedures influenced by the UK

Corporate Governance Code with requirements in respect of Board

independence, composition and effectiveness to ensure that the

HSBC Group is well managed, with appropriate oversight and control.

During the year, the Company adhered to these corporate

governance principles, policies and procedures, as applicable.

As a subsidiary of HSBC Holdings plc, the Company adopts the HSBC

Group’s Subsidiary Accountability Framework (‘SAF’). The SAF

principles set out HSBC Holdings plc’s high level expectations for

corporate governance arrangements in its subsidiaries. The Board

considers the SAF to be sufficiently comprehensive and robust and

has, therefore, chosen not to adopt another corporate governance

code.

Role of the Board

The role of the Board of Directors is to provide entrepreneurial

leadership of the Company within a framework of prudent and

effective controls which enables risks to be assessed and managed.

The Board is collectively responsible for: the long-term success of the

Company and delivery of sustainable value to its shareholders; setting

and approving the Company’s strategy, risk appetite statement and

management’s capital and operating plans to achieve the strategic

objectives.

The Board comprises a majority of independent non-executive

directors. The roles of the Chairman and Chief Executive Officer are

separate. The Chairman leads the Board and is responsible for its

effectiveness and the Chief Executive Officer leads the day-to-day

management of the Company and execution of strategy.

During the year, the Board completed its annual effectiveness

review. The Board considered the outcome of this review and

endorsed actions to further optimise and enhance governance. All

enhancements suggested in the 2023 review were considered to

have been completed or in the course of being addressed.

In 2024, the Board held seven routine meetings and an additional four

ad-hoc meetings to consider matters of a time sensitive nature. The

Board received information from management between meetings

and Directors have full access to all relevant information on a timely

basis, access to the advice of the company secretary and are entitled

to obtain independent external advice at the Company’s expense.

Details of the Board's engagement may be found in ‘Stakeholder

engagement’ on page 8.

Culture and values

Through its work, the Board supports the Company’s purpose and

values outlined on page 6 of the Strategic report by ensuring that the

Company conducts its business by treating customers fairly and

openly, doing business with the right customers and in the right way,

ensuring customers receive good outcomes as required by the

Consumer Duty, is a responsible employer, acts responsibly towards

the communities in which it operates and considers its other

stakeholders.

Board of Directors

All Directors are subject to annual re-election by the shareholder at

the Company’s Annual General Meeting ('AGM').

The Directors who served during the year ended 31 December 2024

and up to the date of this report are shown below:

Dame Clara Furse

Chairman and Independent non-executive

Director

Chairman of the Chairman’s Nominations and Remuneration

Committee

Appointed to the Board: April 2017

Clara is a non-executive director of Assicurazioni Generali S.p.A. She

is a member of the Panel of Senior Advisors to Chatham House and a

member of the European Financial Services Round Table. She is Chair

of the UK Carbon Markets Forum. Former appointments include: non-

executive director of Vodafone Group plc and Amadeus IT Group

S.A.; External Member of the Bank of England’s Financial Policy

Committee; lead independent director of the UK's Department for

Work and Pensions; Chief Executive of the London Stock Exchange;

Group Chief Executive of Credit Lyonnais Rouse; member of the

Shanghai International Financial Advisory Council and non-executive

director of Euroclear plc, LCH Clearnet Group Ltd, Fortis SA, Nomura

Holdings and the Legal & General Group.


HSBC UK Bank plc Annual Report and Accounts 2024	73

John David Stuart (known as Ian

Stuart)

Executive Director and Chief Executive

Officer

Chairman of the Executive Committee

Appointed to the Board: May 2017

Ian has been Chief Executive Officer and director of HSBC UK Bank

plc since May 2017 and was a member of HSBC Holdings plc's

Group Executive Committee during 2024. From 1 January 2025, he

became a member of the Group’s Operating Committee. He joined

the HSBC Group as a Group General Manager and Head of

Commercial Banking Europe in 2014, having previously led the

corporate and business banking businesses at Barclays and worked

at NatWest and Royal Bank of Scotland for over 20 years. He started

his career at the Bank of Scotland and has worked in financial

services for over four decades. Ian was awarded the Freedom of the

City of London for his services to finance. He is also a non-executive

director of UK Finance Limited and a business ambassador for

Meningitis Now.

Marie Claire Baird (known as Claire

Baird)

Executive Director and Chief Financial Officer

Member of the Executive Committee

Appointed to the Board: January 2022

Claire was appointed Chief Financial Officer of HSBC UK Bank plc in

January 2022 and is a member of the HSBC UK and Global Finance

executive committees. Prior to her current role, Claire was Chief

Financial Officer of Global Wealth and Personal Banking. Before

joining HSBC, Claire spent 18 years with RBS/NatWest Group, most

recently as Finance Director for Personal Banking, Deputy Chief

Financial Officer for Royal Bank of Scotland (RBS’ Scottish banking

subsidiary) and as a non-executive director of Coutts & Company

(RBS’ private bank). Previous roles include Finance Director for

Services & Functions, Head of Global Finance Services, and for Ulster

Bank (RBS’ Irish/Northern Irish subsidiaries), she was Group Financial

Controller and Head of Finance, Retail Banking. Claire is a fellow of

Chartered Accountants Ireland.

Abimbola Afolami (known as Bim

Afolami)

Independent non-executive Director

Member of the Risk Committee

Appointed to the Board: January 2025

Bim is a corporate lawyer and former Minister, whose career prior to

becoming an MP encompassed law and banking. Bim has a depth of

experience in policy-making and regulatory processes within financial

services. His role as Economic Secretary to the Treasury and City

Minister covered a wide brief including banking, asset management,

pensions, insurance, private equity, and venture capital, and involved

extensive engagement across the City and with regulators. During his

years of public service Bim held several roles including Vice Chairman

of the Conservative Party, Principal Private Secretary to the Secretary

of State for Trade, and the Foreign Secretary. He also sat as Chair of

the Renewable and Sustainable Energy Parliamentary Group.

Bim has first-hand experience of HSBC UK, having previously held a

role within the Group which included his involvement at the outset of

the ring-fencing process. He currently holds an executive role with

Acrisure, a US headquartered financial technology and insurance

company and works as a patron for the charities Spotlight on Africa

and GRIT (Growing Resilience In Teens).

Simon Calver

Independent non-executive Director

Member of the Audit Committee

Appointed to the Board: April 2023

Simon is the Chair of Marks and Spencer Financial Services plc and

an independent non-executive director of Marks and Spencer Unit

Trust Management Limited, both wholly owned subsidiaries of the

Company. He is also Chair of Vinterior Group Limited. Simon is also a

qualified and practicing executive coach. He was previously a Fellow

of the Institute of Directors (UK) and a former Entrepreneur of the

Year regional winner in the UK. Throughout his career he has led

innovation and disruption in major markets, such as the education

sector with Riverdeep and entertainment sector as Chief Executive

Officer of LoveFilm up to the sale to Amazon in 2011. His former

appointments include Chief Executive Officer of Mothercare plc and

LoveFilm International, chairman of Fenwick 1882 Limited, Moo Print

Ltd, Chemist Direct Ltd, Gousto Ltd, Firefly Learning Ltd, UK

Business Angels Association and also a non-executive director of

Datalex plc.

Oliver Corbett

Independent non-executive Director

Chair of the Audit Committee, Member of the Risk Committee and

the Chairman's Nominations and Remuneration Committee

Appointed to the Board: January 2024

Oliver joined the Board at the start of 2024 and has been a non-

executive director of Allianz (UK) Limited since November 2023. After

qualifying as an accountant, Oliver spent 13 years in investment

banking in London and New York. He was previously Founding Chief

Financial Officer of McGill and Partners and before that held Chief

Financial Officer roles at Howden, LCH Clearnet plc and Novae. He

has also served as a non-executive director and Audit Chair for Close

Brothers Group plc and prior to that Rathbone Brothers Group plc.

Carolyn Dittmeier

Independent non-executive Director

Member of the Risk Committee and the Audit Committee

Appointed to the Board: October 2024

Carolyn joined the Board in October 2024 and she also currently

serves as an independent member of the Board of Eni and Illycaffè

and of the Board of Statutory Auditors of Moncler and Bologna

University Business School. Her career has included heading Internal

Audit of significant enterprises including Poste Italiane and

Montedison. In parallel, she served as Vice Chair of the Board of the

Global IIA, Chair of the European Confederation of Internal Auditors

and IIA Italy. She also launched and led Corporate Governance

Services at Klynveld Peat Marwick Goerdeler 'KPMG' (Italy). Carolyn's

previous directorships include President of the Board of Statutory

Auditors of Assicurazioni Generali as well as independent director of

Alpha Bank, Italmobiliare and Autogrill, chairing the Audit and Risk

Committee in all cases.

Jenny Goldie-Scot

Independent non-executive Director

Member of the Risk Committee

Appointed to the Board: July 2022

Jenny is the Chair of Marks and Spencer Unit Trust Management

Limited and HSBC Trust Company UK. She is also an independent

non-executive director of Marks and Spencer Financial Services plc,

all of which are wholly owned subsidiaries of the Company. She has

spent the bulk of her career in investment banking operations and

finance in senior leadership roles at Morgan Stanley, both in the UK

and the US. She has had a specific focus on system and process

transformation and her last role was leading a large digital


74	HSBC UK Bank plc Annual Report and Accounts 2024

Corporate Governance Report

transformation for Google LLC in California. Jenny has previously

served on the board of LCH Clearnet plc where she was chair of the

Nomination Committee.

Mridul Hegde CB

Independent non-executive Director

Chair of the Risk Committee, Member of the Audit Committee and

the Chairman’s Nominations and Remuneration Committee

Appointed to the Board: February 2018

Mridul is the Chair of HSBC Innovation Bank Limited, a wholly owned

subsidiary of the Company. Mridul's former appointments include:

Member of Ernst & Young LLP Public Interest and UK Audit Board:

non-executive director of the UK Municipal Bonds Agency and

member of its Risk and Audit Committee; and senior roles at the

Financial Reporting Council and HM Treasury, where she was

Director of Financial Stability during the 2008 financial crisis and prior

to that, Director of Public Spending.

Janet Henry

Non-executive Director

Appointed to the Board: November 2022

Janet was appointed as HSBC’s Global Chief Economist in August

2015 and is responsible for all of HSBC’s economic forecasts and

thematic economic research output globally. She is a Governor of the

UK’s National Institute of Economic and Social Research and a

member of the World Economic Forum’s Chief Economists

Community. Janet joined HSBC in 1996 in Hong Kong where she

worked as an Asian economist. She was previously HSBC’s Chief

European Economist. She is also a director of 3 College Fields

Management Company Limited.

Zoe Knight

Non-executive Director

Appointed to the Board: January 2024

Zoë has global responsibility for the Sustainability Research product

across asset classes at HSBC Global Research. She has been

advising institutional investors and other stakeholders on equities and

climate change for over 25 years. While most of her career has been

in capital markets, she has also worked on corporate sustainability

strategy for HSBC in the Middle East. An economist by academic

background, she has participated in a variety of advisory boards and

councils on climate change across the financial services industry,

including the UK All Parliamentary Group on Climate Change, the

Task Force on Climate Related Financial Disclosures and the Energy

Transition Commission.

Brendan Nelson

Independent non-executive Director

Member of the Chairman's Nominations and Remuneration

Committee

Appointed to the Board: January 2025

Brendan joined the Board in January 2025 and is also an independent

Non-executive Director of HSBC Holdings plc, where he Chairs the

Group Audit Committee and is a Member of the Group's Risk,

Technology and Operations, and Nomination & Corporate Governance

Committees. He is also Chairman of BP Pension Trustees Limited.

Brendan brings UK and international financial and auditing expertise,

and significant experience as an audit committee chair of UK-listed

companies. He has spent over 25 years as a partner at KPMG LLP,

served on the board from 2000 and as Vice Chairman from 2006, until

his retirement in 2010. Internationally, he held various senior

positions including Global Chairman of the financial services practice.

Subsequently, Brendan joined the boards of bp plc and NatWest

Group plc where he also served as Chairman of both companies'

audit committees. During his career, Brendan was President of the

Institute of Chartered Accountants of Scotland, a member of the

Financial Reporting Review Panel and a member of the Financial

Services Authority's Practitioner Panel. As current Chairman of the

Board of BP Pension Fund trustees Ltd, Brendan has received

training in ESG considerations for investment decisions and helped

set an ambition to be net zero in terms of greenhouse gas emissions

from investments by 2050.

Other Directors that served during the

year

David Lister – Independent Non-executive Director. Resigned from

the Board on 24 April 2024.

James Coyle – Independent Non-executive Director. Resigned from

the Board on 31 July 2024.

Company Secretary

Nicola S Black

Appointed May 2017. Resigned 30 September 2024.

Fiona Mackay

Appointed: 1 October 2024

Board activities during 2024

The Board’s key areas of focus during 2024 were aligned to the

bank's strategic priorities. In overseeing management's execution

against these priorities, the Board considers whether the actions

being taken will deliver improvements in customer experience and

support our ambition to transform the bank into one that is truly

customer-centric:

– Customer – the Board considered the areas for strategic growth in

the bank's business. It also received regular updates on the bank's

implementation of the FCA's Consumer Duty culminating in the

inaugural Consumer Duty Board Report.

– Simple and Agile – the Board reviewed the changes that had been

made to enhance IT and Cloud governance, as well as longer-term

proposals to adopt the Cloud. Consideration was also given to the

bank's IT system and operational resilience.

– Growth – the Board reviewed management's approach to building

a future state workforce blueprint for the desired size, shape and

skills base of its workforce. It also considered the bank's cultural

ambition to create a customer-centric and high performance

culture.

– ESG – the Board received an update on progress being made

against the bank's Net-Zero Execution Programme.

The Board routinely invites senior management from Risk,

Compliance and Legal to Board meetings to support the discharge of

its responsibilities. The non-executive Directors meet privately with

the Chief Executive Officer ahead of every Board meeting and hold

an in-camera session at the end of every meeting to consider the

effectiveness of the meeting, the papers and presentations.

The Board met eleven times during 2024.

Board committees

The Board has established committees to assist it in discharging its

responsibilities. Each Board committee operates within Terms of

Reference approved by the Board that set out the scope of the

delegation and responsibilities, the membership and operation of the

committee and its reporting requirements to the Board. The Chairs of

the Board committees report to each Board meeting on their

activities. Following the Board's approval of revised Terms of

Reference for its committees, the most material change related to an

expansion of the scope of the Audit Committee’s responsibilities in

relation to internal controls, with effect from 1 January 2025. This will


HSBC UK Bank plc Annual Report and Accounts 2024	75

result in the Audit Committee assuming responsibility for the holistic

oversight of the wider internal control environment, reflecting its

experience in overseeing internal controls over financial reporting,

and supporting HSBC Group’s forthcoming responsibility to make a

declaration on the effectiveness of material controls under the 2024

UK Corporate Governance Code.

During the year and up to the date of this report, the Board's

committees were as follows:

Audit Committee

Role

The Audit Committee has been delegated responsibility for oversight

of financial reporting related matters, internal financial controls and

oversight of HSBC UK's Internal Audit function. All the members of

the committee are independent non-executive directors.

Committee activities during 2024

During the year, the committee reviewed and provided oversight on:

the HSBC UK group’s financial reporting; the integrity of financial

statements and disclosures and management’s application of key

accounting policies and significant accounting judgements; the bank's

progress on improving operational resilience; the transformation plans

and cost management; the financial and regulatory reporting control

environment; financial performance; liquidity, funding and capital

adequacy monitoring; the Company’s Financial Resource Plan; the

nature and scope of Internal Audit reviews; the effectiveness of the

internal financial reporting control systems; the effectiveness of the

Internal Audit function; and the external audit process.

To support the discharge of its responsibilities, the committee

routinely invites senior management from Finance, Internal Audit and

the External Auditor to its meetings. The committee also meets

separately with the External Audit Partner and Internal Audit at least

twice each year without any management present.

The committee met seven times in 2024.

Risk Committee

Role

The Risk Committee has been delegated responsibility for oversight

and monitoring of risk related matters impacting the Company; risk

governance; and internal control systems (other than internal financial

control systems). All the members of the committee are independent

non-executive directors.

Committee activities during 2024

During the year, the committee has, amongst other matters: provided

oversight of risk-related matters including financial and non-financial

risk; assessed the Company’s risk profile and how risks are mitigated

and controlled; considered current and forward-looking risk

exposures; considered the Company's risk appetite and tolerance to

inform the Company’s strategy and business plans and made

recommendations to the Board; reviewed the Company’s Internal

Capital Adequacy Assessment Process and Internal Liquidity

Adequacy Assessment Process and stress testing and made

recommendations, as appropriate, to the Board; considered the risk

management framework and effectiveness of the non-financial

internal control systems; assessed data risk; reviewed reports from

Compliance and Legal; received updates on the FCA's Consumer

Duty; and considered the effectiveness of the CRO and risk

management function.

The committee routinely invites senior management from Risk,

Compliance, Finance, Legal, Internal Audit and the External Auditor to

support the discharge of its delegated responsibilities. It also meets

twice a year in a private session with each of the CRO, Internal

Auditor and External Audit Partner without any management present.

The committee met six times in 2024.

Chairman’s Nominations and

Remuneration Committee

Role

The Chairman’s Nominations and Remuneration Committee has been

delegated responsibilities from the Board in relation to nominations

and remuneration for the Company and its subsidiaries. The

committee keeps the composition of the Board and its committees

under constant review and strives to ensure that the membership,

both individually and collectively, has the skills, knowledge and

experience necessary to oversee, challenge and support

management in the achievement of the bank's strategic and business

objectives. The committee also ensures that HSBC UK's Board

Diversity and Inclusion Policy ("Policy") is taken into consideration in

the succession planning, nomination, selection, operation and

evaluation of the Board. The Policy sets out an ambition of 33% of

the Board to be female and to have a minimum of one Board Director

from an ethnic minority background. The current composition of the

Board meets these targets. All the members of the committee are

independent non-executive directors.

Committee activities during 2024

In undertaking its responsibilities, the committee has, amongst other

things, during the year: considered the Board succession plan;

reviewed and recommended changes to the Board's structure, size

and composition, including skills, knowledge and diversity of the

Board; assessed the independence of non-executive Directors by

reference to the criteria in legislation and regulation and, in particular,

the PRA Rulebook for Ring-fenced Bodies; and ensured that the

remuneration framework and pay review decisions are made in line

with the business strategy, objectives, values and long-term interests

of the Company.

The committee regularly invites the Chief Executive Officer and

senior management in the People function to attend meetings to

support the discharge of its delegated responsibilities.

The committee met eight times during 2024.

Executive Committee

Role

In 2024, the Board delegated the management and day-to-day

running of the Company to the Executive Committee which exercised

all the powers, authorities and discretions of the Board in accordance

with such policies and directions as the Board or HSBC Group may

from time to time determine. The Executive Committee operated as

a general management committee with the Chair being the Chief

Executive Officer. Membership comprised the Executive Directors

and the Chief Executive Officer's senior management team.

From February 2025, the Board has demised the Executive

Committee and delegated authority to the CEO for the management

and day-to-day running of the Company. The CEO will be supported in

the performance of his duties by the establishment of an Operating

Committee.

Committee activities during 2024

To support this committee in discharging its responsibilities, it has

sub-delegated specific responsibilities to other committees or

meetings of executive management. There is a regular RMM of the

Executive Committee, chaired by the CRO, to establish, maintain and

periodically review the policy and guidelines for the management of

risk within the group. The RMM also considers financial crime risk

management to ensure effective enterprise wide management of

financial crime risk within the group and to support the Chief

Executive Officer in discharging his financial crime risk

responsibilities.

The committee met eight times in 2024.


76	HSBC UK Bank plc Annual Report and Accounts 2024

Corporate Governance Report

Conflicts of interest and

indemnification of Directors

The Company’s Articles of Association give the Board the authority to

approve Directors’ actual conflicts and potential conflicts of

interest.The Board has adopted a Conflicts of Interest policy and

procedures for considering and authorising conflicts. A review of

authorised situational conflicts, including the terms of authorisation, is

undertaken by the Board annually.

In accordance with the Companies Act 2006 and the Company’s

Articles of Association, all directors are entitled to be indemnified out

of the assets of the Company in respect of claims from third parties

that may arise in connection with the performance of their functions.

Such qualifying third party indemnity provisions have been in place

during the financial year under review, and remain in place, but have

not been utilised by the Directors. All Directors have the benefit of

directors’ and officers’ liability insurance.

Internal control

The Board is responsible for establishing a framework of controls to

enable the assessment and management of risk and sets the

Company’s Risk Appetite Statement. This responsibility is discharged

through reviewing the effectiveness of risk management and internal

control systems and by determining the appetite and tolerance levels

for the types of risks the Company is willing to take to achieve its

strategic objectives for its long-term success and the benefit of its

stakeholders. For more information, please refer to 'Internal Control'

in 'How we manage our risks' section on page 17.

Employment of people with a

disability

HSBC UK strongly believes in providing equal opportunities for all

employees. The employment of people with a disability is included in

this commitment. The recruitment, training, development and

promotion of people with a disability are based on the aptitudes and

abilities of the individual. Should employees become disabled during

their employment with us, efforts are made to continue their

employment. Where necessary, we will provide appropriate training,

facilities and equipment to ensure that barriers to work are removed

for colleagues. Continuous work is done to ensure individual support

is provided to make home office adjustments. Further information on

Diversity and Inclusion is included on page 7.

Auditor

PricewaterhouseCoopers LLP ("PwC") is the external auditor to the

Company. PwC has expressed its willingness to continue in office

and the Board recommends that PwC be re-appointed as the

Company's auditor. A resolution proposing the reappointment of PwC

as the Company's auditor and giving authority to the Audit

Committee to determine its remuneration will be submitted to the

forthcoming AGM.

Statement on Going Concern

The Board, having made appropriate enquiries, is satisfied that the group as a whole has adequate resources to continue operations for a period

of at least 12 months from the date of this report, and it, therefore, continues to adopt the going concern basis in preparing the financial

statements.

In making their going concern assessment, the Directors have considered a wide range of detailed information relating to present and potential

conditions including: profitability; cash flows; capital requirements; and capital resources. These considerations include stressed scenarios that

reflect the uncertainty in the macroeconomic environment following uncertain inflation, rapidly changing interest rates, and disrupted supply

chains as a result of the Russia-Ukraine war and conflict in the Middle East. They also considered other top and emerging risks, including

climate change, as well as from the related impacts on profitability, capital and liquidity.

Further information relevant to the assessment is provided in the Strategic report and the Report of the Directors, in particular:

– A description of the group’s strategic direction;

– A summary of the group’s financial performance and a review of performance by business;

– Reports and updates regarding regulatory and internal stress testing;

– The group’s approach to capital management and its capital position; and

– The top and emerging risks facing the group, as appraised by the Directors, along with details of the group's approach to mitigating those

risks and its approach to risk management in general.

The objectives, policies and processes for managing credit, liquidity and market risk are set out in the 'Risk section' of the ‘Report of the

Directors' on pages 16 to 77.


HSBC UK Bank plc Annual Report and Accounts 2024	77

Directors' Report Disclosures table

The following table sets out the disclosures required by the

Companies Act 2006, the Large and Medium-sized Companies and

Groups (Accounts and Reports) Regulations 2008 (as updated by

Companies (Miscellaneous Reporting) Regulations 2018) and other

applicable regulations, which are incorporated by reference in this

Directors' Report:


	Page
Stakeholder Engagement	Stakeholder engagement and Section 172(1) on page 8
Employee Engagement	Stakeholder engagement and Section 172(1) on page 8
Diversity & Inclusion	Strategic report 'ESG update' on page 7 and Corporate Governance Report on page 72
Results and Dividends	Financial summary on pages 10 to 12 and Note 6 of the Financial statements on page 109
Segmental Analysis	Strategic report on pages 10 to 12 and Note 1.1(f) of the Financial statements on page 95
Future Developments	Strategic report 'Our purpose, values and strategy' on pages 6 to 7
Share Capital	Note 23 of the Financial statements on page 128
Risk Factors	Report of the Directors on pages 16 to 78
Directors' Emoluments	Note 3 of the Financial statements on page 102
Opportunities and Threats	Strategic report on pages 6 to 7 and Risk report on pages 16 to 71
Directors	Corporate Governance Report on page 72
Subsidiaries and Joint Ventures	Note 29 of the Financial statements on pages 132 to 133
Director Indemnities	Corporate Governance Report on page 76
Post Balance Sheet Events	Note 28 of the Financial statements page 132

The Report of the Directors comprising pages 16 to 78 was approved

by the Board on 18 February 2025 and is signed on its behalf by:

Fiona Mackay

Company Secretary

HSBC UK Bank plc

Registered number 9928412


78	HSBC UK Bank plc Annual Report and Accounts 2024

Statement of Directors' responsibilities in respect of the financial statements

Statement of directors'

responsibilities in respect of the

financial statements

The directors are responsible for preparing the Strategic report, Report of the Directors and the financial statements in accordance with

applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the

group and the company financial statements in accordance with UK-adopted international accounting standards. In preparing the group and

company financial statements, the directors have also elected to comply with International Financial Reporting Standards issued by the

International Accounting Standards Board (IFRSs as issued by IASB).

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the

state of affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements, the

directors are required to:

– select suitable accounting policies and then apply them consistently;

– state whether applicable UK-adopted international accounting standards and IFRSs as issued by IASB have been followed, subject to any

material departures disclosed and explained in the financial statements;

– make judgements and accounting estimates that are reasonable and prudent; and

– prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue

in business.

The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention

and detection of fraud and other irregularities.

The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s

transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that

the financial statements comply with the Companies Act 2006.

