HSBC : Pillar 3 Disclosures at 31 March 2024

HSBC Holdings p lc

Pillar 3 Disclosures at 31 March 2024

Pillar 3 Disclosures at 31 March 2024

Contents

• Introduction

• Highlights
  4 Key metrics

• Capital and leverage
• Approach and policy

• Risk-weightedassets
• Credit risk (including amounts below the thresholds for deduction)
• Counterparty credit risk, including settlement risk
• Securitisation
• Market risk
• Operational risk

1. Minimum requirement for own funds and eligible liabilities

1. Liquidity

1. Cautionary statement regarding forward-looking statements

1. Abbreviations
2. Contacts

Tables

• Key metrics (KM1/IFRS9-FL)
  5 Own funds disclosure
  7 Overview of RWAs (OV1)
  8 RWAs by legal entities
  8 RWA flow statements of credit risk exposures under IRB approach (CR8)

• RWA flow statements of counterparty credit risk exposures under the IMM (CCR7)

• RWA flow statements of market risk exposures under the IMA (MR2-B)

1. Key metrics of the European resolution group (KM2)

1. Key metrics of the Asian resolution group (KM2)
2. Key metrics of the US resolution group (KM2)

13 Level and components of HSBC Group consolidated liquidity coverage ratio (LIQ1)

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

This document should be read in conjunction with the Earnings Release 1Q24, which has been published on our website at www.hsbc.com/investors.

• HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

Introduction

Pillar 3 disclosures and governance

Regulatory framework for disclosure

Our Pillar 3 Disclosures at 31 March 2024 comprise both quantitative and qualitative information required under Pillar 3. These disclosures are made in accordance with Part Eight of CRR II and the Prudential Regulation Authority ('PRA') disclosure templates and instructions. They are supplemented by specific additional requirements of the PRA and discretionary disclosures on our part.

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

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

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

The regulators of the Group's banking entities outside the UK are at varying stages of implementation of Basel's framework, so local regulation may have been on the basis of Basel I, II, III or Basel 3.1.

While the frameworks may vary for some of our banking subsidiaries they do not impact Group disclosures. However, the changes to the local regulatory frameworks may impact distributions from our subsidiaries.

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

Comparatives and references

To give insight into movements during 2024, we provide comparative figures, commentary on variances and flow tables for capital requirements. In all tables where the term 'capital requirements' is used, this represents the minimum total capital charge set at 8% of risk-weighted assets ('RWAs') by Article 92(1) of CRR II. Narratives are included to explain quantitative disclosures where necessary.

The regulatory numbers and ratios presented in this document were accurate as at the date of reporting. Small changes may exist between these numbers and ratios and those submitted in regulatory filings. Where differences are significant, we will restate comparatives.

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

The table below references where comparatives have been restated.

Page ref	Table Reference	Activity
4	Key metrics (KM1/IFRS9-FL)	Updated NSFR based on
		enhanced calculation.

Pillar 3 requirements may be met by inclusion in other disclosure media. Where we adopt this approach, references are provided to the relevant pages of the 1Q24 Earnings Release of HSBC Holdings plc or to other documents.

Governance

Our Pillar 3 disclosures are governed by the Group's disclosure policy framework as approved by the Group Audit Committee. This document has been approved by the Group Disclosure and Controls Committee, chaired by the Group Chief Financial Officer, as delegated by the Group Audit Committee.

Regulatory reporting processes and controls

The quality of regulatory reporting remains a key priority for management and regulators. We are progressing with a comprehensive programme to strengthen our global processes, improve consistency and enhance controls across regulatory reports.

The ongoing programme of work focuses on our material regulatory reports and is being phased over a number of years. This programme includes data enhancement, transformation of the reporting systems and an uplift to the control environment over the report production process.

While this programme continues, there may be further impacts on some of our regulatory ratios, such as the common equity tier 1 ('CET1'), liquidity coverage ratio ('LCR') and net stable funding ratio ('NSFR'), as we implement recommended changes and continue to enhance our controls across the process.

HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

2

Pillar 3 Disclosures at 31 March 2024

Highlights

CET1 capital and ratio

Our CET1 capital was $126.3bn and our ratio was 15.2%, up 0.4 percentage points compared with 31 December 2023. This was driven by capital generation, the net beneficial impact of strategic transactions on CET1 and RWAs, partly offset by the foreseeable dividend accrual, including the special dividend of $0.21 per share following the completion of the sale of our banking business in Canada, and the share buy-backannounced at our 2023 year-endresults.