The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the

preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

Each of the directors, whose names and functions are listed in Corporate Governance Report confirm that, to the best of their knowledge:

– the group and company financial statements, which have been prepared in accordance with UK-adopted international accounting standards

and IFRSs issued by IASB, give a true and fair view of the assets, liabilities and financial position of the group and company, and of the profit

of the group; and

– the Strategic report and Report of the Directors include a fair review of the development and performance of the business and the position

of the group and company, together with a description of the principal risks and uncertainties that it faces.

In the case of each director in office at the date the directors’ report is approved:

– so far as the director is aware, there is no relevant audit information of which the group’s and company’s auditors are unaware; and

– they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information

and to establish that the group’s and company’s auditors are aware of that information.

Approved by the Board on 18 February 2025 and signed on its behalf by:

Fiona Mackay

Company Secretary

HSBC UK Bank plc

Registered number 9928412


HSBC UK Bank plc Annual Report and Accounts 2024	79

Independent auditors’ report to the

members of HSBC UK Bank plc

Report on the audit of the financial statements

Opinion

In our opinion, HSBC UK Bank plc’s group financial statements and parent company financial statements (the 'financial statements'):

– give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2024 and of the group’s profit

and the group’s and parent company’s cash flows for the year then ended;

– have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the provisions

of the Companies Act 2006; and

– have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Accounts 2024 (the "Annual Report"), which comprise:

– the consolidated and HSBC UK Bank plc balance sheets as at the 31 December 2024;

– the consolidated income statement;

– the consolidated statement of comprehensive income;

– the consolidated and HSBC UK Bank plc statements of changes in equity;

– the consolidated and HSBC UK Bank plc statements of cashflows for the year then ended; and

– the notes to the financial statements, comprising material accounting policy information and other explanatory information.

Our opinion is consistent with our reporting to the Audit Committee.

Separate opinion in relation to IFRSs as issued by the IASB

As explained in note 1.1(a) to the financial statements, the group and parent company, in addition to applying UK-adopted international

accounting standards, have also applied International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards

Board (IASB).

In our opinion, the group and parent company financial statements have been properly prepared in accordance with IFRSs as issued by the

IASB.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (''ISAs (UK)'') and applicable law. Our responsibilities under

ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that

the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in

the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical

responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.

Other than those disclosed in Note 4, we have provided no non-audit services to the parent company or its controlled undertakings in the

period under audit.

Our audit approach

Overview

Audit scope

– HSBC UK Bank plc is a member of the HSBC Group, the ultimate parent company of which is HSBC Holdings plc. HSBC UK Bank plc

operates in the United Kingdom.

– We performed a full scope audit of the significant component, namely HSBC UK Bank plc (parent company). For non-significant

components, we performed risk assessment procedures to confirm no additional procedures were required in line with our conclusions

drawn from our scoping assessment.

Key audit matters

– Expected credit loss ('ECL') provision for loans and advances (group and parent).

– Valuation of the defined benefit obligation (group and parent).

Materiality

– Overall group materiality: £282m (2023: £268m) based on 5% of profit before tax (2023: adjusted profit before tax).

– Overall parent company materiality: £267.5m (2023: £249m) based on 5% of profit before tax (2023: adjusted profit before tax), capped at

the level which is used for the audit of the company as a component of the overall group.

– Performance materiality: £211m (2023: £201m) (group) and £200.5m (2023: £187m) (parent company).


80	HSBC UK Bank plc Annual Report and Accounts 2024

Independent auditors’ report to the members of HSBC UK Bank plc

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial

statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)

identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;

and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were

addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a

separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

The acquisition of HINV (formerly Silicon Valley Bank UK Limited), which was a key audit matter last year, is no longer included because of the

completion of the HINV acquisition in the previous year. Otherwise, the key audit matters below are consistent with last year.


Expected credit loss ('ECL') provision for loans and advances
Key audit matter	Matters discussed with the Audit Committee
Determining ECL involves management judgement and is subject to a high degree of estimation uncertainty. Management makes various assumptions when estimating ECL. We performed a risk assessment to identify those assumptions with significant levels of management judgement and for which variations had the most material impact on ECL. Assumptions were made in determining economic scenarios and their probability weightings (specifically the central and downside scenarios given these have the most material impact on ECL) and in determining the estimated loss for the larger individually assessed wholesale Stage 3 cases, specifically around cash flow assumptions, including timing of cash flows and where applicable, valuation of collateral. The level of estimation uncertainty and judgement in these areas is elevated as a result of uncertainties in the macroeconomic and geopolitical environment and the higher interest rate environment. The modelling methodologies used to estimate ECL are developed using historical experience. We assess the impact of limitations in these methodologies when forecasting the extent and timing of future customer defaults or when responding to emerging risks, such as climate risk. The focus of our assessment of the impact of climate risk on ECL was to evaluate management’s risk assessment process for identifying, quantifying and concluding that the impact of climate risk on ECL for the year end was immaterial.	We reported to the Audit Committee our observations covering governance and controls over ECL, the assumptions used and the modelling methodologies implemented by management in determining ECL, with a significant focus on the uncertain prevailing macroeconomic conditions. Our observations regarded: – the severity of economic scenarios, and their related probability weightings; – conclusions over significant assumptions used to estimate the discounted cash flow projections for larger individually assessed credit impaired wholesale exposures; and – the disclosures made in relation to ECL.
How our audit addressed the key audit matter
We assessed the design and effectiveness of governance and controls over the estimation of ECL. We observed management’s review and challenge governance forums for (1) the determination of economic scenarios and their probability weightings, and (2) the assessment of ECL for Retail and Wholesale portfolios. We also tested controls over: – model validation and monitoring; – credit reviews that determine credit risk ratings (‘CRRs’) for wholesale customers; – the input of critical data into source systems and the flow and transformation of critical data from source systems to impairment models; and – the approval of significant individual impairments relating to high value wholesale credit-impaired exposures. We involved our economic experts in assessing the significant assumptions made in determining the severity and probability weighting of economic scenarios. These assessments considered the sensitivity of ECLs to variations in the severity and probability weighting of economic scenarios. We involved our modelling specialists in assessing the appropriateness of the significant assumptions and methodologies used for ECL models. We independently re-performed the calculations for a sample of those models. In respect to a sample of larger individually assessed credit- impaired wholesale exposures, we assessed the significant assumptions used to estimate the discounted cash flow projections, and where appropriate we involved experts to assess the underlying collateral or business valuations. We further considered whether the judgements made in selecting the significant assumptions would indicate possible management bias.
We evaluated management’s risk assessment in respect of the impact of climate change on the ECL provision, including involving our modelling specialists to evaluate the stress testing and scenario analysis methodology used and sensitising key assumptions. Finally, we tested the audited Credit Risk disclosures made in the Annual Report.
Relevant references in the Annual Report and Accounts 2024
Audited credit risk disclosures, Note 1.2(d): Financial instruments measured at amortised cost and Note 1.2(g): Impairment of amortised cost and FVOCI financial assets.


HSBC UK Bank plc Annual Report and Accounts 2024	81



Key audit matter
Valuation of the defined benefit pension obligation	Matters discussed with the Audit Committee
The Group operates a defined benefit pension scheme, which relates to HSBC Bank (UK) pension scheme ('the principal plan'). The present value of the scheme obligation is materially sensitive to a number of actuarial assumptions. We consider the discount rate, inflation and mortality rates to be the most significant assumptions used in determining the defined benefit obligation. Changes in these assumptions can have a material impact on the valuation due to the long duration of the pension liabilities and as such the valuation is considered to be highly judgemental. Management performs a review of the valuation methodology and assumptions each year using their actuarial experts. The assumptions are updated to reflect changing market practice and management’s future outlook. The valuation methodology uses a number of market- based inputs and other financial and demographic assumptions.	We discussed the significant assumptions used by management to determine the value of the defined benefit obligation including the results of the work performed by our actuarial experts.
How our audit addressed the key audit matter
We confirmed our understanding of the Group's third-party actuary's methodologies and key assumptions adopted in calculating the valuation of the defined benefit obligation and reviewed their actuarial report. We considered the independence, objectivity and competence of the third-party actuary engaged by management to perform their valuation. We tested controls in place over the methodologies and the significant assumptions, including those in relation to the use of management's experts. We engaged our actuarial experts to understand the judgements made by management and their actuarial expert in determining the discount rate, inflation rate and mortality rates, and comparing these assumptions to independently compiled expected ranges based on market observable indices and the knowledge and opinions of our experts. We evaluated the appropriateness of the pension disclosures within the financial statements, including the disclosure regarding the sensitivity of assumptions.
Relevant references in the Annual Report and Accounts 2024
Note 1.2(h): Employee compensation and benefits.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a

whole, taking into account the structure of the group and the parent company, the accounting processes and controls, and the industry in

which they operate.

The risks that HSBC faces are diverse, with the interdependencies between them being numerous and complex. In performing our risk

assessment, we engaged with a number of stakeholders to ensure we appropriately understood and considered these risks and their

interrelationships. This included stakeholders within HSBC and our own experts within PwC. This engagement covered external factors across

the geopolitical, macroeconomic, regulatory, and accounting landscape, and the impact of climate change risk. It also covered the strategy and

transformation-driven internal environment at HSBC.

HSBC UK Bank plc is structured into three divisions which are Wealth and Personal Banking, Commercial Banking and Global Banking and

Markets. The divisions operate across a number of subsidiary entities in the United Kingdom. The consolidated financial statements are an

aggregation of the subsidiary entities (‘reporting units’). Each reporting unit submits their financial information to the group which is aggregated

within the group’s main consolidation and financial reporting system.

The risks of material misstatement can be reduced to an acceptable level by testing the entities that are significant due to their size and those

that drive particular significant risks identified as part of our risk assessment. We continually assessed risks and changed the scope of our audit

where necessary.

As a result of our group scoping, we determined that an audit of the complete financial information of HSBC UK Bank plc (parent company) was

necessary, owing to its financial significance and risks.

We then considered the significance of other reporting units in relation to primary statement account balances. In doing this we also considered

the presence of any significant audit risks and other qualitative factors (including history of misstatements through fraud or error). For the

remaining reporting units, the risk of material misstatement was mitigated through group audit procedures including testing of entity level

controls, IT general controls and subsidiary level risk assessment analytical review procedures.

Additional audit procedures were performed on certain group-level account balances.

Certain balances were audited by the PwC HSBC Holdings plc Group engagement team over Group level accounts. HSBC has entity level

controls that have relevance across the Group. They also operate other global and regional governance and controls over aspects of financial

reporting, such as those operated by the Global Risk function for expected credit losses. A significant amount of IT and operational processes

and controls relevant to financial reporting are undertaken in operations centres run by Digital Business Services ('DBS'). Whilst these

operations centres are not separate components, the IT and operational processes and controls are relevant to the financial information of

HSBC UK Bank plc. Financial reporting processes and controls are also performed centrally in HSBC UK Bank plc’s finance team, including the

impairment assessment of investment in subsidiaries, the consolidation of the HSBC UK Bank plc's results, the preparation of financial

statements, and certain management oversight controls relevant to financial reporting.

HSBC Holdings plc group-wide processes or processes in DBS and Finance Operations are subject to specified audit procedures. These

procedures primarily relate to testing of IT general controls, forward looking economic scenarios for ECL, operating expenses, intangible assets,

valuation of financial instruments, intercompany eliminations, reconciliations, and consolidation as well as payroll. For these areas, we directed

and provided oversight of the audit work performed by PwC teams in the UK or overseas, supplemented by our own testing. This audit work,


82	HSBC UK Bank plc Annual Report and Accounts 2024

Independent auditors’ report to the members of HSBC UK Bank plc

together with risk assessment analytical review procedures and assessing the outcome of local external audits, also addressed the risk of

material misstatement for balances in entities that were not part of the significant component.

For the parent company, the group audit engagement partner was also the partner overseeing the audit work performed.

For the parent company, we determined our scope of work using our risk assessment and parent company materiality level. Based on these,

we assessed the level of testing required on each financial statement line item in order to be able to give an opinion on the parent company

financial statements. We utilised work performed over the HSBC UK Bank plc reporting unit as part of the group audit, performing further work

where necessary, and testing parent company balances such as investments in subsidiaries.

The impact of climate risk on our audit

In considering the impact of climate risk on our audit, we:

– Made enquiries of management to understand the extent of the potential impact of climate risk on the group’s financial statements and we

remained alert when performing our audit procedures for any indicators of the impact of climate risk.

– Evaluated and challenged management's assessment of the impact of climate change risk, which includes the potential impact on ECL,

classification and measurement of financial instruments and going concern assumption.

– Read the disclosures in relation to climate risk made in the other information within the Annual Report to ascertain whether the disclosures

are materially consistent with the group financial statements and our knowledge from our audit. Our responsibility over other information is

further described in the Reporting on other information section of our report.

Our procedures did not identify any material impact as a result of climate risk on the group’s and parent company’s financial statements.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together

with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the

individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the

financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:


	Financial statements - group	Financial statements - parent company
Overall materiality	£282m (2023: £268m)	£267.5m (2023: £249m)
How we determined it	5% of profit before tax	5% of profit before tax
Rationale for benchmark applied	Profit before tax (group and parent) is the primary measure used by shareholders in assessing the performance of the group and the parent company. Parent company materiality has been capped at the level which is used for the audit of the company as a component of the overall group. The benchmark used in 2023 was adjusted profit before tax. The adjusted profit before tax considered the gain on bargain purchase related to the acquisition of HSBC Innovation Bank Limited as a one-off transaction to be unrelated to the underlying performance of the group and it is considered irrelevant in 2024.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of

materiality allocated across components was £14.1m – £211m. Certain components were audited to a local statutory audit materiality that was

also less than our overall group materiality.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected

misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature

and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our

performance materiality was 75% (2023: 75%) of overall materiality, amounting to £211m (2023: £201m) for the group financial statements and

£200.5m (2023: £187m) for the parent company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and

aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £14.1m (group audit)

(2023: £13m) and £13m (parent company audit) (2023: £12m) as well as misstatements below those amounts that, in our view, warranted

reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the directors’ assessment of the group's and the parent company’s ability to continue to adopt the going concern basis of

accounting included:

– Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including both internal risks (i.e.

strategy execution) and external risks (i.e. macroeconomic conditions).

– Understanding and evaluating the group’s financial forecasts.

– Understanding and evaluating credit agency ratings and actions.

– Understanding and evaluating the group's stress testing of liquidity and regulatory capital, including the severity of the stress scenarios that

were used.

– Reading and evaluating the adequacy and appropriateness of the disclosures made in the financial statements in relation to going concern.

Based on the work performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,

may cast significant doubt on the group's and the parent company’s ability to continue as a going concern for a period of at least twelve

months from when the financial statements are authorised for issue.


HSBC UK Bank plc Annual Report and Accounts 2024	83

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of

the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the parent

company's ability to continue as a going concern.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.

The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,

accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance

thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether

the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be

materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to

conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on

the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report based on these responsibilities.

With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the UK Companies

Act 2006 have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as

described below.

Strategic report and Report of the Directors

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Report of the

Directors for the year ended 31 December 2024 is consistent with the financial statements and has been prepared in accordance with

applicable legal requirements.

In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did

not identify any material misstatements in the Strategic report and Report of the Directors.

Responsibilities for the financial statements and the audit

Responsibilities of the Directors for the financial statements

As explained more fully in the Statement of directors’ responsibilities in respect of the financial statements, the directors are responsible for

the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair

view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors

either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but

is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected

to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,

outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of

detecting irregularities, including fraud, is detailed below.

Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related

to breaches of financial crime laws and regulations and regulatory compliance, including regulatory reporting requirements and conduct of

business, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered

those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006 and UK tax legislation. We

evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of

controls) and determined that the principal risks were related to posting inappropriate journal entries in relation to cost targets, and

management bias in accounting estimates and judgements. Audit procedures performed by the engagement team included:

– Review of correspondence with and reports from regulators, including the Prudential Regulation Authority ('PRA') and Financial Conduct

Authority ('FCA').

– Review of reporting to the Audit Committee and the Risk Committee in respect of compliance and legal matters.

– Enquiry of management and review of internal audit reports, insofar as they related to the financial statements.

– Obtaining legal confirmations from legal advisors relating to material litigation matters.

– Assessing matters reported on the group's whistleblowing programmes and the results of management's investigation of such matters,

insofar as they related to the financial statements.

– Challenging assumptions and judgements made by management in its significant accounting estimates, in particular in relation to the

determination of expected credit losses, and the valuation of defined benefit pensions obligations.

– Obtaining confirmations from third parties to confirm the existence of a sample of balances.

– Identifying and testing journal entries, including those posted with certain descriptions and posted to certain account combinations.


84	HSBC UK Bank plc Annual Report and Accounts 2024

Independent auditors’ report to the members of HSBC UK Bank plc

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with

laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting

a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate

concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.

However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to

target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a

conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/

auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3

of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any

other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior

consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

– we have not obtained all the information and explanations we require for our audit; or

– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from

branches not visited by us; or

– certain disclosures of directors’ remuneration specified by law are not made; or

– the parent company financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the members on 7 August 2017 to audit the financial

statements for the year ended 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement is 8 years,

covering the years ended 31 December 2017 to 31 December 2024.

Other matter

The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these financial statements

in an annual financial report prepared under the structured digital format required by DTR 4.1.15R - 4.1.18R and filed on the National Storage

Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over whether the structured digital format annual

financial report has been prepared in accordance with those requirements.

Hamish Anderson (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Birmingham

18 February 2025


HSBC UK Bank plc Annual Report and Accounts 2024	85

Financial statements



Contents
86	Consolidated income statement
87	Consolidated statement of comprehensive income
88	Consolidated balance sheet
89	Consolidated statement of changes in equity
90	Consolidated statement of cash flows
91	HSBC UK Bank plc balance sheet
92	HSBC UK Bank plc statement of changes in equity
93	HSBC UK Bank plc statement of cash flows

Notes on the financial statements



Contents
94	1	Basis of preparation and material accounting policies	118	17	Debt securities in issue
102	2	Net fee income	119	18	Accruals, deferred income and other liabilities
102	3	Employee compensation and benefits	119	19	Provisions
107	4	Auditors’ remuneration	121	20	Subordinated liabilities
108	5	Tax	122	21	Maturity analysis of assets, liabilities and off-balance sheet commitments
109	6	Dividends	122	21
110	7	Fair values of financial instruments carried at fair value	127	22	Offsetting of financial assets and financial liabilities
111	8	Fair values of financial instruments not carried at fair value	128	23	Called up share capital and other equity instruments
112	9	Derivatives	128	24	Contingent liabilities, contractual commitments, guarantees and contingent assets
115	10	Financial investments
115	11	Assets pledged, collateral received and assets transferred	129	25	Finance lease receivables
116	12	Interests in joint ventures	129	26	Legal proceedings and regulatory matters
116	13	Investments in subsidiaries	130	27	Related party transactions
117	14	Structured entities	132	28	Events after the balance sheet date
117	15	Goodwill and intangible assets	132	29	HSBC UK Bank plc’s subsidiaries and joint ventures
118	16	Prepayments, accrued income and other assets


86	HSBC UK Bank plc Annual Report and Accounts 2024

Financial statements

Consolidated income statement


for the year ended 31 December
		2024	2023
	Notes	£m	£m
Net interest income		8,084	7,787
– interest income1,2,3		14,789	12,915
– interest expense		(6,705)	(5,128)
Net fee income	2	1,308	1,284
– fee income		1,605	1,554
– fee expense		(297)	(270)
Net income from financial instruments held for trading or managed on a fair value basis		454	414
Gain on acquisition of subsidiary4		—	1,307
Other operating income		133	15
Net operating income before change in expected credit losses and other credit impairment charges		9,979	10,807
Change in expected credit losses and other credit impairment charges		(315)	(421)
Net operating income		9,664	10,386
Employee compensation and benefits	3	(1,128)	(1,007)
General and administrative expenses		(2,442)	(2,265)
Depreciation and impairment of property, plant and equipment and right-of-use assets		(99)	(116)
Amortisation and impairment of intangible assets		(348)	(319)
Total operating expenses		(4,017)	(3,707)
Operating profit		5,647	6,679
Profit before tax		5,647	6,679
Tax expense	5	(1,508)	(1,425)
Profit for the year		4,139	5,254
Attributable to:
– shareholders of the parent company		4,134	5,249
– non-controlling interests		5	5
Profit for the year		4,139	5,254

1Interest income recognised on financial assets measured at amortised cost is £13,836m (2023: £12,478m).

2Interest income recognised on financial assets measured at FVOCI is £953m (2023: £435m).

3Interest income calculated using the effective interest method comprises interest recognised on financial assets measured at either amortised cost or fair value

through other comprehensive income.

4Gain of £1,307m recognised in respect of the acquisition of SVB UK in 2023.


HSBC UK Bank plc Annual Report and Accounts 2024	87

Consolidated statement of comprehensive income


for the year ended 31 December
	2024	2023
	£m	£m
Profit for the year	4,139	5,254
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value through other comprehensive income	(35)	66
– fair value gains/(losses)	(17)	16
– fair value (gains)/losses transferred to the income statement on disposal	(31)	66
– income taxes	13	(16)
Cash flow hedges	(365)	1,031
– fair value gains/(losses)	(1,496)	548
– fair value losses reclassified to the income statement	989	884
– income taxes	142	(401)
Exchange differences	1	8
– other exchange differences	1	8
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit asset	(285)	(128)
– before income taxes	(398)	(176)
– income taxes	113	48
Other comprehensive income/(expense) for the year, net of tax	(684)	977
Total comprehensive income for the year	3,455	6,231
Attributable to:
– shareholders of the parent company	3,450	6,226
– non-controlling interests	5	5
Total comprehensive income for the year	3,455	6,231


88	HSBC UK Bank plc Annual Report and Accounts 2024

Financial statements

Consolidated balance sheet


at 31 December
		2024	2023
	Notes	£m	£m
Assets
Cash and balances at central banks		52,276	65,719
Financial assets mandatorily measured at fair value through profit or loss	7	174	135
Derivatives	9	298	178
Loans and advances to banks		7,263	7,980
Loans and advances to customers		217,604	211,887
Reverse repurchase agreements – non-trading		11,776	7,686
Financial investments	10	37,801	26,315
Prepayments, accrued income and other assets1	16	9,303	8,605
Interests in joint ventures	12	9	8
Goodwill and intangible assets	15	4,373	4,363
Total assets		340,877	332,876
Liabilities and equity
Liabilities
Deposits by banks		11,144	10,843
Customer accounts		280,366	268,345
Repurchase agreements – non-trading		420	4,652
Derivatives	9	107	108
Debt securities in issue	17	2,044	1,988
Accruals, deferred income and other liabilities1	18	3,476	4,535
Current tax liabilities		449	276
Provisions	19	265	350
Deferred tax liabilities	5	949	1,111
Subordinated liabilities	20	15,686	14,598
Total liabilities		314,906	306,806
Equity
Called up share capital	23	—	—
Share premium account	23	—	9,015
Other equity instruments	23	2,196	2,196
Other reserves		1,579	7,226
Retained earnings		22,136	7,573
Total shareholders’ equity		25,911	26,010
Non-controlling interests		60	60
Total equity		25,971	26,070
Total liabilities and equity		340,877	332,876

The accompanying notes on pages 94 to 133 and the audited sections in: the 'Financial summary' on pages 10 to 13 and the ‘Report of the

Directors’ on pages 16 to 78 form an integral part of these financial statements.

1In 2023 ‘Items in the course of collection from other banks’ (£284m) were presented on the face of the balance sheet but are now reported within

‘Prepayments, accrued income and other assets’ in the Annual Report and Accounts 2024. Similarly, ‘Items in the course of transmission to other

banks’ (£411m) are now presented within ‘Accruals, deferred income and other liabilities’.

These financial statements were approved by the Board of Directors on 18 February 2025 and signed on its behalf by:

John David Stuart

Director


HSBC UK Bank plc Annual Report and Accounts 2024	89

Consolidated statement of changes in equity


for the year ended 31 December
				Other reserves
	Called up share capital and share premium	Other equity instru- ments	Retained earnings	Financial assets at FVOCI reserve	Cash flow hedging reserve	Group re- organisa- tion reserve2	Total share- holders’ equity	Non- controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	9,015	2,196	7,573	(172)	(293)	7,691	26,010	60	26,070
Profit for the year	—	—	4,134	—	—	—	4,134	5	4,139
Other comprehensive income (net of tax)	—	—	(285)	(34)	(365)	—	(684)	—	(684)
– debt instruments at fair value through other comprehensive income	—	—	—	(35)	—	—	(35)	—	(35)
– cash flow hedges	—	—	—	—	(365)	—	(365)	—	(365)
– remeasurement of defined benefit asset/ liability	—	—	(285)	—	—	—	(285)	—	(285)
– exchange differences	—	—	—	1	—	—	1	—	1
Total comprehensive income for the year	—	—	3,849	(34)	(365)	—	3,450	5	3,455
Dividends to shareholders	—	—	(3,564)	—	—	—	(3,564)	(5)	(3,569)
Share premium reclassification to retained earnings1	(9,015)	—	9,015	—	—	—	—	—	—
Capitalisation of Group reorganisation reserve through bonus share issuance1	5,248	—	—	—	—	(5,248)	—	—	—
Cancellation of bonus shares1	(5,248)	—	5,248	—	—	—	—	—	—
Other movements3	—	—	15	—	—	—	15	—	15
At 31 Dec 2024	—	2,196	22,136	(206)	(658)	2,443	25,911	60	25,971

At 1 Jan 2023	9,015	2,196	4,834	(246)	(1,324)	7,691	22,166	60	22,226
Profit for the year	—	—	5,249	—	—	—	5,249	5	5,254
Other comprehensive income (net of tax)	—	—	(128)	74	1,031	—	977	—	977
– debt instruments at fair value through other comprehensive income	—	—	—	66	—	—	66	—	66
– cash flow hedges	—	—	—	—	1,031	—	1,031	—	1,031
– remeasurement of defined benefit asset/ liability	—	—	(128)	—	—	—	(128)	—	(128)
– exchange differences	—	—	—	8	—	—	8	—	8
Total comprehensive income for the year	—	—	5,121	74	1,031	—	6,226	5	6,231
Dividends to shareholders	—	—	(2,411)	—	—	—	(2,411)	(5)	(2,416)
Share premium reclassification to retained earnings1	—	—	—	—	—	—	—	—	—
Capitalisation of Group reorganisation reserve through bonus share issuance1	—	—	—	—	—	—	—	—	—
Cancellation of bonus shares1	—	—	—	—	—	—	—	—	—
Other movements3	—	—	29	—	—	—	29	—	29
At 31 Dec 2023	9,015	2,196	7,573	(172)	(293)	7,691	26,010	60	26,070

1 During Q4 2024, HSBC UK Bank plc converted £5.2bn of its group reorganisation reserve and £9.0bn of its share premium account into retained earnings. For

further details, please refer to Note 23.