We have announced our first interim dividend of $0.10 per share. In addition, following the completion of the sale of our banking business in Canada, the Board has approved a special dividend of $0.21 per share, payable in June 2024, alongside the first interim dividend. After completing the $2bn buy-back announced at our full year 2023 results, we have now announced with our 1Q24 results a further share buy-back of up to $3bn, which we expect to have a 0.4 percentage point impact on 2Q24 CET1 capital ratio. The planned buy- back commenced shortly after the annual general meeting ('AGM') held in May 2024.

We intend to manage the CET1 capital ratio within our medium-term target range of 14% to 14.5%, with a dividend payout ratio target of 50% for 2024, excluding material notable items and related impacts.

CET1 capital and ratio

125.7	126.4	124.8	126.5	126.3
				15.2%
		14.9%	14.8%
14.7%	14.7%

31 Mar 23 30 Jun 23 30 Sep 23 31 Dec 23 31 Mar 24

CET1 ratio movement

Canada +0.8ppts

	1.3
0.9	(0.5)
	(0.4)			15.2
14.8	(0.3)
(0.4)	(0.1)
	(0.1)	0.0

CET1	Regulatory	Canada	Special	Dividend	4Q23	Change	FX	Argentina Other*	CET1
4Q23	profits	sale	dividend	accrual	buy	in		HFS	1Q24
				ex.	back	RWAs
				special

• Includes the impact of sale of our retail banking operations in France and regulatory deductions

RWAs

Our RWAs are $832.6bn, a decrease of $21.5bn compared with 31 December 2023. Excluding the $8.9bn fall in foreign currency translation differences, the remaining $12.6bn decrease was predominantly attributed to the impact of our disposals in France and Canada, which was partly offset by asset size and asset quality movements.

RWAs

Risk-weighted assets	31 Mar 2024	31 Dec 2023
	$bn	$bn
Credit risk	663.6	683.9
Counterparty credit risk	36.7	35.5
Market risk	36.6	37.5
Operational risk	95.7	97.2
Total RWAs	832.6	854.1

Liquidity

The average Group LCR was 136% or $172bn above the regulatory requirement and the average high-quality liquid assets ('HQLA') was $645.8bn.

The average Group NSFR was 137% after the adjustment (see page 12). At 31 March 2024, all of the Group's material operating entities were above regulatory minimum levels.

Liquidity

	31 Mar 2024	31 Dec 2023
LCR (%)	136	136
NSFR (%)*	137	138

• We have enhanced our calculation processes during the period, which resulted in a 2% increase on the current period NSFR. Prior quarter has been restated (31 Dec 23: 5% increase).

• HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

Key metrics

The table below sets out the key regulatory metrics covering the Group's available capital (including buffer requirements and ratios), RWAs, leverage ratio, LCR and NSFR. Unless stated otherwise, figures have been prepared on an IFRS 9 transitional basis. Capital figures and ratios are reported on a CRR II transitional basis for capital instruments and the leverage ratio is calculated using the CRR II end point basis for capital. The calculation for LCR is the average of the preceding 12 months for each quarter and NSFR is the average of the preceding four quarters.

Key metrics (KM1/IFRS9-FL)