2 The Group reorganisation reserve is an equity reserve which was used to recognise the contribution of equity reserves associated with the ring fenced

businesses that were notionally transferred from HSBC Bank plc. As at 31 Dec 2024, the balance mainly comprises of the reserve created on consolidation for

the goodwill transfer.

3 Relates to £(7)m pension assets transfer from HSBC Global Services (UK) Limited and HSBC Bank plc (2023: £5m) and share based payments cost of £20m in

2024 (2023: £24m).


90	HSBC UK Bank plc Annual Report and Accounts 2024

Financial statements

Consolidated statement of cash flows


for the year ended 31 December
	2024	2023
	£m	£m
Profit before tax	5,647	6,679
Adjustments for non-cash items:
Depreciation, amortisation and impairment	447	435
Net gain from investing activities	(38)	79
Gain on acquisition of SVB UK	—	(1,307)
Change in expected credit losses gross of recoveries and other credit impairment charges	386	472
Provisions including pensions	(198)	(233)
Share-based payment expense	28	19
Other non-cash items included in profit before tax	(249)	(149)
Elimination of exchange differences1	142	332
Changes in operating assets and liabilities
Change in net trading securities and derivatives	(626)	1,615
Change in loans and advances to banks and customers	(5,073)	(2,773)
Change in reverse repurchase agreements – non-trading	(1,952)	(264)
Change in financial assets mandatorily measured at fair value	(39)	(27)
Change in other assets	(748)	114
Change in deposits by banks and customer accounts	12,322	(20,028)
Change in repurchase agreements – non-trading	(4,231)	(5,086)
Change in debt securities in issue	56	689
Change in other liabilities	(900)	605
Contributions paid to defined benefit plans	(1)	(17)
Tax paid	(1,209)	(1,182)
Net cash from operating activities	3,764	(20,027)
Purchase of financial investments	(33,396)	(17,640)
Proceeds from the sale and maturity of financial investments	22,617	10,222
Proceeds from sale of property, plant and equipment	27	67
Purchase of property, plant and equipment	(71)	(45)
Purchase of intangible assets	(363)	(325)
Proceeds from sale of intangible assets	1	—
Net cash flow from acquisition of SVB UK	—	1,023
Net cash from investing activities	(11,185)	(6,698)
Subordinated loan capital issued2	3,259	2,250
Subordinated loan capital repaid2	(2,194)	—
Dividends paid to shareholders of the parent company and non-controlling interests	(3,569)	(2,416)
Net cash from financing activities	(2,504)	(166)
Net decrease in cash and cash equivalents	(9,925)	(26,891)
Cash and cash equivalents at 1 Jan	73,381	100,319
Exchange differences in respect of cash and cash equivalents	(90)	(47)
Cash and cash equivalents at 31 Dec3	63,366	73,381
Cash and cash equivalents comprise:
– cash and balances at central banks	52,276	65,719
– loans and advances to banks of one month or less	7,263	6,948
– reverse repurchase agreements with banks of one month or less	2,466	328
– treasury bills, other bills and certificates of deposit less than three months	1,103	503
– cash collateral, net settlement accounts and items in course of collection from/transmission to other banks	258	(117)
Cash and cash equivalents at 31 Dec3	63,366	73,381

Interest received was £14,463m (2023: £12,389m) and interest paid was £6,630m ( 2023: £4,607m).

1Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line basis, as details cannot be

determined without unreasonable expense.

2Subordinated liabilities changes during the year are attributable to cash flows from issuance of securities of £3,259m (2023: £2,250m) and repayments of

£(2,194)m (2023: £nil). Non-cash changes during the year included foreign exchange gain/(losses) of £(55)m (2023: £277m).

3At 31 December 2024 £6,190m (2023: £6,770m) was not available for use by the group, mainly related to mandatory deposits at central banks.


HSBC UK Bank plc Annual Report and Accounts 2024	91

HSBC UK Bank plc balance sheet


at 31 December
		2024	2023
	Notes	£m	£m
Assets
Cash and balances at central banks		52,275	65,719
Financial assets mandatorily measured at fair value through profit or loss	7	174	135
Derivatives	9	295	175
Loans and advances to banks		13,070	13,642
Loans and advances to customers		206,187	201,014
Reverse repurchase agreements – non-trading		11,776	7,686
Financial investments	10	37,597	26,104
Investments in subsidiaries	13	1,148	918
Prepayments, accrued income and other assets1	16	9,226	8,213
Interests in joint ventures	12	5	5
Goodwill and intangible assets	15	1,221	1,201
Total assets		332,974	324,812
Liabilities and equity
Liabilities
Deposits by banks		14,780	14,120
Customer accounts		274,160	262,342
Repurchase agreements – non-trading		420	4,652
Derivatives	9	107	108
Debt securities in issue	17	1,621	1,564
Accruals, deferred income and other liabilities1	18	3,244	4,210
Current tax liabilities		281	175
Provisions	19	246	327
Deferred tax liabilities	5	971	1,151
Subordinated liabilities	20	15,686	14,598
Total liabilities		311,516	303,247
Equity
Called up share capital	23	—	—
Share premium account	23	—	9,015
Other equity instruments	23	2,196	2,196
Other reserves		(866)	4,777
Retained earnings		20,128	5,577
Total equity		21,458	21,565
Total liabilities and equity		332,974	324,812

Profit after tax for the year was £4,125m (2023: £3,683m).

The accompanying notes on pages 94 to 133, and the audited sections of the ‘Report of the Directors’ on pages 16 to 78 form an integral part

of these financial statements.

1In 2023 ‘Items in the course of collection from other banks’ (£96m) were presented on the face of the balance sheet but are now reported within ‘Prepayments,

accrued income and other assets’ in the Annual Report and Accounts 2024. Similarly, ‘Items in the course of transmission to other banks’ (£408m) are now

presented within ‘Accruals, deferred income and other liabilities’.

These financial statements were approved by the Board of Directors on 18 February 2025 and signed on its behalf by:

John David Stuart

Director


92	HSBC UK Bank plc Annual Report and Accounts 2024

Financial statements

HSBC UK Bank plc statement of changes in equity


for the year ended 31 December
				Other reserves
	Called up share capital and share premium	Other equity instruments	Retained earnings	Financial assets at FVOCI reserve	Cash flow hedging reserve	Group re- organisation2 reserve	Total share- holders’ equity
	£m	£m	£m	£m	£m	£m	£m
At 1 Jan 2024	9,015	2,196	5,578	(178)	(293)	5,248	21,566
Profit for the year	—	—	4,125	—	—	—	4,125
Other comprehensive expense (net of tax)	—	—	(285)	(30)	(365)	—	(680)
– debt instruments at fair value through other comprehensive income	—	—	—	(31)	—	—	(31)
– cash flow hedges	—	—	—	—	(365)	—	(365)
– remeasurement of defined benefit asset/ liability	—	—	(285)	—	—	—	(285)
– exchange differences	—	—	—	1	—	—	1
Total comprehensive income for the year	—	—	3,840	(30)	(365)	—	3,445
Dividends to shareholders	—	—	(3,564)	—	—	—	(3,564)
Share premium reclassification to retained earnings1	(9,015)	—	9,015	—	—		—
Capitalisation of Group reorganisation reserve through bonus share issuance1	5,248	—		—	—	(5,248)	—
Cancellation of bonus shares1	(5,248)	—	5,248	—	—		—
Other movements3	—	—	11	—	—	—	11
At 31 Dec 2024	—	2,196	20,128	(208)	(658)	—	21,458

At 1 Jan 2023	9,015	2,196	4,405	(246)	(1,324)	5,248	19,294
Profit for the year	—	—	3,683	—	—	—	3,683
Other comprehensive income (net of tax)	—	—	(128)	68	1,031	—	971
– debt instruments at fair value through other comprehensive income	—	—	—	60	—	—	60
– cash flow hedges	—	—	—	—	1,031	—	1,031
– remeasurement of defined benefit asset/ liability	—	—	(128)	—	—	—	(128)
– exchange differences	—	—	—	8	—	—	8
Total comprehensive income for the year	—	—	3,555	68	1,031	—	4,654
Dividends to shareholders	—	—	(2,411)	—	—	—	(2,411)
Share premium reclassification to retained earnings1	—	—	—	—	—	—	—
Capitalisation of Group reorganisation reserve through bonus share issuance1	—	—	—	—	—	—	—
Cancellation of bonus shares1	—	—	—	—	—	—	—
Other movements3	—	—	29	—	—	—	29
At 31 Dec 2023	9,015	2,196	5,578	(178)	(293)	5,248	21,566

1 In Q4 2024, HSBC UK Bank plc converted £5.2bn of its group reorganisation reserve and £9.0bn of its share premium account into retained earnings. For further

details, please refer Note 23.

2 The Group reorganisation reserve is an equity reserve which was used to recognise the contribution of equity reserves associated with the ring fenced

businesses that were notionally transferred from HSBC Bank plc.

3 Relates to £(7)m pension assets transfer from HSBC Global Services (UK) Limited and HSBC Bank plc (2023: £5m) and share based payments cost of £18m in

2024 (2023: £24m).


HSBC UK Bank plc Annual Report and Accounts 2024	93

HSBC UK Bank plc statement of cash flows


for the year ended 31 December
	2024	2023
	£m	£m
Profit before tax	5,489	4,978
Adjustments for non-cash items:
Depreciation, amortisation and impairment	419	411
Net gain from investing activities	(37)	165
Change in expected credit losses gross of recoveries and other credit impairment charges	308	380
Provisions including pensions	(198)	(224)
Share-based payment expense	21	19
Other non-cash items included in profit before tax	(240)	(149)
Elimination of exchange differences1	201	332
Changes in operating assets and liabilities
Change in net trading securities and derivatives	(626)	1,606
Change in loans and advances to banks and customers	(5,072)	(1,900)
Change in reverse repurchase agreements – non-trading	(1,952)	(264)
Change in financial assets mandatorily measured at fair value	(39)	(27)
Change in other assets	(1,266)	(146)
Change in deposits by banks and customer accounts	12,478	(14,733)
Change in repurchase agreements – non-trading	(4,231)	(4,683)
Change in debt securities in issue	57	473
Change in other liabilities	(799)	656
Contributions paid to defined benefit plans	(1)	(17)
Tax paid	(1,156)	(1,145)
Net cash from operating activities	3,356	(14,268)
Purchase of financial investments	(33,404)	(20,071)
Proceeds from the sale and maturity of financial investments	22,618	10,294
Proceeds from sale of property, plant and equipment	13	8
Purchase of property, plant and equipment	(71)	(42)
Purchase of intangible assets	(346)	(319)
Proceeds from sale of intangible assets	1	—
Net cash from investing activities	(11,189)	(10,130)
Subordinated loan capital issued2	3,259	2,250
Subordinated loan capital repaid2	(2,194)	—
Dividends paid to shareholders of the parent company	(3,564)	(2,411)
Net cash from financing activities	(2,499)	(161)
Net decrease in cash and cash equivalents	(10,332)	(24,559)
Cash and cash equivalents at 1 Jan	75,910	100,516
Exchange differences in respect of cash and cash equivalents	(150)	(47)
Cash and cash equivalents at 31 Dec3	65,428	75,910
Cash and cash equivalents comprise:
– cash and balances at central banks	52,275	65,719
– loans and advances to banks of one month or less	9,666	9,832
– reverse repurchase agreements with banks of one month or less	2,466	328
– treasury bills, other bills and certificates of deposit less than three months	933	333
– cash collateral, net settlement accounts and items in course of collection from/transmission to other banks	88	(302)
Cash and cash equivalents at 31 Dec3	65,428	75,910

Interest received was £13,642m (2023: £11,673m), interest paid was £6,581m (2023: £4,554m) and dividends received were £354m (2023:

£140m).

1Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on line-by-line basis, as details cannot be

determined without unreasonable expense.

2Subordinated liabilities changes during the year are attributable to cash flows from issuance of securities of £3,259m (2023: £2,250m) and repayments of

£(2,194)m (2023: £nil). Non-cash changes during the year included foreign exchange gain/(losses) of £(55)m (2023: £277m).

3At 31 December 2024,£6,020m (2023: £6,600m) was not available for use by the bank, mainly related to mandatory deposits at central banks.


94	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

1Basis of preparation and material accounting policies

1.1Basis of preparation

(a)Compliance with International Financial Reporting Standards

The consolidated financial statements of HSBC UK and the separate financial statements of the bank comply with UK-adopted international

accounting standards and with the requirements of the Companies Act 2006. These financial statements are also prepared in accordance with

International Financial Reporting Standards as issued by the International Accounting Standards Board ('IFRS Accounting Standards'), including

interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS Accounting Standards for the

periods presented. There were no unendorsed standards effective for the year ended 31 December 2024 affecting these consolidated and

separate financial statements.

IFRS Accounting Standards adopted during the year ended 31 December 2024

There were no new standards, amendments to standards or interpretations that had an effect on these financial statements. Accounting

policies have been applied consistently.

(b)Future accounting developments

Minor amendments to IFRS Accounting Standards

The International Accounting Standards Board (‘IASB') has published a number of minor amendments to IFRS Accounting standards that are

effective from 1 January 2025. The group expects they will have an insignificant effect, when adopted, on the consolidated financial statements

of the group and the separate financial statements of the bank.

Other amendments and new IFRS Accounting Standards

Amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’

In May 2024, the IASB issued amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’, effective for

annual reporting periods beginning on, or after, 1 January 2026. In addition to guidance as to when certain financial liabilities can be deemed

settled when using an electronic payment system, the amendments also provide further clarification regarding the classification of financial

assets that contain contractual terms that change the timing or amount of contractual cash flows, including those arising from ESG-related

contingencies, and financial assets with certain non-recourse features. The group is undertaking an assessment of the potential impact.

IFRS 18 ‘Presentation and Disclosure in Financial Statements’

In April 2024, the IASB issued IFRS 18 ‘Presentation and Disclosure in Financial Statements’, effective for annual reporting periods beginning

on or after 1 January 2027. The new accounting standard aims to give users of financial statements more transparent and comparable

information about an entity’s financial performance. It will replace IAS 1 ‘Presentation of Financial Statements’ but carries over many

requirements from that IFRS Accounting Standard unchanged. In addition, there are three sets of new requirements relating to the structure of

the income statement, management-defined performance measures and the aggregation and disaggregation of financial information.

While IFRS 18 will not change recognition criteria or measurement bases, it may have an impact on presenting information in the financial

statements, in particular the income statement and to a lesser extent the cash flow statement. HSBC Group are currently assessing impacts

and data readiness before developing a more detailed implementation plan.

(c)Foreign currencies

The functional currency of the bank is sterling, which is also the presentational currency of the consolidated financial statements of

the group.

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Assets and liabilities denominated in

foreign currencies are translated at the rate of exchange at the balance sheet date except non-monetary assets and liabilities measured at

historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in other

comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised.

(d)Presentation of information

Certain disclosures required by IFRS Accounting Standards have been included in the sections marked as ('Audited') in the Annual Report and

Accounts 2024 as follows:

– disclosures concerning the nature and extent of risks relating to financial instruments are included in the ‘Risk review’ on pages 16 to 72;

and

– capital disclosures are included in the ‘Risk review’ on pages 66 to 68.

In publishing the parent company financial statements together with the group financial statements, the bank has taken advantage of the

exemption in Section 408(3) of the Companies Act 2006 not to present its individual income statement and related notes.

(e)Critical estimates and judgements

The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent

uncertainties and the high level of subjectivity involved in the recognition or measurement of items highlighted as the critical estimates and

judgements in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on which management’s

estimates are based. This could result in materially different estimates and judgements from those reached by management for the purposes

of these financial statements. Management’s selection of the group’s accounting policies that contain critical estimates and judgements

reflects the materiality of the items to which the policies are applied and the high degree of judgement and estimation uncertainty involved.


HSBC UK Bank plc Annual Report and Accounts 2024	95

Management has considered the impact of climate-related risks on HSBC UK’s financial position and performance. While the effects of climate

change are a source of uncertainty, as at 31 December 2024 management did not consider there to be a material impact on our critical

judgements and estimates from the physical, transition and other climate-related risks in the short to medium term. In particular management

has considered the known and observable potential impacts of climate-related risks of associated judgements and estimates in our value in use

('VIU') calculations.

(f)Segmental analysis

HSBC UK's chief operating decision-maker is the group Chief Executive, supported by the group Executive Committee, and operating

segments are reported in a manner consistent with the internal reporting provided to the group Chief Executive and the group Executive

Committee.

Measurement of segmental assets, liabilities, income and expenses is in accordance with the group’s accounting policies. Segmental income

and expenses include transfers between segments and these transfers are conducted at arm’s length. Shared costs are included in segments

on the basis of the actual recharges made.

The types of products and services from which each reportable segment derives its revenue are discussed in the ‘Strategic report | Our global

businesses’.

(g)Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the group and bank have the resources to

continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating

to present and future conditions, including future projections of profitability, cash flows, capital requirements and capital resources.

These considerations include stressed scenarios that reflect the uncertainty in the macroeconomic environment following uncertain inflation,

rapidly changing interest rates, and disrupted supply chains as a result of the Russia-Ukraine war, and conflict in the Middle East. They also

considered other top and emerging risks, including climate change, as well as from the related impacts on profitability, capital and liquidity.

1.2Summary of material accounting policies

(a)Consolidation and related policies

Investments in subsidiaries

Where an entity is governed by voting rights, the group consolidates when it holds, directly or indirectly, the necessary voting rights to pass

resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors,

including having exposure to variability of returns, power to direct relevant activities and whether power is held as agent or principal.

Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair value

or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. The election is made for each business

combination.

Goodwill

Goodwill is allocated to CGUs for the purpose of impairment testing, which is undertaken at the lowest level at which goodwill is monitored for

internal management purposes. The group‘s CGUs are based on the business lines described in the Strategic Report. Impairment testing is

performed once a year, or whenever there is an indication of impairment, by comparing the recoverable amount of a CGU with its carrying

amount.

Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within such a

CGU. The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the

portion of the CGU retained.

Interests in associates and joint arrangements

Joint arrangements are investments in which the group, together with one or more parties, has joint control. Depending on the group’s rights

and obligations, the joint arrangement is classified as either a joint operation or a joint venture. The group classifies investments in entities over

which it has significant influence, and that are neither subsidiaries nor joint arrangements, as associates.

The group recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and interests in joint ventures

are recognised using the equity method. The attributable share of the results and reserves of joint ventures and associates is included in the

consolidated financial statements of the group, based on either financial statements made up to 31 December, or pro-rated amounts adjusted

for any material transactions or events occurring between the date the financial statements are available and 31 December.

Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the

investment may be impaired. Goodwill on acquisition of interests in joint ventures and associates is not tested separately for impairment, but is

assessed as part of the carrying amount of the investment.

(b)Income and expense

Operating income

Interest income and expense

Interest income and expense for all financial instruments, excluding those classified as held for trading are recognised in ‘interest income’ and

‘interest expense’ in the income statement using the effective interest method.

Interest on credit-impaired financial assets is recognised by applying the effective interest rate ('EIR') to the amortised cost (i.e. gross carrying

amount of the asset less allowance for ECL).

Non-interest income and expense

The group generates fee income from services provided over time, such as account service and card fees, or when it delivers a specific

transaction at a point in time, such as broking services and import/export services. With the exception of certain performance fees, all other

fees are generated at a fixed price. Fund management and performance fees can be variable depending on the size of the customer portfolio


96	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

and the group’s performance as fund manager. Variable fees are recognised when all uncertainties are resolved. Fee income is generally

earned from short-term contracts with payment terms that do not include a significant financing component.

The group acts as principal in the majority of contracts with customers, with the exception of broking services. For most brokerage trades, the

group acts as agent in the transaction and recognises broking income net of fees payable to other parties in the arrangement.

The group recognises fees earned on transaction-based arrangements at a point in time when it has fully provided the service to the customer.

Where the contract requires services to be provided over time, income is recognised on a systematic basis over the life of the agreement.

Where the group offers a package of services that contains multiple non-distinct performance obligations, such as those included in account

service packages, the promised services are treated as a single performance obligation. If a package of services contains distinct performance

obligations, such as those including both account and insurance services, the corresponding transaction price is allocated to each performance

obligation based on the estimated stand-alone selling prices.

Dividend income is recognised when the right to receive payment is established.

The group buys and sells currencies to customers, as principal and presents the results of this activity, including the related gains and losses

from changes in foreign exchange rates, as trading.

Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:

– ‘Net income from financial instruments held for trading or managed on a fair value basis’: This comprises net trading activities, which

includes all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other financial

instruments managed on a fair value basis, together with the related interest income, interest expense and dividend income, excluding the

effect of changes in the credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the fair

value of derivatives that are managed in conjunction with financial assets and liabilities measured at fair value through profit or loss.

– ‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’: This includes interest on

instruments that fail the solely payments of principal and interest ('SPPI') test, see (d) below.

(c)Valuation of financial instruments

All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument on initial

recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a difference

between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an active market or a

valuation technique that uses only data from observable markets, the group recognises the difference as a trading gain or loss at inception (a

‘day 1 gain or loss’). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the

transaction until the transaction matures, is closed out, the valuation inputs become observable or HSBC UK enters into an offsetting

transaction.

The fair value of financial instruments is generally measured on an individual basis. Financial instruments are classified into one of three fair

value hierarchy levels, described in Note 7, ‘Fair values of financial instruments carried at fair value’.

(d)Financial instruments measured at amortised cost

Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash

flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances

to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. The group accounts for

regular way amortised cost financial instruments using trade date accounting. The carrying value of these financial assets at initial recognition

includes any directly attributable transactions costs.

Non-trading reverse repurchase, repurchase and similar agreements

When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance

sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell (‘reverse repos’) are

not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading repos and reverse repos

are measured at amortised cost. The difference between the sale and repurchase price or between the purchase and resale price is treated as

interest and recognised in net interest income over the life of the agreement.

Finance lease receivables

Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets are classified as

finance leases. They are recorded at an amount equal to the net investment in the lease, less any impairment allowance. The net investment in

finance leases represents the sum of the minimum payments receivable (gross investment in the lease) discounted at the rate of interest

implicit in the lease. Initial direct costs incurred in arranging the lease, less any fee income related to the lease, are included in the initial

measurement of the net investment.

(e)Financial assets measured at fair value through other comprehensive income

Financial assets managed within a business model that is achieved by both collecting contractual cash flows and selling and which contain

contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at FVOCI.

These comprise primarily debt securities. They are recognised on the trade date when the group enters into contractual arrangements to

purchase and are generally derecognised when they are either sold or redeemed. They are subsequently remeasured at fair value with changes

therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognised in other

comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses in other comprehensive income are recognised

in the income statement as ‘Gains less losses from financial instruments’. Financial assets measured at FVOCI are included in the impairment

calculations set out below and impairment is recognised in profit or loss.

(f)Derivatives

Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other indices.

Derivatives are recognised initially and are subsequently measured at fair value through profit or loss. Derivatives are classified as assets when


HSBC UK Bank plc Annual Report and Accounts 2024	97

their fair value is positive or as liabilities when their fair value is negative. This includes embedded derivatives in financial liabilities, which are

bifurcated from the host contract when they meet the definition of a derivative on a stand-alone basis.

Hedge accounting

When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge

accounting relationships where the required criteria for documentation and hedge effectiveness are met. The group uses these derivatives or,

where allowed, other non-derivative hedging instruments in fair value hedges or cash flow hedges as appropriate to the risk being hedged.

Fair value hedge

Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results in

recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be recognised in

the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the

cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income

statement on a recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income

statement immediately.

Cash flow hedge

The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income and the ineffective portion of

the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the

income statement within ‘Net income from financial instruments held for trading or managed on a fair value basis’. The accumulated gains and

losses recognised in other comprehensive income are reclassified to the income statement in the same periods in which the hedged item

affects profit or loss. When a hedge relationship is discontinued, or partially discontinued, any cumulative gain or loss recognised in other

comprehensive income remains in equity until the forecast transaction is recognised in the income statement. When a forecast transaction is

no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is immediately reclassified to

the income statement.

(g)Impairment of amortised cost and FVOCI financial assets

ECL are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements, other financial assets held at

amortised cost, debt instruments measured at FVOCI, and certain loan commitments and financial guarantee contracts. At initial recognition, an

allowance (or provision in the case of some loan commitments and financial guarantees) is recognised for ECL resulting from possible default

events within the next 12 months, or less, where the remaining life is less than 12 months (’12-month ECL’). In the event of a significant

increase in credit risk, an allowance (or provision) is recognised for ECL resulting from all possible default events over the expected life of the

financial instrument (‘lifetime ECL’). Financial assets where 12-month ECL is recognised are considered to be ‘stage 1’; financial assets which

are considered to have experienced a significant increase in credit risk are in ‘stage 2’; and financial assets for which there is objective evidence

of impairment, and so are considered to be in default or otherwise credit impaired are in ‘stage 3’. Purchased or originated credit-impaired

financial assets (‘POCI') are treated differently as set out below.