				At
		31 Mar	31 Dec	30 Sep	30 Jun	31 Mar
Ref		2024	2023	2023	2023	2023
	Available capital ($bn)
1	Common equity tier 1 ('CET1') capital	126.3	126.5	124.8	126.4	125.7
	CET1 capital as if IFRS 9 transitional arrangements had not been applied	126.3	126.4	124.8	126.4	125.7
2	Tier 1 capital	144.1	144.2	142.5	145.8	145.1
	Tier 1 capital as if IFRS 9 transitional arrangements had not been applied	144.1	144.1	142.5	145.8	145.1
3	Total capital	172.5	171.2	165.5	170.0	169.6
	Total capital as if IFRS 9 transitional arrangements had not been applied	172.5	171.1	165.5	170.0	169.6
	Risk-weighted assets ('RWAs') ($bn)
4	Total RWAs	832.6	854.1	840.0	859.5	854.4
	Total RWAs as if IFRS 9 transitional arrangements had not been applied	832.6	854.0	840.0	859.5	854.4
	Capital ratios (%)
5	CET1	15.2	14.8	14.9	14.7	14.7
	CET1 as if IFRS 9 transitional arrangements had not been applied	15.2	14.8	14.9	14.7	14.7
6	Tier 1	17.3	16.9	17.0	17.0	17.0
	Tier 1 as if IFRS 9 transitional arrangements had not been applied	17.3	16.9	17.0	17.0	17.0
7	Total capital	20.7	20.0	19.7	19.8	19.8
	Total capital as if IFRS 9 transitional arrangements had not been applied	20.7	20.0	19.7	19.8	19.8
	Additional own funds requirements based on supervisory review and evaluation
	process ('SREP') as a percentage of RWAs (%)
UK-7a	Additional CET1 SREP requirements	1.5	1.5	1.5	1.5	1.5
UK-7b	Additional AT1 SREP requirements	0.5	0.5	0.5	0.5	0.5
UK-7c	Additional T2 SREP requirements	0.6	0.6	0.6	0.6	0.6
UK-7d	Total SREP own funds requirements	10.6	10.6	10.6	10.6	10.6
	Combined buffer requirement as a percentage of RWAs (%)
8	Capital conservation buffer requirement	2.5	2.5	2.5	2.5	2.5
9	Institution-specific countercyclical capital buffer	0.7	0.7	0.7	0.5	0.4
10	Global systemically important institution buffer	2.0	2.0	2.0	2.0	2.0
11	Combined buffer requirement	5.2	5.2	5.2	5.0	4.9
UK-11a	Overall capital requirements	15.8	15.8	15.8	15.6	15.5
12	CET1 available after meeting the total SREP own funds requirements	9.2	8.8	8.9	8.7	8.7
	Leverage ratio
13	Total exposure measure excluding claims on central banks ($bn)	2,528.0	2,574.8	2,478.3	2,497.9	2,486.1
14	Leverage ratio excluding claims on central banks (%)	5.7	5.6	5.7	5.8	5.8
	Average exposure measure excluding claims on central banks ($bn)	2,563.8	2,498.6	2,491.1	2,506.5	2,454.8
	Additional leverage ratio disclosure requirements
14a	Fully loaded expected credit losses ('ECL') accounting model leverage ratio excluding	5.7	5.6	5.7	5.8	5.8
	claims on central banks (%)
14b	Leverage ratio including claims on central banks (%)	5.0	4.8	4.9	5.0	5.0
14c	Average leverage ratio excluding claims on central banks (%)	5.6	5.7	5.8	5.8	5.7
14d	Average leverage ratio including claims on central banks (%)	4.9	4.9	5.0	5.0	4.9
14e	Countercyclical leverage ratio buffer (%)	0.3	0.2	0.2	0.2	0.2
EU-14d	Leverage ratio buffer requirement (%)	1.0	0.9	0.9	0.9	0.9
EU-14e	Overall leverage ratio requirements (%)	4.3	4.2	4.2	4.2	4.2
	Liquidity coverage ratio ('LCR')
15	Total high-quality liquid assets ($bn)	645.8	647.5	641.1	631.2	634.9
UK-16a	Cash outflows - total weighted value ($bn)	666.6	672.3	673.8	672.2	670.4
UK-16b	Cash inflows - total weighted value ($bn)	192.8	195.2	197.0	194.5	188.7
16	Total net cash outflow ($bn)	473.8	477.1	476.8	477.7	481.7
17	LCR (%)	136	136	134	132	132
	Net stable funding ratio ('NSFR')
18	Total available stable funding ($bn)	1,571.9	1,601.9	1,599.2	1,575.2	1,557.4
19	Total required stable funding ($bn)1	1,151.1	1,162.3	1,157.0	1,132.9	1,110.1
20	NSFR (%)1	137	138	138	139	140

• We have enhanced our calculation processes during the period, which resulted in a 2% increase on the current period NSFR. Comparatives have been restated.

HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

4

Pillar 3 Disclosures at 31 March 2024

Capital and leverage

Approach and policy

Our approach to capital management is driven by our strategic and	HSBC has no foreseen restrictions envisaged with regard to planned
organisational requirements, taking into account the regulatory,	dividend or payments from material subsidiaries. However, the ability
economic and commercial environment. We aim to maintain a strong	of subsidiaries to pay dividends or advance monies to HSBC Holdings
capital base to support the risks inherent in our business and invest in	depends on, among other things, their respective local regulatory
accordance with our strategy, meeting both consolidated and local	capital and banking requirements, exchange controls, statutory
regulatory capital requirements at all times.	reserves, and financial and operating performance. None of our
As at 31 March 2024, capital securities included in the capital base of	subsidiaries that are excluded from the regulatory consolidation have
capital resources below their minimum regulatory requirement.
HSBC have been issued on a fully compliant or grandfathered basis in
For further details of our approach to treasury risk management, see
accordance with the Capital Requirements Regulation. Capital
securities are regularly reviewed for compliance with guidelines. A list	page 203 of the Annual Report and Accounts 2023.
of the main features of our capital instruments and eligible liabilities,
in accordance with Article 437 of CRR II is also published on our
website at www.hsbc.com with reference to our balance sheet on
31 December 2023. The full terms and conditions of our securities are
also available at www.hsbc.com.
Own funds disclosure
			At
			31 Mar	31 Dec
		2024	2023
Ref			$m	$m
6	Common equity tier 1 capital before regulatory adjustments	164,710	165,868
28	Total regulatory adjustments to common equity tier 1	(38,438)	(39,367)
29	Common equity tier 1 capital	126,272	126,501
36	Additional tier 1 capital before regulatory adjustments	17,931	17,732
43	Total regulatory adjustments to additional tier 1 capital	(70)	(70)
44	Additional tier 1 capital	17,861	17,662
45	Tier 1 capital	144,133	144,163
51	Tier 2 capital before regulatory adjustments	29,474	28,148
57	Total regulatory adjustments to tier 2 capital	(1,092)	(1,107)
58	Tier 2 capital	28,382	27,041
59	Total capital	172,515	171,204

At 31 March 2024, our CET1 capital ratio increased to 15.2% from 14.8% at 31 December 2023, reflecting a decrease in RWAs of $21.5bn, and a decline in CET1 capital of $0.2bn.

The key drivers impacting the CET1 ratio were:

• a 0.7 percentage point increase from strategic transactions, including the gain on disposal of our Canada banking business adjusted for the $0.21 per share special dividend, the RWA reduction from our disposals in France and Canada, which was partially offset by the impairment loss following the held for sale classification of our business in Argentina;
• a 0.2 percentage point increase from capital generation, mainly through regulatory profits less dividends, adjusted for the share buy-back announced at our 2023 year-end results;
• a 0.4 percentage point decrease was driven by higher underlying RWAs, excluding the reduction from our disposals in France and Canada; and
• a 0.2 percentage point decrease from the adverse impact of foreign exchange fluctuations and an increase in regulatory deductions.

Our Pillar 2A requirement at 31 March 2024, as per the PRA's Individual Capital Requirement based on a point-in-time assessment, was equivalent to 2.6% of RWAs, of which 1.5% was required to be met by CET1. Throughout 1Q24, we complied with the PRA's regulatory capital adequacy requirement.

Our leverage ratio was 5.7% at 31 March 2024, up from 5.6% at

31 December 2023. The reduction in the leverage exposures led to a rise of 0.1 percentage point in the leverage ratio, primarily due to a decline in the balance sheet. The decline in the balance sheet was mainly driven by the completion of the sale of our banking business in Canada and the sale of our retail banking operations in France.

The average leverage ratio was 5.6% at 31 March 2024, down from 5.7% at 31 December 2023. The movement is primarily due to an increase of 0.2 percentage points in the average leverage exposure, mainly due to a rise in the average balance sheet. This was partly offset by a rise of 0.1 percentage point in average Tier 1 capital.

For further details of certain risks to capital and liquidity, see page 203 of the Annual Report and Accounts 2023.

• HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

Key changes and regulatory assessments

Sale of our banking business in Canada

On 28 March 2024, HSBC Overseas Holdings (UK) Limited, a direct subsidiary of HSBC Holdings plc, completed the sale of HSBC Bank Canada to the Royal Bank of Canada.

The completion of the transaction resulted in a gain on sale of $4.8bn inclusive of recycling of $0.6bn in foreign currency translation reserve losses and $0.4bn in other reserves losses. The gain on sale also included $0.3bn in fair value gains recognised on the related foreign exchange hedges in the first quarter of 2024.