Credit impaired (stage 3)

The group determines that a financial instrument is credit impaired and in stage 3 by considering relevant objective evidence, primarily whether

contractual payments of either principal or interest are past due for more than 90 days, there are other indications that the borrower is unlikely

to pay such as that a concession has been granted to the borrower for economic or legal reasons relating to the borrower’s financial condition,

or the loan is otherwise considered to be in default.

If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due. Therefore, the

definitions of credit impaired and default are aligned as far as possible so that stage 3 represents all loans that are considered defaulted or

otherwise credit impaired.

Interest income is recognised by applying the effective interest rate to the amortised cost amount, i.e. gross carrying amount less allowance for

ECL.

Write-off

Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic prospect of

recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the

net realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.

Forbearance

Loans are identified as forborne and classified as either performing or non-performing when HSBC UK modifies the contractual terms due to

financial difficulty of the borrower. Non-performing forborne loans are stage 3 and classified as non-performing until they meet the curing

criteria, as specified by applicable credit risk policy (for example, when the loan is no longer in default and no other indicators of default have

been present for at least 12 months). Any amount written off as a result of any modification of contractual terms upon entering forbearance

would not be reversed.

The group applies the European Banking Authority ('EBA') Guidelines on the application of definition of default for our retail portfolios, which

affect credit risk policies and our reporting in respect of the status of loans as credit impaired principally due to forbearance (or curing thereof).

Further details are provided under 'Forborne loans and advances' on page 26.

Performing forborne loans are initially stage 2 and remain classified as forborne until they meet applicable curing criteria (for example, they

continue to not be in default and no other indicators of default are present for a period of at least 24 months). At this point, the loan is either

stage 1 or stage 2 as determined by comparing the risk of a default occurring at the reporting date (based on the modified contractual terms)

and the risk of a default occurring at initial recognition (based on the original, unmodified contractual terms).

A forborne loan is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms, or if the

terms of an existing agreement are modified such that the forborne loan is a substantially different financial instrument. Any new loans that

arise following derecognition events in these circumstances would generally be classified as POCI and will continue to be disclosed as

forborne.


98	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Loan modifications other than forborne loans

Loan modifications that are not identified as forborne are considered to be commercial restructurings. Where a commercial restructuring results

in a modification (whether legalised through an amendment to the existing terms or the issuance of a new loan contract) such that HSBC UK

rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. The

rights to cash flows are generally considered to have expired if the commercial restructuring is at market rates and no payment-related

concession has been provided. Modifications of certain higher credit risk wholesale loans are assessed for derecognition having regard to

changes in contractual terms that either individually or in combination are judged to result in a substantially different financial instrument.

Changes to current market rates are not treated as modifications when they were contemplated at initial recognition, but rather a repricing.

Mandatory and general offer loan modifications that are not borrower-specific, for example market-wide customer relief programmes generally

do not result in derecognition, but their stage allocation is determined considering all available and supportable information under our ECL

impairment policy. Changes made to these financial instruments that are economically equivalent and required by interest rate benchmark

reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require the effective

interest rate to be updated to reflect the change of the interest rate benchmark.

Significant increase in credit risk (stage 2)

An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering

the change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or implicitly compares

the risk of default occurring at the reporting date compared with that at initial recognition, taking into account reasonable and supportable

information, including information about past events, current conditions and future economic conditions. The assessment is unbiased,

probability-weighted, and to the extent relevant, uses forward-looking information consistent with that used in the measurement of ECL. The

analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its weight compared with other factors

depends on the type of product, the characteristics of the financial instrument and the borrower. Therefore, it is not possible to provide a single

set of criteria that will determine what is considered to be a significant increase in credit risk and these criteria will differ for different types of

lending, particularly between retail and wholesale. However, unless identified at an earlier stage, all financial assets are deemed to have

suffered a significant increase in credit risk when 30 days past due. In addition, wholesale loans that are individually assessed, which are

typically corporate and commercial customers, and included on a watch or worry list, are included in stage 2.

For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime PD which encompasses a wide range of information

including the obligor’s CRR, macro-economic condition forecasts and credit transition probabilities. For origination CRRs up to 3.3, significant

increase in credit risk is measured by comparing the average PD for the remaining term estimated at origination with the equivalent estimation

at the reporting date. The quantitative measure of significance varies depending on the credit quality at origination as follows:


Origination CRR	Significance trigger – PD that increases by
0.1-1.2	15 bps
2.1-3.3	30 bps

For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has

doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to

relative changes in external market rates.

For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future

macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be

approximated assuming through-the-cycle PDs and through-the-cycle migration probabilities, consistent with the instrument’s underlying

modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-

based thresholds, as set out in the table below:


Origination CRR	Additional significance criteria – Number of CRR grade notches deterioration required to identify as significant credit deterioration (stage 2) (> or equal to)
0.1	5 notches
1.1-4.2	4 notches
4.3-5.1	3 notches
5.2-7.1	2 notches
7.2-8.2	1 notch
8.3	0 notch

Further information about the 23-grade scale used for CRR can be found on page 26 – Risk rating scales.

For Retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internal models, which incorporate all available

information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is

considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogenous portfolios,

generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD

greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk

judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a PD higher than

would be expected from loans that are performing as originally expected and higher than that which would have been acceptable at origination.

It therefore approximates a comparison of origination to reporting date PDs.

We continue to refine the retail transfer criteria approach for certain portfolios as additional data becomes available, in order to utilise a more

relative approach, noting this approach is currently applied to the mortgage portfolio. These enhancements take advantage of the increase in

origination related data in the assessment of significant increases in credit risk by comparing remaining lifetime PD to the comparable

remaining term lifetime PD at origination based on portfolio-specific origination segments.

Unimpaired and without significant increase in credit risk (stage 1)

ECL resulting from default events that are possible within the next 12 months ('12-month ECL') are recognised for financial instruments that

remain in stage 1.


HSBC UK Bank plc Annual Report and Accounts 2024	99

Purchased or originated credit impaired

Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI. This

population includes new financial instruments recognised in most cases following the derecognition of forborne loans. The amount of change in

lifetime ECL for a POCI loan is recognised in profit or loss until the POCI loan is derecognised, even if the lifetime ECL are less than the amount

of ECL included in the estimated cash flows on initial recognition.

Movement between stages

Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk since

initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly increased

since initial recognition based on the assessments described above. In the case of non-performing forborne loans, such financial instruments

are transferred out of stage 3 when they no longer exhibit any evidence of credit impairment and meet the curing criteria as described above.

Measurement of ECL

The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information which

is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of future

events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the time value of money and

considers other factors such as climate-related risks.

In general, the group calculates ECL using three main components: a PD, a LGD and the Exposure at default ('EAD').

The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead. The

12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the instrument

respectively.

The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to

the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the

event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and

the time value of money.

The group makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the

following table:


Model	Regulatory capital	IFRS 9
PD	– Represents long-run average PD throughout a full economic cycle (for mortgage portfolios a hybrid approach, which sits between the extremes of point in time and through the cycle, is used for calculating long-run averages as required by the PRA). – Default backstop of 90+ days past due for all portfolios (includes unlikely to pay ('UTP') criteria in line with internal policy). – May be subject to a sovereign cap.	– Represents current portfolio quality and performance, adjusted for the impact of multiple forward-looking macroeconomic scenarios. – Default backstop of 90+ days past due for all portfolios (includes UTP criteria in line with internal policy).
EAD	– Cannot be lower than current balance.	– Amortisation captured for term products. – Future drawdown captured for revolving products.
LGD	– Downturn LGD (consistent with losses we would expect to suffer during a severe but plausible economic downturn). – Regulatory floors may apply to mitigate risk of underestimating downturn LGD due to lack of historical data. – Discounted using appropriate index (minimum 9%). – All collection costs included.	– LGD based on recent portfolio performance data and includes the expected impact of future economic conditions such as change in the value of collateral. – No floors applied, discounted using the original effective interest rate. – Only costs associated with selling collateral and certain third-party costs are included.
Other		– Discounted back from point of default to balance sheet date.

While 12-month PDs are recalibrated from IRB models where possible, the lifetime PDs are determined by projecting the 12-month PD using a

term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating through the

CRR bands over its life.

The ECL for wholesale stage 3 is determined primarily on an individual basis using a discounted cash flow ('DCF') methodology. The expected

future cash flows are based on estimates of the reporting date, reflecting reasonable and supportable assumptions and projections of future

recoveries and expected future receipts of interest.

Collateral is taken into account if it is likely that the recovery of the outstanding amount will include realisation of collateral based on its

estimated fair value of collateral at the time of expected realisation, less costs for obtaining and selling the collateral.

The cash flows are discounted at a reasonable approximation of the original effective interest rate. For significant cases, cash flows under up to

four different scenarios are probability-weighted by reference to the status of the borrower, economic scenarios applied more generally by the

group and judgement in relation to the likelihood of the workout strategy succeeding or receivership being required. For less significant cases

where an individual assessment is undertaken, the effect of different economic scenarios and work-out strategies results in an ECL calculation

based on a most likely outcome which is adjusted to capture losses resulting from less likely but possible outcomes. For certain less significant

cases, the bank may use a LGD-based modelled approach to ECL assessment, which factors in a range of economic scenarios.

Period over which ECL is measured

Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL (be it

12-month or lifetime ECL) is the maximum contractual period over which the group is exposed to credit risk. However, where the financial

instrument includes both a drawn and undrawn commitment and the contractual ability to demand repayment and cancel the undrawn

commitment does not serve to limit the group’s exposure to credit risk to the contractual notice period, the contractual period does not

determine the maximum period considered. Instead, ECL is measured over the period the group remains exposed to credit risk that is not

mitigated by credit risk management actions. This applies to retail overdrafts and credit cards, where the period is the average time taken for

stage 2 exposures to default or close as performing accounts, determined on a portfolio basis and ranging from between two and six years.


100	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

In addition, for these facilities it is not possible to identify the ECL on the loan commitment component separately from the financial asset

component. As a result, the total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying

amount of the financial asset, in which case the ECL is recognised as a provision. For wholesale overdraft facilities, credit risk management

actions are taken no less frequently than on an annual basis.

Forward-looking economic inputs

The group applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions

representative of its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit loss in

most economic environments. In certain economic environments, additional analysis may be necessary and may result in additional scenarios

or adjustments, to reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed methodology is disclosed in

'Measurement uncertainty and sensitivity analysis of ECL estimates' on page 33.

Critical estimates and judgements


The calculation of the group’s ECL under IFRS 9 requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Judgements	Estimates
– Defining what is considered to be a significant increase in credit risk. – Determining the lifetime and point of initial recognition of overdrafts and credit cards. – Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making reasonable and supportable judgements about how models react to current and future economic conditions. – Selecting model inputs and economic forecasts, including determining whether sufficient and appropriately weighted economic forecasts are incorporated to calculate unbiased expected credit loss. – Making management adjustments to account for late breaking events, model and data limitations and deficiencies, and expert credit judgements. – Selecting applicable recovery strategies for certain wholesale credit-impaired loans.	– The section ‘Measurement uncertainty and sensitivity analysis of ECL estimates’, marked as audited on pages 33 to 38, sets out the assumptions used in determining ECL, and provides an indication of the sensitivity of the result to the application of different weightings being applied to different economic assumptions.

(h) Employee compensation and benefits

Share-based payments

The group enters into both equity-settled and cash-settled share-based payment arrangements with its employees as compensation for the

provision of their services.

The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in respect

of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement. Expenses are

recognised when the employee starts to render service to which the award relates.

Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of vesting

recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a cancellation, and the

amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.

Post-employment benefit plans

The group operates a pension plan which provides defined benefit and defined contribution pensions.

Payments to defined contribution schemes are charged as an expense as the employees render service.

Defined benefit pension obligations are calculated using the projected unit credit method. The net charge to the income statement mainly

comprises the service cost and the net interest on the net defined benefit asset or liability, and is presented in operating expenses.

Remeasurements of the net defined benefit asset or liability, which comprise actuarial gains and losses, return on plan assets (excluding

interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The net

defined benefit asset or liability represents the present value of defined benefit obligations reduced by the fair value of plan assets (see Note

1.2 (c)), after applying the asset ceiling test, where the net defined benefit surplus is limited to the present value of available refunds and

reductions in future contributions to the plan.

The costs of obligations arising from other post-employment plans are accounted for on the same basis as defined benefit pension plans.

Critical estimates and judgements


The most significant critical accounting estimates relate to the determination of key assumptions applied in calculating the defined benefit pension obligation.
Judgements	Estimates
	– A range of assumptions could be applied, and different assumptions could significantly alter the defined benefit obligation and the amounts recognised in OCI or profit or loss. – The calculation of the defined benefit pension obligation includes assumptions with regard to the discount rate, inflation rate, pension payments and deferred pensions, pay and mortality. Management determines these assumptions in consultation with the plan’s actuaries. – Key assumptions used in calculating the defined benefit pension obligation and the sensitivity of the calculation to different assumptions are described in Note 3.


HSBC UK Bank plc Annual Report and Accounts 2024	101

(i)Tax

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to

items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement in which the

related item appears.

Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of previous

years. The group provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax

authorities.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the

amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods

as the assets will be realised or the liabilities settled.

Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.

(j)Provisions, contingent liabilities and guarantees

Provisions

Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or constructive

obligation that has arisen as a result of past events and for which a reliable estimate can be made.

Critical estimates and judgements


The recognition and measurement of provisions requires the group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Judgements	Estimates
– Determining whether a present obligation exists. Professional advice is taken on the assessment of litigation and similar obligations. – Provisions for legal proceedings and regulatory matters typically require a higher degree of judgement than other types of provisions. When matters are at an early stage, accounting judgements can be difficult because of the high degree of uncertainty associated with determining whether a present obligation exists, and estimating the probability and amount of any outflows that may arise. As matters progress, management and legal advisers evaluate on an ongoing basis whether provisions should be recognised, revising previous estimates as appropriate. At more advanced stages, it is typically easier to make estimates around a better defined set of possible outcomes.	– Provisions for legal proceedings and regulatory matters remain very sensitive to the assumptions used in the estimate. There could be a wider range of possible outcomes for any pending legal proceedings, investigations or inquiries. As a result it is often not practicable to quantify a range of possible outcomes for individual matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in aggregate for these types of provisions because of the diverse nature and circumstances of such matters and the wide range of uncertainties involved.

Contingent liabilities, contractual commitments and guarantees

Contingent liabilities

Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related

to legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of

settlement is remote.

Financial guarantee contracts

Liabilities under financial guarantee contracts that are not classified as insurance contracts are recorded initially at their fair value, which is

generally the fee received or present value of the fee receivable.

(k)Impairment of non-financial assets

Software under development is tested for impairment at least annually. Other non-financial assets are property, plant and equipment, intangible

assets (excluding goodwill) and right-of-use assets. They are tested for impairment at the individual asset level when there is indication of

impairment at that level, or at the Cash-generating Unit ('CGU') level for assets that do not have a recoverable amount at the individual asset

level. In addition, impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are

considered to be the principal operating legal entities divided by global business.

Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of the fair

value less costs of disposal or the value in use. The carrying amount of a CGU comprises the carrying values of its assets and liabilities,

including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and consistent

basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping of CGUs. The

recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent and

qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs (see Note 15).

When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the

extent that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of

their respective individual recoverable amount or nil. Impairment is not allocated to the financial assets in a CGU.

Impairment losses recognised in prior periods for non-financial assets are reversed when there has been a change in the estimate used to

determine the recoverable amount. The impairment loss is reversed to the extent that the carrying amount of the non-financial assets would

not exceed the amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised in prior

periods.


102	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

2Net fee income


	Year ended
	31 Dec 2024	31 Dec 2023
Net fee income by product	£m	£m
Account services	278	272
Funds under management	132	120
Cards	590	582
Credit facilities	162	147
Imports/exports	30	28
Insurance agency commission	16	11
Receivables finance	81	86
Other	316	308
Fee income	1,605	1,554
Less: fee expense	(297)	(270)
Net fee income	1,308	1,284
Net fee income by global business
Wealth and Personal Banking	586	588
Commercial Banking	937	922
Global Banking and Markets	(215)	(224)
Corporate Centre	—	(2)

Net fee income includes £1,227m of fees earned on financial assets that are not at fair value through profit or loss (other than amounts

included in determining the effective interest rate) (2023: £1,204m), £214m of fees payable on financial liabilities that are not at fair value

through profit of loss (other than amounts included in determining the effective interest rate) (2023: £199m), £136m of fees earned on trust and

other fiduciary activities (2023: £124m).

3Employee compensation and benefits


	2024	2023
	£m	£m
Wages and salaries	1,086	1,025
Social security costs	119	113
Post-employment benefits1	(77)	(131)
Year ended 31 Dec	1,128	1,007

1Post-employment benefits increase/decrease is a factor of interest receivable on assets, service cost, interest cost on liabilities and administration expenses.


Average number of persons employed by the group during the year
	20241	20231
Wealth and Personal Banking	15,061	15,549
Commercial Banking	4,894	4,796
Global Banking and Markets	64	60
Corporate Centre	15	10
Year ended 31 Dec	20,034	20,415

1Average number of headcount staff in corporate centre are allocated to the respective global businesses. The allocation is on the basis of amounts charged to

the respective global business.

Share-based payments

The share-based payment income statement charge is recognised in wages and salaries as follows:


	2024	2023
	£m	£m
Restricted share awards	17	10
Savings-related and other share award option plans	11	9
Year ended 31 Dec	28	19


HSBC UK Bank plc Annual Report and Accounts 2024	103


HSBC Group share awards
Award	Policy
Deferred share awards (including annual incentive awards, LTI awards delivered in shares)	An assessment of performance over the relevant period ending on 31 December is used to determine the amount of the award to be granted. – Deferred awards generally require employees to remain in employment over the vesting period and are generally not subject to performance conditions after the grant date. – Deferred share awards generally vest over a period of three, four, five or seven years. – Vested shares may be subject to a retention requirement post-vesting. – Awards are subject to malus and clawback provisions.
International Employee Share Purchase Plan (‘ShareMatch’)	The plan was first introduced in Hong Kong in 2013 and now includes employees based in 30 jurisdictions. – Shares are purchased in the market each quarter up to a maximum value of £750, or the equivalent in local currency. – Matching awards are added at a ratio of one free share for every three purchased. – Matching awards vest subject to continued employment and the retention of the purchased shares for a maximum period of two years and nine months.


Movement on HSBC Group share awards
	2024	2023
	Number	Number
	(000s)	(000s)
Restricted share awards outstanding at 1 Jan	3,083	2,981
Additions during the year	2,464	1,826
Released in the year	(1,698)	(1,582)
Forfeited in the year	(20)	(142)
Restricted share awards outstanding at 31 Dec	3,829	3,083
Weighted average fair value of awards granted (£)	5.11	5.55


HSBC Group share option plans
Plans	Policy
Savings-related share option plans (‘Sharesave’)	– Eligible employees can save up to £500 per month with the option to use the savings to acquire shares. – These are generally exercisable within six months following either the third or fifth anniversary of the commencement of a three-year or five-year contract, respectively. – The exercise price is set at a 20% (2023: 20%) discount to the market value immediately preceding the date of invitation.

Calculation of fair values

The fair values of share options are calculated using the Black-Scholes model. The fair value of a share award is based on the share price at the

date of the grant.


Movement on HSBC Group share option plans
	Savings-related share option plans
	Number	WAEP1
	(000s)	£
Outstanding at 1 Jan 2024	42,678	3.44
Granted during the year	5,841	5.37
Exercised during the year	(8,750)	2.98
Expired during the year	(51)	3.31
Forfeited during the year	(1,797)	4.10
Outstanding at 31 Dec 2024	37,921	3.82
– of which exercisable	656	3.40
Weighted average remaining contractual life (years)	2.10


Outstanding at 1 Jan 2023	60,350	2.85
Granted during the year	11,496	4.76
Exercised during the year	(26,249)	2.71
Expired during the year	(658)	4.76
Forfeited during the year	(2,261)	3.32
Outstanding at 31 Dec 2023	42,678	3.44
– of which exercisable	3.527	2.68
Weighted average remaining contractual life (years)	2.44

1Weighted average exercise price.


104	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Post-employment benefit plans

We operate a pension plan for our employees called the HBUK section of the HSBC Bank (UK) Pension Scheme (‘the plan’), which has both

defined benefit and defined contribution sections, managed by the Trustee of the plan. The HSBC Bank (UK) Pension Scheme was fully

sectionalised in 2018 to meet the requirements of the Banking Reform Act.

The Pension risk section on page 65 contains details about the policies and practices associated with the plan. Climate-related risks on page 20

provides details of how the Trustee of the plan, manages climate risk.

The defined benefit section was closed to future benefit accrual in 2015, with defined benefits earned by employees at that date continuing to

be linked to their salary while they remain employed by the HSBC Group. The plan is overseen by an independent corporate trustee, who has a

fiduciary responsibility for the operation of the plan. Its assets are held separately from the assets of the group.

The investment strategy of the plan is to hold the majority of assets in bonds, with the remainder in a diverse range of investments. It also

includes some interest rate swaps to reduce interest rate risk, inflation swaps to reduce inflation risk and longevity swaps to reduce the impact

of longer life expectancy. For further details of the measures to manage the market volatility, see Treasury risk on page 62.

The plan is subject to the statutory funding objective requirements of the UK Pensions Act 2004, which requires that it be funded to at least the

level of technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built up under the plan). Where a

funding valuation is carried out and identifies a deficit, the employer and trustee are required to agree to a deficit recovery plan.

The latest funding valuation of the plan at 31 December 2022 was carried out by Colin G Singer of Willis Towers Watson Limited, who is a

Fellow of the UK Institute and Faculty of Actuaries, using the projected unit credit method. At that date, the market value of the plan’s assets

was £23.9bn and this exceeded the value placed on its liabilities on an ongoing basis by £3.7bn, giving a funding level of 118%. These figures

include defined contribution assets amounting to £3bn. The funding valuation is used to judge the amount of cash contributions the group

needs to put into the pension scheme. It will always be different to the IAS 19 accounting surplus, which is an accounting rule concerning

employee benefits and shown on the balance sheet of our financial statements. The main differences between the assumptions used for

assessing the liabilities for this funding valuation and those used for IAS19 are that an element of prudence is contained in the funding

assumptions for discount rate, inflation rate and life expectancy. The next funding valuation is scheduled to be performed in 2026, with an

effective date 31 December 2025.

The actuary also assessed the value of the liabilities if the HBUK section of the plan were to have been stopped and an insurance company

asked to secure all future pension payments. This is generally larger than the amount needed on the ongoing basis described above because an

insurance company would use more prudent assumptions which allow for reserves and include a more prudent allowance for the future

administrative expenses of the plan. Under this approach, the amount of assets needed was estimated to be £21.3bn at 31 December 2022.

The Trust Deed gives the ability for HSBC UK to take a refund of surplus assets after the plan has been run down such that no further

beneficiaries remain. In assessing whether a surplus is recoverable HSBC UK has considered its right to obtain a future refund together with

the rights of third parties such as trustees. On this basis, any net surplus in the HBUK section of the plan is recognised in HSBC UK’s financial

statements.


Income statement charge/(credit)
	2024	2023
	£m	£m
Defined benefit pension plans	(210)	(241)
Defined contribution pension plans	133	110
Pension plans	(77)	(131)
Year ended 31 Dec	(77)	(131)

Defined benefit pension plans


Net asset/(liability) under defined benefit pension plans
	Fair value of plan assets	Present value of defined benefit obligations	Net defined benefit assets/(liabilities)
	£m	£m	£m
At 1 Jan 2024	20,851	(15,514)	5,337
Service cost	—	(27)	(27)
– current service cost	—	(7)	(7)
– past service cost	—	(20)	(20)
Net interest income/(cost) on the net defined benefit asset/(liability)	949	(701)	248
Remeasurement effects recognised in other comprehensive income	(2,085)	1,687	(398)
– return on plan assets (excluding interest income)	(2,085)	—	(2,085)
– actuarial gains/(losses) financial assumptions	—	1,386	1,386
– actuarial gains/(losses) demographic assumptions	—	126	126
– actuarial gains/(losses) experience adjustments	—	175	175
Transfers to/from the scheme	16	(22)	(6)
Benefits paid	(847)	847	—
Other movements1	(28)	—	(28)
At 31 Dec 2024	18,856	(13,730)	5,126


HSBC UK Bank plc Annual Report and Accounts 2024	105


Net asset/(liability) under defined benefit pension plans (continued)
	Fair value of plan assets	Present value of defined benefit obligations	Net defined benefit assets/ (liabilities)
	£m	£m	£m
At 1 Jan 2023	20,853	(15,596)	5,257
Service cost	—	(8)	(8)
– current service cost	—	(11)	(11)
– past service cost	—	3	3
Net interest income/(cost) on the net defined benefit asset/(liability)	1,003	(744)	259
Remeasurement effects recognised in other comprehensive income	(181)	6	(175)
– return on plan assets (excluding interest income)	(181)	—	(181)
– actuarial gains/(losses) financial assumptions	—	(98)	(98)
– actuarial gains/(losses) demographic assumptions	—	287	287
– actuarial gains/(losses) experience adjustments	—	(183)	(183)
Transfers to/from the scheme	30	(25)	5
Benefits paid	(855)	855	—
Other movements1	1	(2)	(1)
At 31 Dec 2023	20,851	(15,514)	5,337

1Other movements of Fair value of plan assets includes contributions by HSBC UK of £1m (2023: £17m), less administrative costs £29m (2023: £16m).