The gain on sale had a favourable impact of approximately 0.8 percentage points on our CET1 ratio, adjusted for the $0.21 per share special dividend. Leverage exposures were reduced by $85.4bn and Group RWAs reduced by $32.7bn, which included the impact from the foreign exchange hedges for the Canada sale proceeds.

Sale of our retail banking operations in France

On 1 January 2024, HSBC Continental Europe completed the sale of its retail banking business in France to CCF, a subsidiary of Promontoria MMB SAS ('My Money Group'). As a result of the sale, our CET1 ratio increased by 0.1 percentage point, due to the reduced RWAs, and the leverage exposures decreased by $15.4bn.

Upon completion and in accordance with the terms of the sale, HSBC Continental Europe retained a portfolio of €7.1bn ($7.8bn) consisting of home and certain other loans.

Argentina

On 9 April 2024, HSBC Latin America B.V. entered into a binding agreement to sell its business in Argentina to Grupo Financiero Galicia ('Galicia').

The transaction is subject to conditions, including regulatory approval, and is expected to be completed within the next 12 months. At

31 March 2024, our investment in HSBC Argentina has been

classified as held for sale in accordance with IFRS 5. As a result, we classified total assets of $5.1bn and total liabilities of $3.5bn to held for sale, and recognised a $1.1bn pre-tax loss in the first quarter of 2024, which reduced the CET1 ratio by 0.1 percentage point. The transaction is expected to have an immaterial impact on the Group's CET1 ratio at completion of sale, as the initial reduction of 0.1 percentage point in 1Q24 is expected to be broadly offset by the estimated reduction in RWAs on closing.

For further details of disposal groups and business acquisitions, see page 4 of the Earnings Release 1Q24 .

Basel 3.1

The PRA is expected to release their near final draft of the remaining parts of Basel 3.1 in 2Q24. However, in preparation we are assessing the impact of the Basel 3.1 UK consultation paper released in November 2022 and the associated implementation challenges (including data provision) on our RWAs upon initial implementation, which is expected to be 1 July 2025. The RWA output floor under Basel 3.1 is proposed to be subject to a four-and-a-half year transitional provision. Any impact from the output floor is expected to be towards the end of the transition period.

Environmental, Social and Governance risk

The work by Basel on climate-related financial risks across all three pillars of regulation, supervision and disclosure is ongoing. The initial work by Basel concluded that climate risk drivers, including physical and transition risks, can be captured in traditional financial risk categories such as credit, market, operational and liquidity risks. As part of its wider efforts to improve ESG risk coverage, Basel published a consultation paper in November 2023 on a Pillar 3 disclosures framework for climate-related financial risks with a proposed effective date of 1 January 2026.

HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

6

Pillar 3 Disclosures at 31 March 2024

Risk-weighted assets

The table below shows total RWAs including free deliveries, and the corresponding total own funds requirement split by risk type, and represents the minimum capital charge set at 8% of RWAs by Article 92(1) of CRR II. Other counterparty credit risk includes securities financing transactions RWAs.

Overview of RWAs (OV1)

				At
			31 Mar	31 Dec	31 Mar
			2024	2023	2024
					Total own
					funds
			RWAs	RWAs	requirements
			$m	$m	$m
1	Credit risk (excluding counterparty credit risk)	654,538	676,102	52,363
2	-	standardised approach ('STD')	170,725	167,096	13,658
3	-	foundation internal ratings-based ('FIRB') approach	79,330	77,544	6,346
4	-	slotting approach	24,883	25,886	1,991
UK 4a	-	equities under the simple risk-weighted approach1	5,570	5,662	446
5	-	advanced IRB ('AIRB') approach	374,030	399,914	29,922
6	Counterparty credit risk ('CCR')	36,613	35,374	2,929
7	-	standardised approach	9,135	10,017	731
8	-	internal model method ('IMM')	11,312	11,208	905
UK-8a	-	exposures to a central counterparty	1,817	1,675	145
UK-8b	-	credit valuation adjustment	2,042	2,763	163
9	-	other counterparty credit risk	12,307	9,711	985
15	Settlement risk	95	104	8
16	Securitisation exposures in the non-trading book	9,038	7,887	723
17	-	internal ratings-based approach ('SEC-IRBA')	2,754	2,169	220
18	-	external ratings-based approach ('SEC-ERBA') (including internal assessment approach ('IAA'))	2,321	2,410	186
19	-	standardised approach ('SEC-SA')	3,799	3,142	304
UK-19a	- 1250%/deduction	164	166	13
20	Position, foreign exchange and commodities risks (market risk)	36,641	37,490	2,931
21	-	standardised approach	9,983	15,172	799
22	-	internal models approach ('IMA')	26,658	22,318	2,132
23	Operational risk	95,708	97,157	7,657
UK-23b	-	standardised approach	95,708	97,157	7,657
29	Total	832,633	854,114	66,610
24	-	of which: amounts below the thresholds for deduction (subject to 250% risk-weight)2	46,756	46,969	3,740