Following the 31 December 2022 funding valuation, a new Schedule of Contributions was signed in March 2024 resulting in a reduction of contributions in 2024

due to risk benefits, augmentations and administration expenses (defined benefit/defined contribution administration expenses and defined contribution annual

management charge) were reimbursed through the plan assets.Based on the new Schedule of Contributions, it is expected that contribution to the plan for

2025 is nil. Other movements of Present value of defined benefit obligations includes the adjustment on administrative cost paid lower than expected incurred

of Nil (2023: £2m).

Benefits expected to be paid from the plan to retirees over each of the next five years, and in aggregate for the five years thereafter, are as

follows:


Benefits expected to be paid from plan
	2025	2026	2027	2028	2029	2030–2034
	£m	£m	£m	£m	£m	£m
The plan1	872	900	929	959	990	5,450

1The duration of the defined benefit obligation is 11.8 years under the disclosure assumptions adopted (2023: 12.9 years).


Fair value of plan assets by asset classes
	At 31 Dec 2024			At 31 Dec 2023
	Value	Quoted market price in active market	No quoted market price in active market	Value	Quoted market price in active market	No quoted market price in active market
	£m	£m	£m	£m	£m	£m
The plan
Fair value of plan assets	18,856	11,084	7,772	20,851	11,768	9,083
– equities1	52	—	52	65	—	65
– bonds fixed income2	4,675	4,283	392	4,126	3,716	410
– bonds index linked	6,579	6,579	—	8,077	8,077	—
– derivatives3	235	—	235	832	—	832
– property	664	—	664	651	—	651
– pooled investment vehicles	6,429	—	6,429	7,125	—	7,125
– other	222	222	—	(25)	(25)	—

1Includes £52m (2023: £65m) in relation to private equities.

2Bonds fixed income, includes £(134)m (2023: £(838)m) in relation to repurchase agreements.

3 Includes longevity swaps that are used to hedge the risk of increase in life expectancy of pensioner population in HSBC UK. The longevity swaps are reported at

£(389)m (2023: £(197)m).

Post-employment defined benefit plan actuarial financial assumptions

HSBC UK determines the discount rates to be applied to its obligations in consultation with the plan's local actuaries, on the basis of current

average yields of high quality (AA-rated or equivalent) debt instruments with maturities consistent with those of the defined benefit obligations.


Key actuarial assumptions for the plan
	Discount rate	Inflation rate (RPI)	Inflation rate (CPI)	Rate of increase for pensions	Rate of pay increase
	%	%	%	%	%
UK
At 31 Dec 2024	5.54	3.33	2.88	3.22	3.63
At 31 Dec 2023	4.65	3.23	2.67	3.14	3.42


106	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


Mortality tables and average life expectancy at age 60 for the plan
	Mortality table	Life expectancy at age 60 for a male member currently:		Life expectancy at age 60 for a female member currently:
	Mortality table	Aged 60	Aged 40	Aged 60	Aged 40
UK
At 31 Dec 2024	SAPS S31	26.1	27.7	28.3	29.9
At 31 Dec 2023	SAPS S32	26.2	27.7	28.3	29.8

1Self-administered pension scheme (‘SAPS’) S3 table, with different tables and multipliers adopted based on gender, pension amount and member status,

reflecting the Scheme’s actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation's CMI 2023 core

projection model with an initial addition to improvement of 0.25% per annum, and a long-term rate of improvement of 1.25% per annum and with a 0%

weighting to 2020 and 2021 mortality experience and a 15% weighting to 2022 and 2023, reflecting updated long-term view on mortality improvements post-

pandemic.

2Self-administered pension scheme (‘SAPS’) S3 table, with different tables and multipliers adopted based on gender, pension amount and member status,

reflecting the Scheme’s actual mortality experience. Improvements are projected in accordance with the Continuous Mortality Investigation's CMI 2022 core

projection model with an initial addition to improvement of 0.25% per annum, and a long-term rate of improvement of 1.25% per annum and with a 0%

weighting to 2020 and 2021 mortality experience and a 25% weighting to 2022, reflecting updated long-term view on mortality improvements post-pandemic.


The effect of changes in key assumptions on the plan
	Impact on HSBC Bank (UK) Pension Scheme Obligation
	Financial impact of increase		Financial impact of decrease
	2024	2023	2024	2023
	£m	£m	£m	£m
Discount rate – increase/decrease of 0.25%	(377)	(470)	395	495
Inflation rate (RPI/CPI) – increase/decrease of 0.25%	310	392	(312)	(390)
Pension payments and deferred pensions – increase/decrease of 0.25%	388	488	(381)	(463)
Pay – increase/decrease of 0.25%	5	6	(5)	(5)
Change in mortality – increase/decrease of 1 year	385	481	(370)	(481)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this in unlikely

to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to

significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit

method at the end of the reporting period) has been applied as when calculating the defined benefit asset recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Directors’ emoluments

The aggregate emoluments of the Directors of the Company, computed in accordance with the Companies Act 2006 as amended by statutory

instrument 2008 No. 410, were:


	2024	2023
	£000	£000
Fees paid to non-executive Directors	1,871	1,519
Salaries and other emoluments1	2,599	2,559
Annual incentives2	1,384	1,362
Long-term incentives3	1,353	1,013
Year ended 31 Dec	7,207	6,453

1Salaries and other emoluments include Fixed Pay Allowances.

2Discretionary annual incentives for the Executive Directors are based on a combination of individual and corporate performance and are determined by the

Remuneration Committee of the Company’s ultimate parent company, HSBC Holdings plc. Incentive awards made to Executive Directors are delivered in the

form of cash and HSBC Holdings plc shares. The total amount shown is comprised of £691,988 (2023: £681,040) in cash and £691,988 (2023: £681,040) in

Restricted Shares, which is the upfront portion of the annual incentive granted in respect of performance year 2024.

3The amount shown is comprised of £421,425 (2023: £416,869) in deferred cash and £931,437 (2023: £595,927) in deferred Restricted Shares. These amounts

relate to the portion of the awards that will vest following the substantial completion of the vesting condition attached to these awards in 2024. The total

deferral period of deferred cash and share awards is no less than five years up to a maximum of seven years. Grants with a five-year deferral vest in five equal

tranches on each anniversary of the grant date on a pro-rate basis. Grants with a seven-year deferral vest in five equal tranches on each anniversary from the

third anniversary of the grant date on a pro-rata basis. The deferral periods and pro-rata calculations are in line with the requirements set out in the Remuneration

rules applicable to Material Risk Takers. The share awards are subject to a retention period of six months to one year upon vesting. Details of the Plans are

contained within the Directors’ Remuneration Report of HSBC Holdings plc.


HSBC UK Bank plc Annual Report and Accounts 2024	107

No Director exercised share options over HSBC Holdings plc ordinary shares during the year (2023: 1 Director).

Awards were made to 2 Directors under HSBC Holdings plc long-term incentive plans in respect of qualifying services rendered in 2024

(2023: 2). During 2024, 2 Directors received shares in respect of awards in HSBC Holdings plc long-term incentive plans that vested during the

year (2023: 2).

Retirement benefits accrued to 1 Director during the year in respect of their qualifying services (2023: 1 Director). No Directors received cash in

lieu of pension contributions during the year in respect of their qualifying services (2023: no Directors). Cash received in lieu of pension is

included in the salary and other emoluments disclosure in the table above.

Of these aggregate figures, the following amounts are attributable to the highest paid Director:


	2024	2023
	£000	£000
Salaries and other emoluments	1,798	1,787
Annual incentives1	1,064	1,042
Long-term incentives2	1,271	876
Year ended 31 Dec	4,133	3,705

1Awards made to the highest paid Director are delivered in the form of cash and HSBC Holdings plc shares. The amount shown is comprised of £531,988 (2023:

£521,040) in cash and £531,988 (2023: £521,040) in Restricted Shares.

2The amount shown is comprised of £391,063 (2023: £362,179) in deferred cash and £880,086 (2023: £514,297) in deferred Restricted Shares.

These amounts represent a portion of the total award that will vest following satisfaction of the vesting condition attached to the 2024 awards.

The total period of deferral for these cash and share awards is seven years with pro-rata vesting in five equal tranches between the third and

seventh anniversary of the date granted. The vested share awards are then subject to a one-year retention period.

The highest paid Director received shares in respect of qualifying services under an HSBC Holdings plc long term incentive ('LTI') plan.

No pension contributions were made by the Company in respect of services by the highest paid Director during the year (2023: £nil).

4Auditors’ remuneration


	2024	2023
	£m	£m
Audit fees payable to PwC	6.1	6.9
Assurance fees payable to PwC	2.1	2.3
Year ended 31 Dec	8.2	9.2


Fees payable by the group to PwC
	2024	2023
	£m	£m
Audit fees for HSBC UK Bank plc‘s statutory audit1	4.2	4.7
Fees for other services provided to the group	4.0	4.5
– audit of the group‘s subsidiaries	1.9	2.2
– audit-related assurance services2	2.1	2.2
– other assurance services3	—	0.1
Year ended 31 Dec	8.2	9.2

1 Fees payable to PwC for the statutory audit of the consolidated financial statements of the group and the separate financial statements of HSBC UK Bank plc.

They exclude amounts payable for the statutory audit of the bank’s subsidiaries which have been included in ‘Fees for other services provided to the group’.

2 Including services for assurance and other services that relate to statutory and regulatory filings, including comfort letters and interim and quarterly reviews.

3 Including comfort and arrangement letters to underwriters or other financial intermediaries and assurance reviews of PRA regulatory reporting returns.

No fees were payable to PwC as principal auditor for the following types of services: internal audit services and services related to litigation,

recruitment and remuneration.

In addition to the above, the estimated fees paid to PwC by third parties associated with HSBC UK amounted to £0.6m (2023: £2.2m). In these

cases, HSBC UK was connected with the contracting party and may therefore have been involved in appointing PwC. These fees arose from

services such as reviewing the financial position of corporate concerns that borrow from HSBC UK.

Fees payable for non-audit services for HSBC UK Bank plc are not disclosed separately because such fees are disclosed on a consolidated basis

for the group.


108	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

5Tax


Tax expense
	2024	2023
	£m	£m
Current tax	1,399	1,310
– for this year	1,404	1,320
– adjustments in respect of prior years	(5)	(10)
Deferred tax	109	115
– origination and reversal of temporary differences	112	122
– effect of changes in tax rates	—	(1)
– adjustments in respect of prior years	(3)	(6)
Year ended 31 Dec1	1,508	1,425

1In addition to amounts recorded in the income statement, a tax credit of £268m (2023: charge of £369m) was recorded directly to equity.

On 1 April 2023, the main rate of UK corporation tax increased from 19% to 25% and the UK banking surcharge rate decreased from 8% to

3%, giving a rate of 28% for HSBC UK Bank plc and its banking subsidiaries in 2024 (2023: 27.75%). The tax rate applicable for non-banking

entities in 2024 is 25% (2023: 23.5%).

On 20 June 2023, legislation was substantively enacted in the UK, the jurisdiction of the entity’s ultimate parent entity, HSBC Holdings plc, to

introduce the ‘Pillar Two’ global minimum tax model rules of the Organisation of Economic Co-operation and Development's ('OECD') Inclusive

Framework on Base Erosion and Profit Shifting ('BEPS'), as well as a qualified domestic minimum top-up tax, with effect from 1 January 2024.

Under these rules, a top-up tax liability arises where the effective tax rate of the HSBC Holdings plc group’s operations in a jurisdiction,

calculated based on principles set out in the OECD’s Pillar Two model rules, is below 15%. Based on the Group’s calculations, no top-up tax

liability arose in respect of the UK in the year and these rules are not expected to affect HSBC UK Bank plc’s tax expense in future periods.

Tax reconciliation

The tax charged to the income statement differs from the tax expense that would apply if all profits had been taxed at the UK corporation tax

rate as follows:


	2024		2023
	£m	%	£m	%
Profit before tax	5,647		6,679
Tax expense
Taxation at UK corporation tax rate of 25% (2023: 23.50%)	1,412	25.0	1,570	23.5
Items increasing the tax charge in 2024:
– UK banking surcharge at 3% (2023: 4.25%)	163	2.9	277	4.1
– UK bank levy	12	0.2	14	0.2
– other permanent disallowables	5	0.1	4	0.1
Items decreasing the tax charge in 2024:
– deductions for AT1 coupon payments	(65)	(1.2)	(61)	(0.9)
– adjustments in respect of prior period liabilities	(8)	(0.1)	(1)	—
– non-deductible regulatory matters and legal proceedings	(6)	(0.1)	1	—
– non-deductible UK customer redress	(5)	(0.1)	(2)	(0.1)
– non-taxable gain on SVB UK acquisition	—	—	(361)	(5.4)
– movement in uncertain tax positions	—	—	(15)	(0.2)
– change in tax rates	—	—	(1)	—
Year ended 31 Dec	1,508	26.7	1,425	21.3

The effective tax rate for the year was 26.7% (2023: 21.3%). The effective tax rate reflects the statutory tax rate of 28.0%, tax relief on AT1

coupon payments and the non-taxable release of provisions for regulatory and legal matters. The effective tax rate for 2023 was reduced by

5.4% due to the non-taxable gain arising on the acquisition of SVB UK in the period. The effective tax rate for 2023 excluding this item is 26.7%

and reflects the statutory blended tax rate of 27.75%, tax relief on AT1 coupon payments and tax credit from prior period adjustments including

release of provisions for uncertain tax positions.


HSBC UK Bank plc Annual Report and Accounts 2024	109


Movement of deferred tax assets and liabilities
	Loan impairment provisions	Cash flow hedges	FVOCI reserves	Defined benefit pension	Fixed and intangible assets	Other	Total
	£m	£m	£m	£m	£m	£m	£m
The group
At 1 Jan 2024	74	115	76	(1,494)	58	60	(1,111)
Income statement	(18)	—	(4)	(54)	(11)	(22)	(109)
Other comprehensive income	—	142	9	113	—	7	271
At 31 Dec 2024	56	257	81	(1,435)	47	45	(949)
Assets	56	257	81	—	47	45	486
Liabilities	—	—	—	(1,435)	—	—	(1,435)


At 1 Jan 2023	92	516	92	(1,472)	84	22	(666)
Income statement	(11)	—	(16)	(70)	(1)	(17)	(115)
Other comprehensive income	—	(401)	(24)	48	—	—	(377)
Acquisition of subsidiary	(7)	—	24	—	(25)	55	47
At 31 Dec 2023	74	115	76	(1,494)	58	60	(1,111)
Assets	74	115	76	—	58	60	383
Liabilities	—	—	—	(1,494)	—	—	(1,494)


The bank
At 1 Jan 2024	68	115	65	(1,494)	67	28	(1,151)
Income statement	(17)	—	—	(54)	(13)	(7)	(91)
Other comprehensive income	—	142	10	113	—	6	271
At 31 Dec 2024	51	257	75	(1,435)	54	27	(971)
Assets	51	257	75	—	54	27	464
Liabilities	—	—	—	(1,435)	—	—	(1,435)


At 1 Jan 2023	85	516	89	(1,472)	68	24	(690)
Income statement	(17)	—	—	(70)	(1)	4	(84)
Other comprehensive income	—	(401)	(24)	48	—	—	(377)
At 31 Dec 2023	68	115	65	(1,494)	67	28	(1,151)
Assets	68	115	65	—	67	28	343
Liabilities	—	—	—	(1,494)	—	—	(1,494)

Management has assessed the likely availability of future taxable profits against which to recover the deferred tax assets of the bank and the

group, taking into consideration the reversal of existing taxable temporary differences, past business performance and forecasts of future

business performance. Management is satisfied that there is sufficient evidence to support recognition of all deferred tax assets.

6Dividends

On 11 February 2025, the Directors resolved to pay an interim dividend of £595m to the ordinary shareholders of the parent company in respect

of the financial year ending 31 December 2024. No liability is recognised in the financial statements in respect of this dividend.


Dividends to the shareholder of the parent company
	2024		2023
	£ per share	£m	£ per share	£m
Dividends paid on ordinary shares
Interim dividend in respect of the previous year	28,239	1,412	10,779	539
Interim dividend in respect of the current year	38,478	1,924	33,159	1,658
Total	66,717	3,336	43,938	2,197


Total coupons on capital securities classified as equity
		2024	2023
	First call date	£m	£m
Undated Subordinated Additional Tier 1 instruments
– £1,096m	Dec 2019	113	106
– £1,100m	Dec 2024	115	108
Total		228	214


110	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

7Fair values of financial instruments carried at fair value

Control framework

Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent of the

risk taker.

Where fair values are determined by reference to externally quoted prices or observable pricing inputs to models, independent price

determination or validation is used.

For fair values determined using valuation models, the control framework includes development or validation by independent support functions

of the model logic, inputs, model outputs and adjustments. Valuation models are subject to a process of due diligence before becoming

operational and are calibrated against external market data on an ongoing basis.

Changes in fair value are generally subject to a profit and loss analysis process and are disaggregated into high-level categories including

portfolio changes, market movements and other fair value adjustments.

Fair value hierarchy

Fair values of financial assets and liabilities are determined according to the following hierarchy:

– Level 1 – valuation technique using quoted market price: financial instruments with quoted prices for identical instruments in active markets

that can be accessed at the measurement date.

– Level 2 – valuation technique using observable inputs: financial instruments with quoted prices for similar instruments in active markets or

quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant

inputs are observable.

– Level 3 – valuation technique with significant unobservable inputs: financial instruments valued using valuation techniques where one or

more significant inputs are unobservable.


Financial instruments carried at fair value and bases of valuation
	2024				2023
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
The group	£m	£m	£m	£m	£m	£m	£m	£m
Recurring fair value measurements at 31 Dec
Assets
Financial assets mandatorily measured at fair value through profit or loss	135	—	39	174	89	—	46	135
Derivatives	1	294	3	298	2	173	3	178
Financial investments	18,800	2,662	17	21,479	14,284	212	—	14,496
Liabilities
Derivatives	—	107	—	107	—	108	—	108


Financial instruments carried at fair value and bases of valuation
	2024				2023
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
The bank	£m	£m	£m	£m	£m	£m	£m	£m
Recurring fair value measurements at 31 Dec
Assets
Financial assets mandatorily measured at fair value through profit or loss	135	—	39	174	89	—	46	135
Derivatives	1	294	—	295	2	173	—	175
Financial investments	18,800	2,662	17	21,479	14,284	212	—	14,496
Liabilities
Derivatives	—	107	—	107	—	108	—	108

Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and out of

levels of the fair value hierarchy are primarily attributable to observability of valuation inputs and price transparency. There were no transfers

between Level 1 and Level 2 during 2024 and 2023.

Fair value adjustments

Fair value adjustments are adopted when the group determines there are additional factors considered by market participants that are not

incorporated within the valuation model. Movements in the level of fair value adjustments do not necessarily result in the recognition of profits

or losses within the income statement, such as when models are enhanced and therefore fair value adjustments may no longer be required.

Fair value valuation bases

Equities

The fair value of equity investment is estimated on the basis of an analysis of the investee’s financial position and results, risk profile, prospects

and other factors. If necessary, adjustments are made to the net asset value of funds to obtain the best estimate of fair value.


HSBC UK Bank plc Annual Report and Accounts 2024	111

8Fair values of financial instruments not carried at fair value


Fair values of financial instruments not carried at fair value and bases of valuation
		Fair value
	Carrying amount	Quoted market price Level 1	Observable inputs Level 2	Significant unobservable inputs Level 3	Total
	£m	£m	£m	£m	£m
The group
At 31 Dec 2024
Assets
Loans and advances to banks	7,263	—	7,263	—	7,263
Loans and advances to customers	217,604	—	—	216,767	216,767
Reverse repurchase agreements – non-trading	11,776	—	11,776	—	11,776
Financial investments – at amortised cost	16,322	15,593	170	—	15,763
Liabilities
Deposits by banks	11,144	—	11,144	—	11,144
Customer accounts	280,366	—	280,366	—	280,366
Repurchase agreements – non-trading	420	—	420	—	420
Debt securities in issue	2,044	—	1,626	418	2,044
Subordinated liabilities	15,686	—	15,898	—	15,898

At 31 Dec 2023
Assets
Loans and advances to banks	7,980	—	7,979	—	7,979
Loans and advances to customers	211,887	—	—	209,462	209,462
Reverse repurchase agreements – non-trading	7,686	—	7,686	—	7,686
Financial investments – at amortised cost	11,819	9,931	1,639	—	11,570
Liabilities
Deposits by banks	10,843	—	10,843	—	10,843
Customer accounts	268,345	—	268,345	—	268,345
Repurchase agreements – non-trading	4,652	—	4,652	—	4,652
Debt securities in issue	1,988	—	1,568	416	1,984
Subordinated liabilities	14,598	—	14,678	—	14,678


Fair values of financial instruments not carried at fair value and bases of valuation (continued)
		Fair value
	Carrying amount	Quoted market price Level 1	Observable inputs Level 2	Significant unobservable inputs Level 3	Total
	£m	£m	£m	£m	£m
The bank
At 31 Dec 2024
Assets
Loans and advances to banks	13,070	—	13,079	—	13,079
Loans and advances to customers	206,187	—	—	205,376	205,376
Reverse repurchase agreements – non-trading	11,776	—	11,776	—	11,776
Financial investments held at amortised cost	16,118	15,593	—	—	15,593
Liabilities
Deposits by banks	14,780	—	14,780	—	14,780
Customer accounts	274,160	—	274,160	—	274,160
Repurchase agreements – non-trading	420	—	420	—	420
Debt securities in issue	1,621	—	1,626	—	1,626
Subordinated liabilities	15,686	—	15,898	—	15,898

At 31 Dec 2023
Assets
Loans and advances to banks	13,642	—	13,646	—	13,646
Loans and advances to customers	201,014	—	—	198,552	198,552
Reverse repurchase agreements – non-trading	7,686	—	7,686	—	7,686
Financial investments held at amortised cost	11,608	9,931	1,469	—	11,400
Liabilities
Deposits by banks	14,120	—	14,120	—	14,120
Customer accounts	262,342	—	262,342	—	262,342
Repurchase agreements – non-trading	4,652	—	4,652	—	4,652
Debt securities in issue	1,564	—	1,568	—	1,568
Subordinated liabilities	14,598	—	14,678	—	14,678

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly,

their carrying amount is a reasonable approximation of fair value. This includes cash and balances at central banks which is measured at

amortised cost.


112	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Valuation

Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date. It does not reflect the economic benefits and costs that the group expects to flow from an

instrument’s cash flow over its expected future life. Our valuation methodologies and assumptions in determining fair values for which no

observable market prices are available may differ from those of other companies.

Loans and advances to banks and customers

To determine the fair value of loans and advances to banks and customers, loans are segregated, as far as possible, into portfolios of similar

characteristics. Fair values are based on observable market transactions, when available. When they are unavailable, fair values are estimated

using valuation models incorporating a range of input assumptions. These assumptions may include: forward-looking discounted cash flow

models, taking account of expected customer prepayment rates, using assumptions that HSBC UK believes are consistent with those that

would be used by market participants in valuing such loans; and new business rates estimates for similar loans.

The fair value of loans reflects expected credit losses at the balance sheet date and the fair value effect of repricing between origination and

the balance sheet date. For credit impaired loans, fair value is estimated by discounting the future cash flows over the time period they are

expected to be recovered.

Deposits by banks and customer accounts

The fair values of deposits are approximated by their carrying value.

Debt securities in issue and subordinated liabilities

Fair values are determined using quoted market prices at the balance sheet date where available, or by reference to quoted market prices for

similar instruments. When quoted market prices are unavailable, these instruments are valued using valuation techniques, the inputs for which

are derived from observable market data and, where relevant, assumptions in respect of unobservable inputs.

Repurchase and reverse repurchase agreements – non-trading

Fair values approximate carrying amounts as balances are generally short dated.

Financial investments

The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are

determined using valuation techniques that incorporate the prices and future earnings streams of equivalent quoted securities.

9Derivatives


Notional contract amounts and fair values of derivatives by product contract type held
	Notional contract amount		Fair value – Assets			Fair value – Liabilities
	Trading	Hedging	Trading	Hedging	Total	Trading	Hedging	Total
The group and bank	£m	£m	£m	£m	£m	£m	£m	£m
Foreign exchange	16,199	1,960	201	27	228	63	28	91
Interest rate	55,666	100,083	1,305	1,288	2,593	1,274	1,268	2,542
Equities	11	—	3	—	3	—	—	—
Gross total fair values	71,876	102,043	1,509	1,315	2,824	1,337	1,296	2,633
Offset (Note 22)					(2,526)			(2,526)
At 31 Dec 2024	71,876	102,043	1,509	1,315	298	1,337	1,296	107


Foreign exchange	8,064	75	61	2	63	76	1	77
Interest rate	61,286	74,368	2,042	1,744	3,786	2,019	1,686	3,705
Equities	9	—	3	—	3	—	—	—
Gross total fair values	69,359	74,443	2,106	1,746	3,852	2,095	1,687	3,782
Offset (Note 22)					(3,674)			(3,674)
At 31 Dec 2023	69,359	74,443	2,106	1,746	178	2,095	1,687	108

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting indicate the

nominal value of transactions outstanding at the balance sheet date; they do not represent amounts at risk.

Use of derivatives

We undertake derivative activity for two primary purposes: to create risk management solutions for commercial clients and to manage and

hedge our own balance sheet risks.

Hedge accounting derivatives

The group applies hedge accounting to manage the following risks: interest rate risk and foreign exchange risks. Further details on how these

risks arise and how they are managed by the group can be found in the 'Risk review'.

Hedge risk components

The group designates a portion of cash flows of a financial instrument or a group of financial instruments for a specific interest rate or foreign

currency risk component in a fair value or cash flow hedge. The designated risks and portions are either contractually specified or otherwise

separately identifiable components of the financial instrument that are reliably measurable. Risk-free or benchmark interest rates generally are

regarded as being both separately identifiable and reliably measurable, except for the Interbank offered rate ('IBOR') Reform transition where

the group designates Alternative Benchmark Rates as the hedged risk which may not have been separately identifiable upon initial designation,


HSBC UK Bank plc Annual Report and Accounts 2024	113

provided the group reasonably expects it will meet the requirement within 24 months from the first designation date. The designated risk

component accounts for a significant portion of the overall changes in fair value or cash flows of the hedged items.