1 This includes off-balance sheet collective investment undertakings ('CIU') equity exposures, calculated as per the PRA Rulebook Article 132(c).

2 These balances are included in rows 2 and 5 of the table and include thresholds for the recognition of significant investments and deferred tax assets.

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

Credit risk (including amounts below the thresholds for deduction)

Credit risk RWAs reduced by $21.6bn. Excluding a decrease of $7.4bn from foreign currency translation differences, RWAs fell by $14.2bn, reflecting:

• a $30.1bn decrease primarily due to a $26.6bn fall from the disposal of our banking business in Canada, and the sale of our retail banking operations in France.

This was partly offset by:

• a $7.7bn increase in RWAs due to asset size movements, mainly from increased corporate lending, notably in HSBC Bank plc and SAB, and a temporary increase from the Canada sale proceeds;
• a $7.2bn rise in RWAs due to asset quality movements driven by unfavourable credit risk rating migrations and portfolio mix changes in Asia; and
• a $1.0bn increase in RWAs due to methodology changes and credit risk parameter refinements, notably in HSBC Bank plc and the Middle East.

Counterparty credit risk, including settlement risk

Counterparty credit risk RWAs rose by $1.2bn, largely due to higher securities financing exposures in Argentina, Asia and HSBC Bank plc, and risk parameter changes in HSBC Bank plc. These were partly offset by a $0.5bn reduction from the disposal of our banking business in Canada.

Securitisation

Securitisation RWAs increased by $1.2bn, primarily due to risk parameter changes in HSBC UK Bank plc and portfolio growth, notably in Asia.

Market risk

The $0.9bn decrease in market risk RWAs was attributed to the $5.6bn impact of the foreign exchange hedges for the Canada sale proceeds, which was largely offset by an increase of $4.7bn, mainly driven by higher value at risk.

Operational risk

Operational risk RWAs decreased by $1.5bn due to foreign exchange translation differences.

• HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

RWAs by legal entities1

			The						Holding
			Hongkong						companies,
			and	HSBC	HSBC		Grupo		shared
			Shanghai	Bank	North		Financiero		service
			Banking	Middle	America	HSBC	HSBC,	Other	centres and
	HSBC UK	HSBC	Corporation	East	Holdings	Bank	S.A.	trading	intra-Group
	Bank plc	Bank plc	Limited	Limited	Inc	Canada3	de C.V.	entities	eliminations	Total
	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn	$bn
Credit risk	110.7	75.8	318.9	18.2	61.2	-	26.7	43.2	8.9	663.6
Counterparty credit risk	0.2	18.2	9.5	0.6	3.2	-	0.8	4.2	-	36.7
Market risk2	0.1	25.8	27.2	2.4	3.7	0.5	0.7	1.6	3.1	36.6
Operational risk	17.8	18.0	46.1	3.7	7.2	3.4	5.3	5.2	(11.0)	95.7
At 31 Mar 2024	128.8	137.8	401.7	24.9	75.3	3.9	33.5	54.2	1.0	832.6
At 31 Dec 2023	129.2	131.5	396.7	24.3	72.2	31.9	32.6	59.6	6.7	854.1

1 Balances are on a third-party Group consolidated basis.

2 Market risk RWAs are non-additive across the legal entities due to diversification effects within the Group.

3 The remaining RWA balance in HSBC Bank Canada results from averaging and will roll off over future reporting cycles.

The table below shows the drivers of the quarterly movements of credit risk RWAs, excluding counterparty credit risk and including free deliveries under the IRB approach. The table also excludes securitisation positions, equity exposures and non-credit obligation assets.