Fair value hedges

The group enters into fixed-for-floating-interest-rate swaps to manage the exposure to changes in fair value due to movements in market

interest rates on certain fixed rate financial instruments which are not measured at fair value through profit or loss.


Hedging instrument by hedged risk
	Hedging Instrument
	Carrying amount
	Notional amount1	Assets	Liabilities	Balance sheet Presentation	Change in fair value2
Hedged risk	£m	£m	£m	Balance sheet Presentation	£m
Interest rate3	37,500	1,171	922	Derivatives	212
At 31 Dec 2024	37,500	1,171	922		212


Interest rate3	22,928	1,135	1,086	Derivatives	(270)
At 31 Dec 2023	22,928	1,135	1,086		(270)

1The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at

the balance sheet date; they do not represent amounts at risk.

2Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.

3The hedged risk ‘interest rate’ includes inflation risk.


Hedged item by hedged risk
	Hedged item						Ineffectiveness
	Carrying amount		Accumulated fair value hedge adjustments included in carrying amount2			Change in fair value1	Recognised in profit and loss	Profit and loss presentation
	Assets	Liabilities	Assets	Liabilities	Balance sheet presentation	Change in fair value1	Recognised in profit and loss
Hedged risk	£m	£m	£m	£m	Balance sheet presentation	£m	£m
Interest rate4	17,224		(256)		Financial investments measured at fair value through other comprehensive income	(208)	(7)	Net income from financial instruments held for trading or managed on a fair value basis
	10,670		(75)	—	Loans and advances to customers	(24)
	392		9		Financial Investments measured at amortised cost	(11)
		8,433		(310)	Subordinated Liabilities3	24
At 31 Dec 2024	28,286	8,433	(322)	(310)		(219)	(7)


Interest rate4	12,141		(17)		Financial investments measured at fair value through other comprehensive income	465	4	Net income from financial instruments held for trading or managed on a fair value basis
	2,172		(58)		Loans and advances to customers	54
	403		25		Financial Investments measured at amortised cost	26
		6,691		(285)	Subordinated Liabilities3	(271)
At 31 Dec 2023	14,716	6,691	(50)	(285)		274	4

1 Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.

2 The accumulated amount of fair value adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for

hedging gains and losses were assets/(liabilities) of £(8)m (2023: £(4)m) for FVOCI and liabilities of £(75)m (2023: £(58)m) for Loans and advances to customers

and £(2)m (2023: £(3)m) for Financial Investments measured at amortised cost.

3 The notional amount of non-dynamic fair value hedges is equal to £8,650m (2023: £6,921m), of which the weighted-average maturity date is December 2028

(2023: January 2028) and the weighted average swap rate is 2.95% (2023: 1.89%). These hedges are all internal to HSBC Group and hedges internal funding

between HSBC Group and HSBC UK.

4 The hedged risk ‘interest rate’ includes inflation risk.

The hedged item is either the benchmark interest rate risk portion within the fixed rate of the hedged item or the full fixed rate and it is hedged

for changes in fair value due to changes in the benchmark interest rate risk.

HSBC UK applies macro fair value hedging for interest rate risk exposures on portfolios of fixed rate mortgages. These are considered to be

dynamic hedges and both the hedged items and the hedging instruments are adjusted on a monthly basis when the existing hedging

relationship is terminated and a new one designated. The hedged items and hedging instruments are adjusted to reflect changes in the size

and maturity profile of the hedged portfolio.


114	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Sources of hedge ineffectiveness may arise from basis risk including but not limited to the discount rates used for calculating the fair value of

derivatives, hedges using instruments with a non-zero fair value and notional and timing differences between the hedged items and hedging

instruments. Hedge ineffectiveness may also arise in macro fair value hedge relationships when the actual behaviour of the hedged items

differs from expectations, such as higher than expected repayments during the hedged period.

For some debt securities held, HSBC UK manages interest rate risk in a dynamic risk management strategy. The assets in scope of this

strategy are high-quality fixed-rate debt securities, which may be sold to meet liquidity and funding requirements. The interest rate risk of the

HSBC UK fixed-rate debt securities issued is managed in a non-dynamic risk management strategy.

The disclosures for the group are the same as the disclosures for the bank.

Cash flow hedges

The group’s cash flow hedging instruments consist principally of interest rate swaps and cross-currency swaps that are used to manage the

variability in future interest cash flows of non-trading financial assets and liabilities, arising due to changes in market interest rates and foreign-

currency basis.

The group applies macro cash flow hedging for interest-rate risk exposures on portfolios of replenishing current and forecasted issuances of

non-trading assets and liabilities that bear interest at variable rates, including rolling such instruments. The amounts and timing of future cash

flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of their

contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate cash flows representing both

principal balances and interest cash flows across all portfolios are used to determine the effectiveness and ineffectiveness. Macro cash flow

hedges are considered to be dynamic hedges.

The group also hedges the variability in future cash-flows on foreign-denominated financial assets and liabilities arising due to changes in

foreign exchange market rates with cross-currency swaps, these are considered dynamic hedges.


Hedging instrument by hedged risk
	Hedging Instrument					Hedged Item	Ineffectiveness
		Carrying amount			Change in fair value2	Change in fair value3	Recognised in profit and loss	Profit and loss presentation
	Notional amount1	Assets	Liabilities	Balance sheet presentation	Change in fair value2	Change in fair value3	Recognised in profit and loss
Hedged risk	£m	£m	£m	Balance sheet presentation	£m	£m	£m
Foreign currency	1,960	27	28	Derivatives	(16)	(16)	—	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	62,583	117	346	Derivatives	(1,480)	(1,480)	—
At 31 Dec 2024	64,543	144	374		(1,496)	(1,496)	—


Foreign currency	75	2	1	Derivatives	12	12	—	Net income from financial instruments held for trading or managed on a fair value basis
Interest rate	51,440	609	600	Derivatives	537	536	1
At 31 Dec 2023	51,515	611	601		549	548	1

1 The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at

the balance sheet date; they do not represent amounts at risk.

2Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.

3Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.

Sources of hedge ineffectiveness may arise from basis risk, including but not limited to timing differences between the hedged items and

hedging instruments and hedges using instruments with a non-zero fair value.

The disclosures for the group are the same as the disclosures for the bank.


Reconciliation of equity and analysis of other comprehensive income by risk type
	Interest rate	Foreign Currency
	£m	£m
Cash flow hedging reserve at 1 Jan 2024	(294)	1
Fair value gains/(losses)	(1,480)	(16)
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
– hedged items that have affected profit or loss	976	13
Income taxes	142	—
Cash flow hedging reserve at 31 Dec 2024	(656)	(2)


Cash flow hedging reserve at 1 Jan 2023	(1,325)	1
Fair value gains/(losses)	536	12
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of:
– hedged items that have affected profit or loss	896	(12)
Income taxes	(401)	—
Cash flow hedging reserve at 31 Dec 2023	(294)	1


HSBC UK Bank plc Annual Report and Accounts 2024	115

10Financial investments


Carrying amount of financial investments
	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Financial investments measured at fair value through other comprehensive income	21,479	14,496	21,479	14,496
– treasury and other eligible bills	2,128	884	2,128	884
– debt securities	19,350	13,611	19,350	13,611
– equity securities	1	1	1	1
Debt instruments measured at amortised cost	16,322	11,819	16,118	11,608
– treasury and other eligible bills	1,429	3,188	1,259	3,017
– debt securities	14,893	8,631	14,859	8,591
At 31 Dec	37,801	26,315	37,597	26,104

11Assets pledged, collateral received and assets transferred

Assets pledged


Financial assets pledged as collateral
	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Treasury bills and other eligible securities	170	170	—	—
Debt securities	5,569	6,717	5,569	6,717
Loans and advances to banks	6,020	6,600	8,256	9,047
Loans and advances to customers	15,201	15,016	15,201	15,016
Other	941	116	941	116
Assets pledged at 31 Dec	27,901	28,619	29,967	30,896

The amount of assets pledged to secure liabilities may be greater than the book value of assets utilised as collateral. For example, where

assets are placed with a custodian or a settlement agent that has a floating charge over all the assets placed to secure any liabilities under

settlement accounts.

These transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant, standard

securities lending and borrowing, repurchase agreements and derivative margining. The group places both cash and non-cash collateral in

relation to derivative transactions.


Financial assets pledged as collateral that the counterparty has the right to sell or repledge
	The group and bank
	2024	2023
	£m	£m
Financial investments	4,475	5,542
At 31 Dec	4,475	5,542

Collateral received

The fair value of assets accepted as collateral, relating primarily to standard securities lending, reverse repurchase agreements and derivative

margining, that the group and the bank is permitted to sell or repledge in the absence of default was £15,273m (2023: £10,689m). The group

and the bank is obliged to return equivalent securities. These transactions are conducted under terms that are usual and customary to standard

securities lending, reverse repurchase agreements and derivative margining. The fair value of financial assets accepted as collateral by the

group and the bank that have been sold or repledged is £1,329m (2023: £3,456m).

Assets transferred

The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt securities

held by counterparties as collateral under repurchase agreements and securities lent under securities lending agreements and mortgages to

collateralise the covered bond programme. For secured borrowings, the transferred asset collateral continues to be recognised in full and a

related liability, reflecting the group’s obligation to repurchase the assets for a fixed price at a future date is also recognised on the balance

sheet.

Where securities are swapped, the transferred asset continues to be recognised in full. There is no associated liability as the non-cash collateral

received is not recognised on the balance sheet. The group is unable to use, sell or pledge the transferred assets for the duration of these

transactions, and remains exposed to interest rate risk and credit risk on these pledged assets. The counterparty’s recourse is not limited to the

transferred assets.


116	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


Transferred financial assets not qualifying for full derecognition and associated financial liabilities
	2024		2023
	Carrying amount of:		Carrying amount of:
	Transferred assets	Associated liabilities	Transferred assets	Associated liabilities
The group	£m	£m	£m	£m
Repurchase agreements	2,935	375	4,350	2,644
Securities lending agreements	1,540	—	1,192	—

The bank
Repurchase agreements	2,935	375	4,350	2,644
Securities lending agreements	1,540	—	1,192	—
Other sales	4,889	999	2,829	998

12Interests in joint ventures

Vaultex UK Limited is a joint venture of the bank and the group. Vaultex UK Limited is incorporated in England and Wales and its principal

activity is that of cash management services. At 31 December 2024, the group had a 50% interest in the £10m issued equity capital (2023:

50%).

For further detail see Note 29.

13Investments in subsidiaries


Main subsidiaries of HSBC UK Bank plc
	Country of incorporation or registration	HSBC UK Bank plc’s interest in equity capital	Share class
	Country of incorporation or registration	%	Share class
HSBC Equipment Finance (UK) Limited	England and Wales	100.00	Ordinary £1
HSBC Invoice Finance (UK) Limited	England and Wales	100.00	Ordinary £1
M&S Financial Services plc	England and Wales	100.00	Ordinary £1
HSBC Innovation Bank Limited	England and Wales	100.00	Ordinary £1

All the above prepare their financial statements up to 31 December.

Details of all group subsidiaries, as required under Section 409 of the Companies Act 2006, are set out in Note 29. The principal country of

operation is the same as the country of incorporation.

Impairment testing of investments in subsidiaries

At each reporting period end, HSBC UK Bank plc reviews investments in subsidiaries for indicators of impairment. An impairment is recognised

when the carrying amount exceeds the recoverable amount for that investment. The recoverable amount is the higher of the investment’s fair

value less costs of disposal and its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting management’s

cash flow projections for the investment. The cash flows represent the free cash flows based on the subsidiary’s binding capital requirements.

We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:

– The cash flow projections for each investment are based on the latest approved plans, which includes forecast capital available for

distribution based on the capital requirements of the subsidiary taking into account minimum and core capital requirements. For the

impairment test at 31 December 2024, cash flow projections until the end of 2029 were considered in line with our internal planning horizon.

Our cash flow projections include known and observable climate-related opportunities and costs associated with our operating model.

– A long-term growth rate is used to extrapolate the cash flows in perpetuity. The growth rate reflects inflation and is based on the UK long-

term average.

– The rate used to discount the cash flows is based on the cost of capital assigned to each investment, which is derived using a Capital asset

pricing model ('CAPM') model. CAPM depends on a number of inputs reflecting financial and economic variables, including the risk free rate

and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s assessment of the

economic variables and management’s judgement. The discount rates for each investment are refined to reflect the rates of inflation for the

countries within which the investment operates. In addition, for the purposes of testing investments for impairment, management

supplements this process by comparing the discount rates derived using the internally generated CAPM, with cost of capital rates produced

by external sources for businesses operating in similar markets. The impacts from climate risk are included to the extent that they are

observable in discount rates and asset prices.

Impairment test results

In 2023, an impairment of £92m was recognised on the bank's investment in Marks and Spencer Financial Services plc('M&S') as the VIU

calculation performed identified that the recoverable amount was below the carrying amount.

A VIU calculation was performed during 2024 using latest cash flows, long term growth rate and discount rate. While the impairment

recognised in 2023 could have been partially reversed, we decided to keep the carrying value unchanged as the new Relationship Agreement

with Marks and Spencer plc was only signed recently, and the execution of the plan was still at an early stage.

In 2023, an impairment of £0.1m was recognised on the bank's investment in HSBC Trust Company (UK) Limited, due to a reduction in the net

assets of the entity. There was no change in the carrying value of the company in 2024.

No further impairments were recognised as a result of the impairment testing in subsidiaries performed in 2024.


HSBC UK Bank plc Annual Report and Accounts 2024	117

14Structured entities

The group is involved with both consolidated and unconsolidated structured entities through the securitisation of financial assets and

investment funds, established either by the group or a third party.

Consolidated structured entities

Total assets of the group’s consolidated structured entities, split by entity type:


	Securitisations	Other	Total
	£m	£m	£m
At 31 Dec 2024	627	1,007	1,634
At 31 Dec 2023	675	1,006	1,681

Securitisations

The group uses a structured entity to securitise customer loans and advances to diversify its sources of funding for asset origination and capital

efficiency purposes. The loans and advances are transferred by the group to the structured entity synthetically, and the structured entity issues

debt securities to investors.

Unconsolidated structured entities

The term ‘unconsolidated structured entities’ refers to all structured entities not controlled by the group. The group enters into transactions

with unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment

opportunities.

The group's interest in unconsolidated structured entities consist of unit holdings in four funds managed by a third party within the wider HSBC

Group. The group's unit holdings are held to facilitate customer transactions and are recognised as Other assets with a carrying value and

maximum exposure to loss at 31 December 2024 of £0.2m (2023: £0.2m). The total assets of the funds at 31 December 2024 were £0.8bn

(2023: £1.1bn). The group has no liabilities or commitments in respect of the funds.

15Goodwill and intangible assets


	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Goodwill	3,281	3,285	223	223
Other intangible assets1	1,092	1,078	998	978
At 31 Dec	4,373	4,363	1,221	1,201

1Included within the group's other intangible assets is internally generated software with a net carrying value of £1,026m (2023: £991m). During the year,

capitalisation of internally generated software is £363m (2023: £321m), impairment was £9m (2023: £8m) and amortisation is £319m (2023: £295m). The

amortisation and impairment of intangible assets totalled for the group £348m (2023: £319m).

Impairment testing

The group’s annual impairment test in respect of goodwill allocated to each CGU is performed at 1 October each year. A review for indicators

of impairment is undertaken at 30 June and 31 December. At 31 December 2024, this review did not identify any indicators of impairment. As a

result, no impairment test has been performed at 31 December 2024.

Basis of the recoverable amount

The recoverable amount of all CGUs to which goodwill has been allocated was equal to its VIU at each respective testing date. The VIU is

calculated by discounting management’s cash flow projections for the CGU. At 1 October 2024, all CGUs supporting goodwill had a VIU larger

than their respective carrying amounts. The key assumptions used in the VIU calculation for each CGU are discussed below.


Key assumptions in VIU calculation
	Goodwill at 1 Oct 2024	Discount rate	Growth rate beyond initial cash flow projections	Goodwill at 1 Oct 2023	Discount rate	Growth rate beyond initial cash flow projections
Cash-generating unit	£m	%	%	£m	%	%
WPB	2,042	10.6	2.0	2,046	10.4	2.1
CMB	1,239	9.0	2.0	1,239	9.0	2.1
Total	3,281			3,285

The group’s CGUs do not carry on their balance sheets any significant intangible assets with indefinite useful lives, other than goodwill.


118	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Management’s judgement in estimating the cash flows of a CGU

The cash flow projections for each CGU are based on the forecast profitability plans approved by the Board and minimal capital levels required

to support the business operations of a CGU. The Board challenges and endorses planning assumptions in light of internal capital allocation

decisions necessary to support HSBC UK’s strategy, current market conditions and macroeconomic outlook. For the 1 October 2024

impairment test, cash flow projections until the end of 2029 were considered, in line with internal planning horizon. As required by IFRS

Accounting Standards, estimates of future cash flows exclude estimated cash inflows or outflows that are expected to arise from restructuring

initiatives before an entity has a constructive obligation to carry out the plan, and would therefore have recognised a provision for restructuring

costs. Our cash flow projections include known climate-related opportunities and costs associated with our operating model.

Discount Rate

The rate used to discount the cash flows is based on the cost of equity assigned to each CGU, which is derived using a CAPM and market

implied cost of equity. The impacts of climate-risk are included to the extent that they are observable in discount rates and asset prices.

Long-term growth rate

The long-term growth rate is used to extrapolate the cash flows in perpetuity because of the long-term perspective within the group of

business units making up the CGUs. The long-term growth rate reflects inflation for the UK.

Sensitivities of key assumptions in calculating VIU

At 1 October 2024, there were no CGUs deemed sensitive to reasonably possible adverse changes in key assumptions supporting the

recoverable amounts. In making an estimate of reasonably possible changes to assumptions, management considers the available evidence in

respect of each input into the VIU calculation, such as the external range of discount rates observable, historical performance against forecast

and risks attaching to the key assumptions underlying cash flow projections.

16Prepayments, accrued income and other assets


	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Prepayments and accrued income	1,470	1,378	1,502	1,360
Settlement accounts and items in course of collection from other banks	390	369	220	182
Cash collateral and margin receivables	806	27	806	27
Endorsements and acceptances	38	32	38	32
Employee benefit assets (Note 3)	5,126	5,337	5,126	5,337
Right-of-use assets	153	169	143	145
Other accounts	945	922	1,017	776
Owned property, plant and equipment	375	371	374	354
At 31 Dec	9,303	8,605	9,226	8,213

For the group, prepayments, accrued income and other assets include £3,006m (2023: £2,087m), and for the bank £3,118m (2023: £1,907m) of

financial assets, majority of which are measured at amortised cost.

17Debt securities in issue


	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Bonds and medium-term notes1	573	574	150	150
Covered bonds	999	998	999	998
Other debt securities in issue2	472	416	472	416
At 31 Dec	2,044	1,988	1,621	1,564

1The group's Bonds and medium-term notes includes £424m (2023: £426m) issued by structured entities.

2Other debt securities in issue consists of commercial paper and certificates of deposits.


HSBC UK Bank plc Annual Report and Accounts 2024	119

18Accruals, deferred income and other liabilities


	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Accruals and deferred income	1,295	1,203	1,249	1,125
Settlement accounts and items in course of transmission to other banks	239	415	238	412
Cash collateral and margin payable	210	263	210	263
Endorsements and acceptances	41	38	41	38
Lease liabilities	163	188	152	163
Other liabilities	1,528	2,428	1,354	2,209
At 31 Dec	3,476	4,535	3,244	4,210

For the group, accruals, deferred income and other liabilities include £3,278m (2023: £4,370m), and for the bank £3,192m (2023: £4,152m) of

financial liabilities, the majority of which are measured at amortised cost.

19Provisions


	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The group	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2024	30	34	89	74	227
Additions	15	9	19	23	66
Amounts utilised	(17)	(19)	(31)	(12)	(79)
Unused amounts reversed	(9)	(23)	(24)	(16)	(72)
Exchange and other movements	1	1	—	—	2
At 31 Dec 2024	20	2	53	69	144
Contractual commitments1
At 1 Jan 2024					123
Net change in expected credit loss provision and other movements					(2)
At 31 Dec 2024					121
Total provisions
At 31 Dec 2023					350
At 31 Dec 2024					265


Provisions (excluding contractual commitments)
At 1 Jan 2023	63	32	142	82	319
Additions	28	4	24	18	74
Amounts utilised	(36)	(2)	(49)	(6)	(93)
Unused amounts reversed	(28)	—	(29)	(18)	(75)
Exchange and other movements	3	—	1	(2)	2
At 31 Dec 2023	30	34	89	74	227
Contractual commitments1
At 1 Jan 2023					105
Net change in expected credit loss provision and other movements					18
At 31 Dec 2023					123
Total provisions
At 31 Dec 2022					424
At 31 Dec 2023					350

1Contractual commitments include the provision for contingent liabilities measured under IFRS 9 Financial Instruments in respect of financial guarantees and the

expected credit loss provision on off-balance sheet guarantees and commitments.


120	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


	Restructuring costs	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
The bank	£m	£m	£m	£m	£m
Provisions (excluding contractual commitments)
At 1 Jan 2024	30	34	74	74	212
Additions	14	9	19	22	64
Amounts utilised	(17)	(19)	(29)	(12)	(77)
Unused amounts reversed	(9)	(23)	(22)	(16)	(70)
Exchange and other movements	1	1	—	—	2
At 31 Dec 2024	19	2	42	68	131
Contractual commitments1
At 1 Jan 2024					115
Net change in expected credit loss provision and other movements					—
At 31 Dec 2024					115
Total provisions
At 31 Dec 2023					327
At 31 Dec 2024					246


Provisions (excluding contractual commitments)
At 1 Jan 2023	63	32	107	82	284
Additions	27	4	32	18	81
Amounts utilised	(35)	(2)	(39)	(6)	(82)
Unused amounts reversed	(28)	—	(27)	(18)	(73)
Exchange and other movements	3	—	1	(2)	2
At 31 Dec 2023	30	34	74	74	212
Contractual commitments1
At 1 Jan 2023					102
Net change in expected credit loss provision and other movements					13
At 31 Dec 2023					115
Total provisions
At 31 Dec 2022					386
At 31 Dec 2023					327

1Contractual commitments include the provision for contingent liabilities measured under IFRS 9 Financial Instruments in respect of financial guarantees and the

expected credit loss provision on off-balance sheet guarantees and commitments.

Customer remediation

Customer remediation refers to HSBC UK’s activities to compensate customers for losses or damages associated with a failure to comply with

regulations or to treat customers fairly. Customer remediation is often initiated by HSBC UK in response to customer complaints and/or

industry developments in sales practices, and is not necessarily initiated by regulatory action.

Restructuring costs

The restructuring costs provision is for costs associated with the group’s transformation programme.

Legal proceedings and regulatory matters

Further details of 'Legal proceedings and regulatory matters' are set out in Note 26. Legal proceedings include civil court, arbitration or tribunal

proceedings brought against the group (whether by way of claim or counterclaim), or civil disputes that may, if not settled, result in court,

arbitration or tribunal proceedings. Regulatory matters refer to investigations, reviews and other actions carried out by, or in response to the

actions of, regulatory or law enforcement agencies in connection with alleged wrongdoing.


HSBC UK Bank plc Annual Report and Accounts 2024	121

20Subordinated liabilities


Subordinated liabilities
	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
At amortised cost1	15,686	14,598	15,686	14,598
At 31 Dec	15,686	14,598	15,686	14,598

1Includes £12.5bn (2023: £11.3bn) of eligible debt issued to meet our Minimum requirement for own funds and Eligible Liabilities applicable from

1 January 2020.

Subordinated liabilities rank behind senior obligations and generally count towards the capital base of the group. Capital securities may be called

and redeemed by the group subject to prior notification to and consent of the PRA.

The balance sheet amounts disclosed below are presented on an IFRS basis and do not reflect the amount that the instruments contribute to

regulatory capital principally due to regulatory amortisation and regulatory eligibility limits.


Subordinated liabilities of the group
				Carrying amount
				2024	2023
		First call date	Maturity date	£m	£m
Capital instruments
Tier 2 instruments
£550m	HSBC UK Bank plc Subordinated Floating Loan due 20331	Jul 2028	Jul 2033	548	548
$840m	HSBC UK Bank plc Subordinated Floating Loan due 20332	Jul 2028	Jul 2033	668	656
£100m	HSBC UK Bank plc 2.8594% Subordinated Loan due 2029	Mar 2024	Mar 2029	—	100
£1,000m	HSBC UK Bank plc Subordinated Floating Loan due 20303	Jul 2025	Jul 2030	1,000	1,000
£650m	HSBC UK Bank plc Subordinated Floating Loan due 20334	Sep 2028	Sep 2033	650	650
£79m	HSBC UK Bank plc 2.1250% Subordinated Loan due 2031	Mar 2026	Mar 2031	79	79
£250m	HSBC UK Bank plc 6.8960% Subordinated Loan due 2033	Dec 2028	Dec 2033	248	255
Other instruments
Subordinated loan instruments not eligible for inclusion in regulatory capital
$2000m	HSBC UK Bank plc 0.9760% MREL eligible Subordinated Loan due 2025	May 2024	May 2025	—	1,536
£350m	HSBC UK Bank plc 1.8777% MREL eligible Subordinated Loan due 2025	Oct 2024	Oct 2025	—	350
£150m	HSBC UK Bank plc 2.1003% MREL eligible Subordinated Loan due 2025	Oct 2024	Oct 2025	—	150
€500m	HSBC UK Bank plc MREL eligible Subordinated Floating Loan due 20265	Sep 2025	Sep 2026	415	437
£1,000m	HSBC UK Bank plc 1.1250% MREL eligible Subordinated Loan due 2026	Nov 2025	Nov 2026	1,000	1,000
£1,000m	HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan due 2027	Jul 2026	Jul 2027	999	999
£1,000m	HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan due 2028	Jul 2027	Jul 2028	929	922
£1,000m	HSBC UK Bank plc 1.7500% MREL eligible Subordinated Loan due 2029	Aug 2028	Aug 2029	1,000	1,000
$3000m	HSBC UK Bank plc 3.9730% MREL eligible Subordinated Loan due 2030	May 2029	May 2030	2,201	2,181
£750m	HSBC UK Bank plc 3.0000% MREL eligible Subordinated Loan due 2030	May 2029	May 2030	660	666
£1,000m	HSBC UK Bank plc MREL eligible Subordinated Floating Loan due 20296	Apr 2028	Apr 2029	998	998
£1,000m	HSBC UK Bank plc 6.8000% MREL eligible Subordinated Loan due 2031	Sep 2030	Sep 2031	1,023	1,071
$1,850m	HSBC UK Bank plc 5.597% MREL eligible Subordinated Loan due 2028	May 2027	May 2028	1,486	—
€1,250m	HSBC UK Bank plc 3.755% MREL eligible Subordinated Loan due 2029	May 2028	May 2029	1,056	—
£750m	HSBC UK Bank plc 5.290% MREL eligible Subordinated Loan due 2032	Sep 2031	Sep 2032	726	—
At 31 Dec				15,686	14,598

1The floating rate of interest is Sterling Overnight Index Average ('Sonia') plus 3.37%.

2The floating rate of interest is Secured Overnight Financing Rate('SOFR') plus 3.03%.

3The floating rate of interest is Sonia plus 1.89%.

4The floating rate of interest is Sonia plus 2.14%.

5The floating rate of interest is three month Euro interbank offered rate ('Euribor') plus 1.00%.

6The floating rate of interest is Sonia plus 2.03%.


122	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

21Maturity analysis of assets, liabilities and off-balance sheet commitments

The following table provides an analysis of consolidated total assets, liabilities and off-balance sheet commitments by residual contractual

maturity at the balance sheet date. These balances are included in the maturity analysis as follows:

– Trading derivatives are included in the ‘Due not more than 1 month’ time bucket, because trading balances are typically held for short

periods of time.

– Financial assets and liabilities with no contractual maturity (such as equity securities) are included in the ‘Due over 5 years’ time bucket.

Undated or perpetual instruments are classified based on the contractual notice period which the counterparty of the instrument is entitled

to give. Where there is no contractual notice period, undated or perpetual contracts are included in the ‘Due over 5 years’ time bucket.

– Non-financial assets and liabilities with no contractual maturity are included in the ‘Due over 5 years’ time bucket.

– Loan and other credit-related commitments are classified on the basis of the earliest date they can be drawn down.


Maturity analysis of assets, liabilities and off-balance sheet commitments
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 9 months	Due over 9 months but not more than 1 year	Due over 1 year but not more than 2 years	Due over 2 years but not more than 5 years	Due over 5 years	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
The group
Financial assets
Cash and balances at central banks	52,276	—	—	—	—	—	—	—	52,276
Hong Kong Government certificates of indebtedness	—	—	—	—	—	—	—	—	—
Trading assets	—	—	—	—	—	—	—	—	—
Financial assets mandatorily measured at fair value	135	—	—	—	—	—	—	39	174
Derivatives	201	—	6	8	10	10	16	47	298
Loans and advances to banks	7,263	—	—	—	—	—	—	—	7,263
Loans and advances to customers	17,936	9,421	5,613	5,699	6,191	17,815	42,915	112,014	217,604
– personal	6,388	2,639	1,986	1,975	1,912	7,132	19,929	104,774	146,735
– corporate and commercial	10,690	5,314	2,418	2,154	3,382	9,744	22,107	6,918	62,727
– financial	858	1,468	1,209	1,570	897	939	879	322	8,142
Reverse repurchase agreements – non-trading	7,285	1,923	725	—	1,843	—	—	—	11,776
Financial investments	2,188	1,623	1,407	537	3,322	3,656	11,108	13,960	37,801
Accrued income and other financial assets	2,612	262	88	14	22	3	3	—	3,004
Total financial assets at 31 Dec 2024	89,896	13,229	7,839	6,258	11,388	21,484	54,042	126,060	330,196
Non-financial assets	—	—	—	—	—	—	—	10,681	10,681
Total assets at 31 Dec 2024	89,896	13,229	7,839	6,258	11,388	21,484	54,042	136,741	340,877
Off-balance sheet commitments received
Loan and other credit-related commitments	1,316	—	—	—	—	—	—	—	1,316
Financial liabilities
Deposits by banks	833	11	500	—	3,040	—	6,760	—	11,144
Customer accounts1	265,481	5,010	2,961	2,832	3,150	920	12	—	280,366
– personal	163,612	1,362	1,963	2,618	2,946	896	10	—	173,407
– corporate and commercial	89,751	3,489	903	205	196	23	2	—	94,569
– financial	12,118	159	95	9	8	1	—	—	12,390
Repurchase agreements – non-trading	420	—	—	—	—	—	—	—	420
Derivatives	63	—	—	—	—	10	25	9	107
Debt securities in issue	69	404	—	150	—	212	998	211	2,044
Accruals and other financial liabilities	2,513	391	127	104	22	37	53	31	3,278
Subordinated liabilities	—	—	—	1,415	1,000	1,078	10,444	1,749	15,686
Total financial liabilities at 31 Dec 2024	269,379	5,816	3,588	4,501	7,212	2,257	18,292	2,000	313,045
Non-financial liabilities	—	—	—	—	—	—	—	1,861	1,861
Total liabilities at 31 Dec 2024	269,379	5,816	3,588	4,501	7,212	2,257	18,292	3,861	314,906
Off-balance sheet commitments given
Loan and other credit-related commitments	77,295	45	4	58	31	2	46	78	77,559
– personal	40,795	—	—	—	—	—	—	—	40,795
– corporate and commercial	30,950	45	4	58	31	2	46	78	31,214
– financial	5,550	—	—	—	—	—	—	—	5,550


HSBC UK Bank plc Annual Report and Accounts 2024	123


Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 9 months	Due over 9 months but not more than 1 year	Due over 1 year but not more than 2 years	Due over 2 years but not more than 5 years	Due over 5 years	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
The group
Financial assets
Cash and balances at central banks	65,719	—	—	—	—	—	—	—	65,719
Financial assets mandatorily measured at fair value	89	—	—	—	—	—	—	46	135
Derivatives	73	1	—	—	1	4	25	74	178
Loans and advances to banks	6,947	111	922	—	—	—	—	—	7,980
Loans and advances to customers	16,357	9,502	6,562	5,339	5,877	19,294	40,853	108,103	211,887
– personal	6,280	2,490	1,980	1,907	1,897	7,047	19,955	101,056	142,612
– corporate and commercial	9,536	5,596	3,366	2,015	3,290	11,103	20,413	6,659	61,978
– financial	541	1,416	1,216	1,417	690	1,144	485	388	7,297
Reverse repurchase agreements – non-trading	2,257	3,334	1,195	—	900	—	—	—	7,686
Financial investments	1,273	2,275	1,270	386	412	1,942	5,963	12,794	26,315
Accrued income and other financial assets	1,719	256	90	9	10	1	4	—	2,089
Total financial assets at 31 Dec 2023	94,434	15,479	10,039	5,734	7,200	21,241	46,845	121,017	321,989
Non-financial assets	—	—	—	—	—	—	—	10,887	10,887
Total assets at 31 Dec 2023	94,434	15,479	10,039	5,734	7,200	21,241	46,845	131,904	332,876
Off-balance sheet commitments received
Loan and other credit-related commitments	—	—	—	—	—	—	—	—	—
Financial liabilities
Deposits by banks	519	24	—	—	—	500	9,800	—	10,843
Customer accounts1	253,400	4,615	2,876	2,378	3,363	1,652	61	—	268,345
– personal	159,488	1,028	1,639	2,048	3,112	1,619	56	—	168,990
– corporate and commercial	89,054	3,311	1,180	320	248	30	5	—	94,148
– financial	4,858	276	57	10	3	3	—	—	5,207
Repurchase agreements – non-trading	4,652	—	—	—	—	—	—	—	4,652
Derivatives	91	—	—	—	—	2	6	9	108
Debt securities in issue	47	368	—	150	—	—	1,204	219	1,988
Accruals and other financial liabilities	3,269	484	306	143	26	38	70	32	4,368
Subordinated liabilities	—	100	1,536	—	500	2,438	6,106	3,918	14,598
Total financial liabilities at 31 Dec 2023	261,978	5,591	4,718	2,671	3,889	4,630	17,247	4,178	304,902
Non-financial liabilities	—	—	—	—	—	—	—	1,904	1,904
Total liabilities at 31 Dec 2023	261,978	5,591	4,718	2,671	3,889	4,630	17,247	6,082	306,806
Off-balance sheet commitments given
Loan and other credit-related commitments	72,921	24	2	—	15	111	48	71	73,192
– personal	41,180	—	—	—	—	—	—	—	41,180
– corporate and commercial	28,399	24	2	—	15	111	48	71	28,670
– financial	3,342	—	—	—	—	—	—	—	3,342

1'Customer accounts' includes £135,366m (2023: £133,791m) insured by guarantee schemes.


124	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


Maturity analysis of assets, liabilities and off-balance sheet commitments
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 9 months	Due over 9 months but not more than 1 year	Due over 1 year but not more than 2 years	Due over 2 years but not more than 5 years	Due over 5 years	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
The bank
Financial assets
Cash and balances at central banks	52,275	—	—	—	—	—	—	—	52,275
Financial assets mandatorily measured at fair value	135	—	—	—	—	—	—	39	174
Derivatives	202	—	6	8	10	10	16	43	295
Loans and advances to banks	9,666	381	546	187	182	683	1,421	4	13,070
Loans and advances to customers	19,242	5,219	4,251	4,402	5,155	17,028	39,586	111,304	206,187
– personal	4,101	2,358	1,886	1,878	1,820	6,807	19,427	104,716	142,993
– corporate and commercial	8,724	2,348	1,985	1,999	3,053	8,808	18,673	6,183	51,773
– financial	6,417	513	380	525	282	1,413	1,486	405	11,421
Reverse repurchase agreements – non-trading	7,285	1,923	725	—	1,843	—	—	—	11,776
Financial investments	2,188	1,453	1,407	537	3,322	3,657	11,107	13,926	37,597
Accrued income and other financial assets	2,788	214	83	13	20	—	—	—	3,118
Total financial assets at 31 Dec 2024	93,781	9,190	7,018	5,147	10,532	21,378	52,130	125,316	324,492
Non-financial assets	—	—	—	—	—	—	—	8,482	8,482
Total assets at 31 Dec 2024	93,781	9,190	7,018	5,147	10,532	21,378	52,130	133,798	332,974
Off-balance sheet commitments received
Loan and other credit-related commitments	1,346	—	—	—	—	—	—	—	1,346
Financial liabilities
Deposits by banks	2,132	89	636	119	3,191	453	7,660	500	14,780
Customer accounts1	260,209	4,355	2,907	2,788	3,062	837	2	—	274,160
– personal	163,152	1,322	1,910	2,574	2,858	813	—	—	172,629
– corporate and commercial	85,366	2,898	902	205	196	23	2	—	89,592
– financial	11,691	135	95	9	8	1	—	—	11,939
Repurchase agreements – non-trading	420	—	—	—	—	—	—	—	420
Derivatives	63	—	—	—	—	10	25	9	107
Debt securities in issue	69	404	—	150	—	—	998	—	1,621
Accruals and other financial liabilities	2,488	343	123	103	22	35	47	30	3,191
Subordinated liabilities	—	—	—	1,415	1,000	1,078	10,444	1,749	15,686
Total financial liabilities at 31 Dec 2024	265,381	5,191	3,666	4,575	7,275	2,413	19,176	2,288	309,965
Non-financial liabilities	—	—	—	—	—	—	—	1,551	1,551
Total liabilities at 31 Dec 2024	265,381	5,191	3,666	4,575	7,275	2,413	19,176	3,839	311,516
Off-balance sheet commitments given
Loan and other credit-related commitments	60,288	—	—	—	—	—	—	—	60,288
– personal	29,955	—	—	—	—	—	—	—	29,955
– corporate and commercial	27,479	—	—	—	—	—	—	—	27,479
– financial	2,854	—	—	—	—	—	—	—	2,854


HSBC UK Bank plc Annual Report and Accounts 2024	125


Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 6 months	Due over 6 months but not more than 9 months	Due over 9 months but not more than 1 year	Due over 1 year but not more than 2 years	Due over 2 years but not more than 5 years	Due over 5 years	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
The bank
Financial assets
Cash and balances at central banks	65,719	—	—	—	—	—	—	—	65,719
Financial assets mandatorily measured at fair value	89	—	—	—	—	—	—	46	135
Derivatives	73	1	—	—	1	4	25	71	175
Loans and advances to banks	9,831	456	1,395	155	152	505	1,148	—	13,642
Loans and advances to customers	19,065	4,715	4,364	3,961	5,147	18,387	37,953	107,422	201,014
– personal	3,992	2,223	1,885	1,817	1,813	6,758	19,564	101,030	139,082
– corporate and commercial	9,267	2,159	2,130	1,888	3,032	10,012	17,243	5,909	51,640
– financial	5,806	333	349	256	302	1,617	1,146	483	10,292
Reverse repurchase agreements – non-trading	2,257	3,334	1,195	—	900	—	—	—	7,686
Financial investments	1,273	2,105	1,270	386	412	1,942	5,962	12,754	26,104
Accrued income and other financial assets	1,631	175	85	8	9	—	—	—	1,908
Total financial assets at 31 Dec 2023	99,938	10,786	8,309	4,510	6,621	20,838	45,088	120,293	316,383
Non-financial assets	—	—	—	—	—	—	—	8,429	8,429
Total assets at 31 Dec 2023	99,938	10,786	8,309	4,510	6,621	20,838	45,088	128,722	324,812
Financial liabilities
Deposits by banks	2,144	67	92	77	112	765	10,413	450	14,120
Customer accounts1	249,185	3,280	2,658	2,348	3,286	1,580	5	—	262,342
– personal	158,993	987	1,598	2,019	3,048	1,547	—	—	168,192
– corporate and commercial	85,708	2,141	1,019	319	235	30	5	—	89,457
– financial	4,484	152	41	10	3	3	—	—	4,693
Repurchase agreements – non-trading	4,652	—	—	—	—	—	—	—	4,652
Derivatives	90	—	—	—	—	2	7	9	108
Debt securities in issue	48	368	—	150	—	—	998	—	1,564
Accruals and other financial liabilities	3,135	429	302	141	25	34	57	28	4,151
Subordinated liabilities	—	100	1,536	—	500	2,438	6,106	3,918	14,598
Total financial liabilities at 31 Dec 2023	259,254	4,244	4,588	2,716	3,923	4,819	17,586	4,405	301,535
Non-financial liabilities	—	—	—	—	—	—	—	1,712	1,712
Total liabilities at 31 Dec 2023	259,254	4,244	4,588	2,716	3,923	4,819	17,586	6,117	303,247
Off-balance sheet commitments given
Loan and other credit-related commitments	56,063	—	—	—	—	—	—	—	56,063
– personal	30,562	—	—	—	—	—	—	—	30,562
– corporate and commercial	24,617	—	—	—	—	—	—	—	24,617
– financial	884	—	—	—	—	—	—	—	884

1‘Customer accounts’ includes £134,391m (2023: £132,847m) insured by guarantee schemes.

Contractual maturity of financial liabilities

The following table shows, on an undiscounted basis, all cash flows relating to principal and future coupon payments (except for derivatives not

treated as hedging derivatives). For this reason, balances in the table below do not agree directly with those in our consolidated balance sheet

and the bank's balance sheet. Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their

contractual maturities. Derivatives not treated as hedging derivatives are included in the ‘Due not more than 1 month’ time bucket and not by

contractual maturity.

In addition, loans and other credit-related commitments, financial guarantees and similar contracts are generally not recognised on our balance

sheet. The undiscounted cash flows potentially payable under loan and other credit-related commitments and financial guarantees are classified

on the basis of the earliest date they can be called.


126	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


Cash flows payable under financial liabilities by remaining contractual maturities
	Due not more than 1 month	Due over 1 month but not more than 3 months	Due over 3 months but not more than 1 year	Due over 1 year but not more than 5 years	Due over 5 years	Total
The group	£m	£m	£m	£m	£m	£m
Deposits by banks	881	107	3,924	7,233	—	12,145
Customer accounts	265,541	5,065	9,100	1,005	—	280,711
Repurchase agreements – non-trading	420	—	—	—	—	420
Derivatives	62	154	411	895	771	2,293
Debt securities in issue	69	419	191	1,501	244	2,424
Subordinated liabilities	62	122	2,933	13,123	1,845	18,085
Other financial liabilities	2,018	293	183	105	36	2,635
	269,053	6,160	16,742	23,862	2,896	318,713
Loan and other credit-related commitments	77,296	45	93	47	78	77,559
Financial guarantees	1,046	—	—	—	—	1,046
At 31 Dec 2024	347,395	6,205	16,835	23,909	2,974	397,318
Proportion of cash flows payable in period %	87	2	4	6	1	100


Deposits by banks	560	106	367	12,257	—	13,290
Customer accounts	253,436	4,658	8,744	1,818	—	268,656
Repurchase agreements – non-trading	4,568	84	—	—	—	4,652
Derivatives	91	148	449	874	939	2,501
Debt securities in issue	48	382	192	1,598	268	2,488
Subordinated liabilities	49	196	2,430	9,976	4,034	16,685
Other financial liabilities	2,804	390	411	121	36	3,762
	261,556	5,964	12,593	26,644	5,277	312,034
Loan and other credit-related commitments	72,921	24	16	160	71	73,192
Financial guarantees	1,122	—	—	—	—	1,122
At 31 Dec 2023	335,599	5,988	12,609	26,804	5,348	386,348
Proportion of cash flows payable in period %	87	2	3	7	1	100


The bank
Deposits by banks	2,188	200	4,390	8,834	729	16,341
Customer accounts	260,250	4,406	8,914	913	—	274,483
Repurchase agreements – non-trading	420	—	—	—	—	420
Derivatives	62	154	411	895	771	2,293
Debt securities in issue	69	406	156	1,166	—	1,797
Subordinated liabilities	62	122	2,933	13,123	1,845	18,085
Other financial liabilities	2,013	254	180	96	35	2,578
	265,064	5,542	16,984	25,027	3,380	315,997
Loan and other credit-related commitments	60,289	—	—	—	—	60,289
Financial guarantees	1,038	—	—	—	—	1,038
At 31 Dec 2024	326,391	5,542	16,984	25,027	3,380	377,324
Proportion of cash flows payable in period %	86	1	5	7	1	100


Deposits by banks	2,191	157	685	13,290	647	16,970
Customer accounts	249,216	3,316	8,416	1,691	—	262,639
Repurchase agreements – non-trading	4,568	84	—	—	—	4,652
Derivatives	90	148	449	873	939	2,499
Debt securities in issue	48	370	156	1,240	—	1,814
Subordinated liabilities	49	196	2,430	9,976	4,034	16,685
Other financial liabilities	2,685	343	404	103	31	3,566
	258,847	4,614	12,540	27,173	5,651	308,825
Loan and other credit-related commitments	56,063	—	—	—	—	56,063
Financial guarantees	1,122	—	—	—	—	1,122
At 31 Dec 2023	316,032	4,614	12,540	27,173	5,651	366,010
Proportion of cash flows payable in period %	86	1	4	7	2	100


HSBC UK Bank plc Annual Report and Accounts 2024	127

22Offsetting of financial assets and financial liabilities

In the offsetting of financial assets and financial liabilities, the net amount is reported in the balance sheet when the offsetting criteria is met.

This is achieved when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or

realise the asset and settle the liability simultaneously.

In the following table, the ‘Amounts not set off in the balance sheet’ include transactions where:

– the counterparty has an offsetting exposure with the group and a master netting or similar arrangement is in place with a right to set off only

in the event of default, insolvency or bankruptcy, or the offset criteria are otherwise not satisfied; and

– cash and non-cash collateral (debt securities) has been received/pledged for derivatives and reverse repurchase/repurchase, stock

borrowing/lending and similar agreements to cover net exposure in the event of a default or other predetermined events.

The effect of over-collateralisation is excluded.

Amounts not subject to enforceable master netting agreements’ include contracts executed in jurisdictions where the rights of set off may not

be upheld under the local bankruptcy laws.

For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored and the

relevant customer agreements are subject to review and updated, as necessary, to ensure that the legal right of offset remains appropriate.


	Amounts subject to enforceable netting arrangements						Amounts not subject to enforceable netting arrangements4	Total
				Amounts not set off in the balance sheet		Net amount
	Gross amounts	Amounts offset	Net amounts in the balance sheet	Financial instruments, including non-cash collateral	Cash collateral	Net amount
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives1 (Note 9)	2,821	(2,526)	295	(88)	(207)	—	3	298
Reverse repos, stock borrowing and similar agreements classified as:
– non-trading assets	15,659	(3,883)	11,776	(11,776)	—	—	—	11,776
Loans and advances to customers2	6,037	(2,067)	3,970	(3,310)	—	660	—	3,970
At 31 Dec 2024	24,517	(8,476)	16,041	(15,174)	(207)	660	3	16,044


Derivatives1 (Note 9)	3,849	(3,674)	175	(37)	(128)	10	3	178
Reverse repos, stock borrowing and similar agreements classified as:
– non-trading assets	10,936	(3,250)	7,686	(7,686)	—	—	—	7,686
Loans and advances to customers2	5,652	(1,910)	3,742	(2,922)	—	820	—	3,742
At 31 Dec 2023	20,437	(8,834)	11,603	(10,645)	(128)	830	3	11,606


Financial liabilities
Derivatives1 (Note 9)	2,633	(2,526)	107	(55)	(48)	4	—	107
Repos, stock lending and similar agreements classified as:
– non-trading liabilities	4,303	(3,883)	420	(420)	—	—	—	420
Customer accounts3	9,949	(2,067)	7,882	(3,310)	—	4,572	6	7,888
At 31 Dec 2024	16,885	(8,476)	8,409	(3,785)	(48)	4,576	6	8,415


Derivatives1 (Note 9)	3,782	(3,674)	108	(86)	(18)	4	—	108
Repos, stock lending and similar agreements classified as:
– non-trading liabilities	7,902	(3,250)	4,652	(4,652)	—	—	—	4,652
Customer accounts3	8,790	(1,910)	6,880	(2,922)	—	3,958	4	6,884
At 31 Dec 2023	20,474	(8,834)	11,640	(7,660)	(18)	3,962	4	11,644

1At 31 December 2024, the amount of cash margin received that had been offset against the gross derivatives assets was £7m (2023: Nil). The amount of cash

margin paid that had been offset against the gross derivatives liabilities was £618m (2023: £353m).

2At 31 December 2024, the total amount of 'Loans and advances to customers' recognised on the balance sheet was £217,604m (2023: £211,877m) of which

£3,970m (2023: £3,742m) was subject to offsetting.

3At 31 December 2024, the total amount of 'Customer accounts' recognised on the balance sheet was £280,366m (2023: £268,345m) of which £7,882m (2023:

£6,880m) was subject to offsetting.

4This includes exposures that continue to be secured by financial collateral.


128	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

23Called up share capital and other equity instruments

Called up share capital and share premium


HSBC UK Bank plc ordinary shares of £1.00 each, issued and fully paid
	2024		2023
	Number	£m	Number	£m
At 1 Jan	50,002	—	50,002	—
Capitalisation of group reorganisation reserve through bonus share issuance	5,248,464,979	5,248	—	—
Less: Bonus shares cancelled	(5,248,464,979)	(5,248)	—	—
At 31 Dec	50,002	—	50,002	—


HSBC UK Bank plc share premium
	2024	2023
	£m	£m
At 1 Jan	9,015	9,015
Reclassification to retained earnings	(9,015)	—
At 31 Dec	—	9,015


Total called up share capital and share premium
	2024	2023
	£m	£m
At 31 Dec	—	9,015

The cancellation of the bonus shares and the share premium account was approved by the High Court of Justice in England and Wales on

19 November 2024 and it took effect upon the Court order being registered with Companies House on 12 December 2024, creating additional

retained earnings of £14.2bn.

Other equity instruments


HSBC UK Bank plc additional tier 1 instruments
		2024	2023
		£m	£m
£1,096m	Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2019 onwards)	1,096	1,096
£1,100m	Undated Subordinated Additional Tier 1 instrument issued 2014 (Callable December 2024 onwards)	1,100	1,100
At 31 Dec		2,196	2,196

The bank has issued capital instruments that are included in the group’s capital base as fully CRR II compliant additional tier 1 capital.

Interest on these instruments will be due and payable only at the sole discretion of the bank, and the bank has sole and absolute discretion at

all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any date. There are

limitations on the payment of principal, interest or other amounts if such payments are prohibited under UK banking regulations, or other

requirements, if the bank has insufficient distributable items or if the bank fails to satisfy the solvency condition as defined in the instruments

terms.

The instruments are undated and are repayable, at the option of the bank, in whole at the initial call date, or on any interest payment date after

the initial call date. In addition, the instruments are repayable at the option of the bank in whole for certain regulatory or tax reasons. Any

repayments require the prior notification to and consent of the PRA. These instruments rank pari passu with the bank’s most senior class or

classes of issued preference shares and therefore ahead of ordinary shares. These instruments will be written down in whole, together with

any accrued but unpaid interest if either the group’s solo or consolidated .Common Equity Tier 1 Capital Ratio falls below 7.00%.