RWA flow statements of credit risk exposures under IRB approach (CR8)

			Quarter ended
		31 Mar	31 Dec	30 Sep	30 Jun
		2024	2023	2023	2023
Ref		$m	$m	$m	$m
1	RWAs at opening period	489,736	486,371	497,817	503,959
2	Asset size	4,772	(814)	919	(2,155)
3	Asset quality	7,623	1,779	1,409	1,077
4	Model updates	-	(120)	(902)	(660)
5	Methodology and policy	(750)	(4,208)	(3,058)	(4,711)
6	Acquisitions and disposals	(28,933)	(123)	(1,785)	-
7	Foreign exchange movements1	(6,294)	6,851	(8,029)	307
9	RWAs at end of period	466,154	489,736	486,371	497,817

• Foreign exchange movements in this disclosure are computed by retranslating the RWAs into US dollars based on the underlying transactional currencies.

Excluding foreign currency translation differences, RWAs under the	RWAs increased by $7.6bn mainly due to unfavourable credit risk
IRB approach fell by $17.3bn during 1Q24.	rating migrations and portfolio mix changes in Asia.
RWAs decreased by $28.9bn primarily due to a fall of $25.4bn from	RWAs rose by $4.8bn due to asset size movements, mainly reflecting
the disposal of our banking business in Canada, and the sale of our	a temporary RWA increase from the Canada sale proceeds, higher
retail banking operations in France.	sovereign exposures and corporate lending.
Changes in methodology and policy led to a $0.8bn decrease in
RWAs, mostly due to credit risk parameter refinements and
methodology changes, notably in HSBC Bank plc and the Middle East.

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

RWA flow statements of counterparty credit risk exposures under the IMM (CCR7)

			Quarter ended
		31 Mar	31 Dec	30 Sep	30 Jun
		2024	2023	2023	2023
Ref		$m	$m	$m	$m
1	RWAs at opening period	11,208	11,819	12,029	11,080
2	Asset size	163	(589)	(266)	915
3	Credit quality of counterparties	(59)	(22)	56	34
9	RWAs at end of period	11,312	11,208	11,819	12,029

RWAs under the internal model method increased by $0.1bn in 1Q24, largely due to mark-to-market movements.

HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024

8

Pillar 3 Disclosures at 31 March 2024

The table below shows the drivers of the quarterly movements of market risk RWAs under the internal model approach, split by VaR, SVaR, IRC and other models.

RWA flow statements of market risk exposures under the IMA (MR2-B)

		a	b	c	e	f	g
				Incremental
		Value at	Stressed	risk charge		Total	Capital
		risk ('VaR')	VaR	('IRC')	Other	RWAs	requirement
Ref		$m	$m	$m	$m	$m	$m
1	RWAs at 1 Jan 2024	7,164	8,297	5,163	1,694	22,318	1,785
2	Movement in risk levels	1,231	3,299	(237)	47	4,340	347
3	Model updates/changes	-	-	-	-	-	-
4	Methodology and policy	-	-	-	-	-	-
8	RWAs at 31 Mar 2024	8,395	11,596	4,926	1,741	26,658	2,132
1	RWAs at 1 Oct 2023	9,402	10,406	6,446	1,035	27,289	2,183
2	Movement in risk levels	(2,238)	(2,109)	(403)	570	(4,180)	(335)
3	Model updates/changes	-	-	-	(89)	(7)	(7)
4	Methodology and policy	-	-	(880)	89	(791)	(63)
8	RWAs at 31 Dec 2023	7,164	8,297	5,163	1,694	22,318	1,785
1	RWAs at 1 Jul 2023	9,322	9,614	5,839	1,221	25,996	2,080
2	Movement in risk levels	80	792	607	(186)	1,293	103
3	Model updates/changes	-	-	-	-	-	-
4	Methodology and policy	-	-	-	-	-	-
8	RWAs at 30 Sep 2023	9,402	10,406	6,446	1,035	27,289	2,183
1	RWAs at 1 Apr 2023	7,994	8,337	5,476	1,601	23,408	1,873
2	Movement in risk levels	1,378	1,308	201	(291)	2,596	208
3	Model updates/changes	-	-	-	(89)	(89)	(7)
4	Methodology and policy	(50)	(31)	162	-	81	6
8	RWAs at 30 Jun 2023	9,322	9,614	5,839	1,221	25,996	2,080

RWAs under the internal models approach increased by $4.3bn, mainly attributed to higher value at risk.

• HSBC Holdings plc Pillar 3 Disclosures at 31 March 2024