24Contingent liabilities, contractual commitments, guarantees and

contingent assets


	The group		The bank
	2024	2023	2024	2023
	£m	£m	£m	£m
Guarantees and other contingent liabilities:
– financial guarantees1	1,046	1,121	1,038	1,121
– performance and other guarantees	2,416	2,330	2,400	2,295
At 31 Dec	3,462	3,451	3,438	3,416
Commitments2:
– documentary credits and short-term trade-related transactions	142	187	142	187
– forward asset purchases and forward deposits placed	1,641	297	1,386	—
– standby facilities, credit lines and other commitments to lend	75,776	72,708	58,760	55,876
At 31 Dec	77,559	73,192	60,288	56,063

1Financial guarantees contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified

debtor fails to make payment when due, in accordance with the original or modified terms of a debt instrument. The amounts in the above table are nominal

principal amounts.

2Includes £74bn (2023: £70bn) for the group and £57bn (2023: £53bn) for the bank of commitments to which the impairment requirements in IFRS 9 are applied

where the group and bank has become party to an irrevocable commitment.


HSBC UK Bank plc Annual Report and Accounts 2024	129

The preceding table discloses the nominal principal amounts of off-balance sheet liabilities and commitments for the group, which represents

the maximum amounts at risk should the contracts be fully drawn upon and clients default. As a significant portion of guarantees and

commitments are expected to expire without being drawn upon, the total of the nominal principal amounts is not indicative of future liquidity

requirements. The expected credit loss provision relating to guarantees and commitments under IFRS 9 is disclosed in Note 19.

The majority of the guarantees have a term of less than one year, while guarantees with terms of more than one year are subject to the group's

annual credit review process.

Contingent liabilities arising from legal proceedings, regulatory and other matters against group companies are excluded from this note but are

disclosed in Note 26.

Financial Services Compensation Scheme ('FSCS')

The FSCS provides compensation, up to certain limits, to eligible customers of financial services firms that are unable, or likely to be unable, to

pay claims against them. The FSCS may impose a further levy on group to the extent the industry levies imposed to date are not sufficient to

cover the compensation due to customers in any future possible collapse. The ultimate FSCS levy to the industry as a result of a collapse

cannot be estimated reliably. It is dependent on various uncertain factors including the potential recovery of assets by the FSCS, changes in the

level of protected products (including deposits and investments) and the population of FSCS members at the time.

UK branches of HSBC overseas entities

In December 2017, HM Revenue & Customs (‘HMRC’) challenged the value-added tax ('VAT') status of certain UK branches of HSBC overseas

entities. In Q1 2019, HMRC reaffirmed its assessment that the UK branches are ineligible to be members of the UK VAT group and HSBC filed

appeals. Since January 2018, HSBC's returns have been prepared on the basis that the UK branches are not in the UK VAT group. In July 2024,

a resolution to these appeals was agreed with HMRC, which did not have a material financial impact on HSBC UK Bank plc.

25Finance lease receivables

The group leases a variety of assets to third parties under finance leases, including transport assets, property and general plant and machinery.

At the end of lease terms, assets may be sold to third parties or leased for further terms. Rentals are calculated to recover the cost of assets

less their residual value, and earn finance income.


	2024			2023
	Total future minimum payments	Unearned finance income	Present Value	Total future minimum payments	Unearned finance income	Present Value
	£m	£m	£m	£m	£m	£m
Lease receivables1
– No later than one year	1,485	(127)	1,358	1,363	(117)	1,246
– One to two years	1,070	(84)	986	1,049	(82)	967
– Two to three years	697	(50)	647	728	(50)	678
– Three to four years	375	(29)	346	376	(28)	348
– Four to five years	350	(46)	304	184	(17)	167
– Later than 5 years	189	(17)	172	360	(55)	305
31 Dec2	4,166	(353)	3,813	4,060	(349)	3,711

1Finance leases receivables are disclosed within ‘Loans and advances to customers’ in the balance sheet.

2ECL of £22m (2023: £27m) is held in respect of loans and advances under Finance lease receivables.

26Legal proceedings and regulatory matters

The group is party to legal proceedings and regulatory matters arising out of its normal business operations. Apart from the matters described

below, the group considers that none of these matters are material. The recognition of provisions is determined in accordance with the

accounting policies set out in Note 1 of the Annual Report and Accounts 2024. While the outcomes of legal proceedings and regulatory matters

are inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect

of these matters as at 31 December 2024. Where an individual provision is material, the fact that a provision has been made is stated and

quantified. Any provision recognised does not constitute an admission of wrongdoing or legal liability. It is not practicable to provide an

aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities.

Payment Protection Insurance ('PPI')

Although the FCA deadline for bringing PPI complaints has passed, court cases are being brought alleging historic PPI mis-selling.

First Citizens litigation

In May 2023, First-Citizens Bank & Trust Company (‘First Citizens’) brought a lawsuit in the US District Court for the Northern District of

California against HSBC UK and HINV, certain other HSBC companies and seven US-based HSBC employees who had previously worked for

Silicon Valley Bank (‘SVB’). The lawsuit seeks $1bn in damages and alleges, among other things, that the HSBC companies conspired with the

individual defendants to solicit employees from First Citizens and that the individual defendants took confidential information belonging to SVB

and/or First Citizens. In July 2024, the court dismissed several of First Citizens’ claims and also dismissed HSBC UK and other defendants for

lack of jurisdiction, but allowed limited discovery into whether some of these defendants, including HSBC UK, may be subject to jurisdiction.

The remaining claims are proceeding against certain defendants, including HINV.

Based on the facts currently known, it is not practicable at this time to predict the resolution of this matter, including the timing or any possible

impact on HSBC UK, which could be significant.


130	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements

Other regulatory reviews and litigation

HSBC UK and/or certain of its affiliates are also subject to enquiries, requests for information, reviews by various regulators, competition and

law enforcement authorities, as well as litigation, in connection with various matters arising out of their businesses and operations. At the

present time, HSBC UK does not expect the ultimate resolution of any of these matters to be material to the group’s financial position;

however, given the uncertainties involved in legal proceedings and regulatory matters, there can be no assurance regarding the eventual

outcome of a particular matter or matters.

27Related party transactions

The immediate and ultimate parent company of the group is HSBC Holdings plc, which is incorporated in England and Wales.

Copies of the Group financial statements may be obtained from the following address:

HSBC Holdings plc

8 Canada Square

London E14 5HQ

The group’s related parties include the parent, fellow subsidiaries, joint ventures, post-employment benefit plans for HSBC UK employees, key

management personnel ( 'KMP') of the Company and its ultimate parent company, HSBC Holdings plc, close family members of KMP and

entities which are controlled, jointly controlled or significantly influenced by KMP or their close family members.

Particulars of transactions between the group and its related parties are tabulated below in accordance with IAS 24 ‘Related party disclosures’.

The disclosure of the year-end balance and the highest amounts outstanding during the year are considered to be the most meaningful

information to represent the amount of the transactions and outstanding balances during the year.

Key Management Personnel

The KMP of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the activities of

the Company and the group, and include the Directors of the Company, certain senior executives of the Company, directors of HSBC Holdings

plc and certain senior executives of HSBC Holdings plc. The emoluments of those KMP who are not directors or senior executives of the

Company are paid by other Group companies who make no recharge to the Company. It is therefore not possible to make a reasonable

apportionment of their emoluments in respect of services they have provided to the Company during the year. Accordingly, no emoluments in

respect of these KMP are included in the following disclosure.

The table below represents the compensation for KMP (Directors and certain senior executives) of the Company in exchange for services

rendered to the Company for the period they served during the year.


Compensation of Key Management Personnel
	2024	2023
	£000	£000
Short-term employee benefits	10,726	10,960
Post-employment benefits	53	19
Other long-term employee benefits	917	841
Share-based payments	3,322	2,808
Year ended 31 Dec	15,018	14,628


Advances and credits, guarantees and deposit balances during the year with Key Management Personnel1
	2024		2023
	Balance at 31 Dec	Highest amounts outstanding during year	Balance at 31 Dec	Highest amounts outstanding during year
	£m	£m	£m	£m
Advances and credits	10	13	9	11
Deposits	8	31	5	17

1Includes close family members and entities which are controlled or jointly controlled by KMP or their close family members.

The above transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and

security, as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not

involve more than the normal risk of repayment or present other unfavourable features.

In addition to the requirements of IAS 24, particulars of advances (loans and quasi-loans), credits and guarantees entered into by the bank and

its subsidiaries with Directors of the Company are required to be disclosed pursuant to section 413 of the Companies Act 2006. Under the

Companies Act, there is no requirement to disclose transactions with other KMP.


Transactions with Directors: advances, credits and guarantees (Companies Act 2006)
	2024	2023
	Balance at 31 Dec	Balance at 31 Dec
	£000	£000
Loans	5,096	5,118


HSBC UK Bank plc Annual Report and Accounts 2024	131

Other related parties


Transactions and balances during the year with KMP of the bank’s ultimate parent company1,2
	2024		2023
	Balance at 31 Dec	Highest amounts outstanding during the year	Balance at 31 Dec	Highest amounts outstanding during the year
	£m	£m	£m	£m
Advances and credits	—	—	—	1
Deposits	16	33	14	33

1Excludes those who are also KMP of the Company.

2 Includes close family members and entities which are controlled or jointly controlled by the KMP or their close family members.

The above transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and

security, as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not

involve more than the normal risk of repayment or present other unfavourable features.


Transactions and balances during the year with the associates and joint venture
	2024		2023
	Balance at 31 Dec	Highest balance during the year	Balance at 31 Dec	Highest balance during the year
	£m	£m	£m	£m
Unsubordinated amounts due from the joint venture	55	80	74	76
Amounts due to associates	33	90	—	—
Amounts due to joint venture	50	61	47	70
Guarantees and commitments	249	260	237	252

The group provides certain banking and financial services to its joint venture, including loans, overdrafts, interest and non-interest- bearing

deposits and current accounts. Details of the interest in the joint venture are given in Note 12.


The group’s transactions and balances during the year with HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2024				2023
	Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance
	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Derivatives	—	—	42	42	—	—	28	63
Loans and advances to banks	—	—	1,161	1,174	—	—	392	1,311
Reverse repos	—	—	1,048	1,400	—	—	400	495
Prepayments and accrued income	—	—	9	9	—	—	3	9
Other assets	1	1	641	677	—	1	573	935
Total related party assets at 31 Dec	1	1	2,901	3,302	—	1	1,396	2,813
Liabilities
Deposits by banks	—	—	787	873	—	—	464	713
Customer accounts	6,776	6,776	2,369	2,399	—	—	2,036	2,280
Repos	—	—	265	533	—	—	330	900
Other liabilities	53	56	371	640	54	54	259	800
Accruals & Deferred Income	252	322	7	9	203	203	6	8
Derivatives	—	—	18	41	—	—	22	54
Subordinated liabilities	15,686	16,078	—	—	14,598	14,598	—	—
Total related party liabilities at 31 Dec	22,767	23,232	3,817	4,495	14,855	14,855	3,117	4,755

The group routinely enters into related party transactions with other entities in the HSBC Group. These include transactions to facilitate third-

party transactions with customers, transactions for internal risk management, and other transactions relevant to HSBC Group processes. These

transactions and the above outstanding balances arose in the ordinary course of business and on substantially the same terms, including

interest rates and security, as for comparable transactions with third-party counterparties. The group's income statement included interest

payable to HSBC Holdings plc of £735m (2023: £513m) and general and administrative expenses payable to other subsidiaries of HSBC

Holdings plc of £1,964m (2023: £1,724m).


132	HSBC UK Bank plc Annual Report and Accounts 2024

Notes on the financial statements


The bank's transactions and balances during the year with HSBC UK Bank plc subsidiaries, HSBC Holdings plc and subsidiaries of HSBC Holdings plc
	2024						2023
	Due to/from subsidiaries of HSBC UK Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc		Due to/from subsidiaries of HSBC UK Bank plc subsidiaries		Due to/from HSBC Holdings plc		Due to/from subsidiaries of HSBC Holdings plc
	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance	31 Dec	Highest balance
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Assets
Derivatives	—	—	—	—	42	42	—	2	—	—	28	63
Loans and advances to banks	5,809	5,920	—	—	1,159	1,173	5,686	6,203	—	—	391	1,231
Loans and advances to customers	8,703	8,703	—	—	—	—	8,051	8,307	—	—	—	—
Reverse repos	—	—	—	—	1,048	1,400	—	—	—	—	400	495
Prepayments and accrued income	105	107	—	—	8	8	80	80	—	—	3	9
Other assets	1,441	1,441	1	1	637	673	1,006	1,187	—	1	572	935
Total related party assets at 31 Dec	16,058	16,171	1	1	2,894	3,296	14,823	15,779	—	1	1,394	2,733
Liabilities
Deposits by banks	3,637	4,034	—	—	787	873	3,276	3,276	—	—	464	673
Customer accounts	457	491	6,776	6,776	2,369	2,400	491	678	—	—	2,036	2,280
Repos	—	—	—	—	265	533	—	—	—	—	330	900
Derivatives	—	—	—	—	18	41	—	5	—	—	22	54
Other liabilities	45	45	51	56	350	626	16	152	54	54	253	796
Accruals & Deferred Income	51	60	252	322	8	10	25	26	203	203	6	8
Subordinated liabilities	—	—	15,686	16,078	—	—	—	—	14,598	14,598	—	—
Total related party liabilities at 31 Dec	4,190	4,630	22,765	23,232	3,797	4,483	3,808	4,137	14,855	14,855	3,111	4,711

The above outstanding balances arose in the ordinary course of business and on substantially the same terms, including interest rates and

security, as for comparable transactions with third-party counterparties.

Post-employment benefit plans

The HSBC Bank (UK) Pension Scheme has placed deposits of £59m (2023: £87m) with HSBC UK, earning interest of £0.9m (2023: £0.5m).

The above outstanding balances arose from the ordinary course of business and on substantially the same terms, including interest rates and

security, as for comparable transactions with third-party counterparties.

28Events after the balance sheet date

These accounts were approved by the Board of Directors on 18 February 2025 and authorised for issue.

On 11 February 2025, the Directors resolved to pay an interim dividend to ordinary shareholders of £595m in respect of the financial year

ending 31 December 2024. No liability is recognised in the financial statements in respect of this dividend.

In its assessment of events after the balance sheet date, HSBC UK has considered and concluded that no material events have occurred

resulting in adjustments to the financial statements.

29HSBC UK Bank plc’s subsidiaries and joint ventures

In accordance with section 409 of the Companies Act 2006 a list of HSBC UK Bank plc subsidiaries and joint ventures, the registered office

address and the effective percentage of equity owned at 31 December 2024 is disclosed below.

Unless otherwise stated, the share capital comprises ordinary or common shares which are held by HSBC UK Bank plc subsidiaries. The

ownership percentage is provided for each undertaking. The undertakings below are consolidated by HSBC UK Bank plc unless otherwise

indicated.

HSBC UK Bank plc's registered office address is:

HSBC UK Bank plc

1 Centenary Square

Birmingham B1 1HQ

United Kingdom


HSBC UK Bank plc Annual Report and Accounts 2024	133

Subsidiaries

The undertakings below are consolidated by HSBC UK Bank plc.

Unless otherwise stated the place of incorporation is England and

Wales.


Subsidiaries	% of share class held by immediate parent company (or by HSBC UK Bank plc where this varies)	Footnotes
Assetfinance December (F) Limited	100.00	6
Assetfinance June (D) Limited	100.00	6
Assetfinance March (D) Limited	100.00	6
Assetfinance September (G) Limited	100.00	6
B&Q Financial Services Limited	100.00	2,7
Canada Square Nominees (UK) Limited	100.00	2,7
HSBC Bank Pension Trust (UK) Limited	100.00	2,7
HSBC Branch Nominee (UK) Limited	100.00	2,6
HSBC UK Covered Bonds LLP	N/A	0,6
HSBC Equipment Finance (UK) Limited	100.00	2,6
HSBC Executor & Trustee Company (UK) Limited	100.00	6
HSBC Finance Limited	100.00	2,7
HSBC Innovation Bank Limited	100.00	2,10
HSBC Invoice Finance (UK) Limited	100.00	2,6
HSBC Private Bank (UK) Limited	100.00	2,7
HSBC Trust Company (UK) Limited	100.00	2,7
HSBC UK Client Nominee Limited	100.00	2,6
HSBC UK Societal Projects Limited	N/A	2,5,6
HSBC Wealth Client Nominee Limited	100.00	2,6
HSBC Legacy Partnership Limited	100.00	2,4,7
Marks and Spencer Financial Services plc	100.00	2,8
Marks and Spencer Unit Trust Management Limited	100.00	2,8
Midland Bank (Branch Nominees) Limited	100.00	2,6
Midland Nominees Limited	100.00	6
St Cross Trustees Limited	100.00	6
Turnsonic (Nominees) Limited	100.00	6

Associates

The undertakings below are associates and equity accounted.


Associates	% of share class held by immediate parent company (or by the Group where this varies)	Footnotes
HSBC UK Covered Bonds (LM) Limited	20.00	1, 11

Joint venture

The undertaking below is a Joint Venture and equity accounted.


Joint venture	% of share class held by immediate parent company (or by HSBC UK Bank plc where this varies)	Footnotes
Vaultex UK Limited	50.00	3,9


Footnotes
0	Where an entity is governed by voting rights, HSBC consolidates when it holds – directly or indirectly – the necessary voting rights to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other factors, including having exposure to variability of returns, power to direct relevant activities, and whether power is held as an agent or principal. HSBC’s consolidation policy is described in Note 1.2(a)
1	Management has determined that these undertakings are excluded from consolidation in the Group accounts as these entities do not meet the definition of subsidiaries in accordance with IFRS. HSBC’s consolidation policy is described in Note 1.2(a)
2	Directly held by HSBC UK Bank plc
3	Financial year ended 6 October 2024
4	Previously John Lewis Financial Services Limited
5	Limited by guarantee and therefore no share capital. HSBC UK Bank plc is the sole member.
Registered Offices
6	1 Centenary Square, Birmingham, United Kingdom, B1 1HQ
7	8 Canada Square, London, United Kingdom, E14 5HQ
8	Kings Meadow Chester Business Park, Chester, United Kingdom, CH99 9FB
9	All Saints Triangle, Caledonian Road, London, United Kingdom, N1 9UT
10	All Alphabeta, 14-18 Finsbury Square, London, United Kingdom, EC2A 1BR
11	All 10th Floor 5 Churchill Place, London, United Kingdom, E14 5HU


134	HSBC UK Bank plc Annual Report and Accounts 2024

Other information

Reconciliation of alternative

performance measures

Return on equity and return on tangible equity

RoTE is measured as reported profit attributable to the ordinary shareholders, excluding impairment of goodwill and other intangible assets for

the period, divided by average reported equity adjusted for goodwill and intangibles. The adjustment to reported results and reported equity

excludes amounts attributable to non-controlling interests. We provide RoTE in addition to RoE as a way of assessing our performance, which

is closely aligned to our capital position. The measures are calculated in US dollars in line with the standard HSBC Group-wide calculation

methodology.

The following table details the adjustments made to the reported results and equity:


Return on Equity and Return on Tangible Equity
	Year ended
	31 Dec 2024	31 Dec 2023
	$m	$m
Profit
Profit attributable to the ordinary shareholders of the parent company	4,989	6,226
Profit attributable to the ordinary shareholders, excluding goodwill and other intangible assets impairment	4,989	6,226
Equity
Average shareholders’ equity	33,100	30,016
Effect of average preference shares, additional Tier 1 and other equity instruments	(2,808)	(2,726)
Average ordinary shareholders’ equity	30,292	27,290
Effect of goodwill and other intangibles (net of deferred tax)	(5,549)	(5,342)
Average tangible ordinary shareholders' equity	24,743	21,948
Ratio	%	%
Return on equity	16.5	22.8
Return on average tangible equity1,2	20.2	28.4

1Excluding the gain recognised on acquisition of SVB UK in 2023, the 2023 RoTE was 22.4%.

2Under IAS 19 HSBC UK holds a pension fund surplus, and records pension income in the Income Statement. The IAS 19 pension fund surplus increases

Tangible Equity but not CET1. In the event that the IAS 19 pension fund surplus was zero, RoTE would be 22.8%(2023: 32.4%, 25.5% excluding the acquisition

of SVB UK), we refer to this as Pension Adjusted RoTE.


HSBC UK Bank plc Annual Report and Accounts 2024	135

Abbreviations


Currencies
£	British pound sterling
€	Euro
$	United States dollar
Abbreviations
4Q25	Fourth quarter of 2025
2Q24	Second quarter of 2024
A
AGM	Annual General Meeting
AI	Artificial Intellegence
AIEA	Average interest-earning assets
ALCO	Asset and Liability Management Committee
AT1	Additional tier 1
B
BACS	Bankers' Automated Clearing System
Basel	Basel Committee on Banking Supervision
Basel III	Basel Committee’s reforms to strengthen global capital and liquidity rules
BoE	Bank of England
Bps	Basis points. One basis point is equal to one hundredth of a percentage point
C
CAP	Consolidated Action Plan
CAPM	Capital asset pricing model
CBDC	Central Bank Digital Currency
CEO	Chief Executive Officer
CET1	Common equity tier 1
CFO	Chief Financial Officer
CGU	Cash-generating Unit
CMB	Commercial Banking
CODM	Chief Operating Decision Maker
CDI	CORE Deposit Intangible
CRO	Chief Risk Officer
CRR	Customer risk rating
CRR II	Revised Capital Requirements Regulation and Directive, as implemented
CPI	Consumer Price Index
D
DBS	Digital Business Services
DCF	Discounted cash flows
DPD	Days past due
DBO	Defined Benefit Obligation
DECL	Disclosures about Expected Credit Losses
DRA	Dynamic Risk Assessment
Dec	December
E
EAD	Exposure at default
EBA	European Banking Authority
EC	European Commission
ECL	Expected credit losses. In the income statement, ECL is recorded as a change in expected credit losses and other credit impairment charges. In the balance sheet, ECL is recorded as an allowance for financial instruments to which only the impairment requirements in IFRS 9 are applied.
EIR	Effective interest rate
ESG	Environmental, social and governance
EU	European Union
Euribor	Euro interbank offered rate
EVE	Economic value of equity
EPC	Energy Performance Certificate
ETR	Effective Tax Rate
F
FCA	Financial Conduct Authority (UK)
FRC	Financial Reporting Council
FSCS	Financial Services Compensation Scheme


FTE	Full-time equivalent staff
FVOCI	Fair value through other comprehensive income
FY	Full Year
FY23	Full Year 2023
FY24	Full Year 2024
G
GBM	Global Banking and Markets
GDP	Gross domestic product
GPSP	Group Performance Share Plans
group	HSBC UK Bank plc together with its subsidiary undertakings
Group	HSBC Holdings plc together with its subsidiary undertakings
GTRF	Global Trade and Receivables Finance
H
HMRC	HM Revenue and Customs
HMT	His Majesty’s Treasury
HSBC Group	HSBC Holdings plc together with its subsidiary undertakings
HSBC Holdings plc	HSBC Holdings plc, the parent company of HSBC UK
HSBC UK	HSBC UK Bank plc together with its subsidiary undertakings
HINV	HSBC Innovation Bank Limited, formerly Silicon Valley Bank UK Limited
HR	Human Resources
I
IAS	International Accounting Standards
IASB	International Accounting Standards Board
Ibor	Interbank offered rate
ICAAP	Internal capital adequacy assessment process
IFRS® Accounting Standards	International Financial Reporting Standards as issued by the IASB
IFRS® Sustainability Disclosure Standards	Standards issue by the International Sustainability Standards Board (‘ISSB’)
ISSB	International Sustainability Standards Board
ILAAP	Internal liquidity adequacy assessment process
IRB	Internal ratings-based
IT	Information technology
J
Jan	January
K
KMP	Key management personnel
KPI	Key performance indicator
KPMG	Klynveld Peat Marwick Goerdeler
L
LC	Large Corporates
LCR	Liquidity coverage ratio
LFRF	Liquidity and Funding Risk management Framework
LGD	Loss given default
Libor	London interbank offered rate
LTI	Long-term incentive
LTV	Loan to value
M
MI	Management Information
MME	Mid-Market Enterprises
MREL	EU minimum requirements for own funds and eligible liabilities
M&S	Marks and Spencer
N
NII	Net interest income
NIM	Net interest margin
NPS	Net Promoter Score
NSFR	Net stable funding ratio


O
OCI	Other comprehensive income
OECD	Organisation of Economic Co-operation and Development
P
PBT	Profit before tax
PD	Probability of default
PLCA	Purpose Led Conduct Approach
POCI	Purchased or originated credit impaired
PPA	Power Purchase Agreement
PPI	Payment protection insurance
PRA	Prudential Regulation Authority
PSR	Payment Systems Regulator
PIV	Pooled Investment Vehicles
PwC	PricewaterhouseCoopers LLP and its network of firms
R
RAS	Risk Appetite Statement
Revenue	Net operating income before change in expected credit losses and other credit impairment charges/Loan impairment charges and other credit provisions, also referred to as revenue
RMM	Risk Management Meeting
ROC	Resilience Oversight Committee
RoE	Return on average ordinary shareholders’ equity
RoTE	Return on average tangible equity
RPI	Retail Price Index
RWA	Risk-weighted asset
S
SAF	Subsidiary Accountability Framework
Sep	September
SME	Small and medium-sized enterprise
SOFR	Secured Overnight Financing Rate
Sonia	Sterling Overnight Index Average
SPPI	Solely payments of principal and interest
STD	Standardised Approach
SVB UK	Silicon Valley Bank UK Limited
T
TCFD	Taskforce on Climate-Related Financial Disclosures
U
UK	United Kingdom
US	United States of America
V
VaR	Value at risk
VAT	Value-added tax
VIU	Value in use
W
WPB	Wealth and Personal Banking
Y
YoY	Year-on-year