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Annual Financial Report - 44x of 48

3rd Apr 2013 17:04

RNS Number : 3944B

HSBC Holdings PLC

03 April 2013

24 Property, plant and equipment

	Freehold land and buildings	Long leasehold land and buildings	Short leasehold land and buildings1	Equipment, fixtures and fittings2	Equipment on operating leases	Total3
	US$m	US$m	US$m	US$m	US$m	US$m
Cost or fair value
At 1 January 2012 .....................................	3,537	1,800	3,872	11,579	71	20,859
Additions at cost4 ......................................	135	89	209	1,016	50	1,499
Fair value adjustments ...............................	(35)	31	76	-	-	72
Disposals ...................................................	(141)	-	(68)	(915)	(14)	(1,138)
Reclassified to held for sale ........................	(10)	(36)	(6)	(70)	-	(122)
Transfers ...................................................	59	(7)	(55)	3	-	-
Exchange differences .................................	(59)	10	40	195	4	190
Other changes ...........................................	9	(23)	-	(148)	-	(162)

At 31 December 2012 ...............................	3,495	1,864	4,068	11,660	111	21,198

Accumulated depreciation and impairment
At 1 January 2012 .....................................	(544)	(332)	(1,181)	(7,909)	(28)	(9,994)
Depreciation charge for the year ...............	(72)	(57)	(201)	(1,055)	(12)	(1,397)
Disposals ...................................................	44	-	53	844	13	954
Reclassified to held for sale ........................	13	1	1	27	-	42
Transfers ...................................................	(26)	1	22	3	-	-
Impairment losses recognised ....................	(9)	(4)	(11)	(63)	-	(87)
Exchange differences .................................	(8)	(2)	(15)	(137)	(1)	(163)
Other changes ...........................................	(67)	3	12	84	3	35

At 31 December 2012 ...............................	(669)	(390)	(1,320)	(8,206)	(25)	(10,610)

Net carrying amount at 31 December 2012 ...............................................................	2,826	1,474	2,748	3,454	86	10,588

Cost or fair value
At 1 January 2011 .....................................	3,952	1,673	4,004	12,529	53	22,211
Additions at cost4 ......................................	353	114	180	1,183	19	1,849
Fair value adjustments ...............................	(15)	44	89	-	-	118
Disposals ...................................................	(188)	(19)	(279)	(1,400)	-	(1,886)
Reclassified to held for sale ........................	(424)	(19)	(158)	(260)	-	(861)
Transfers ...................................................	(12)	(35)	25	10	-	(12)
Exchange differences .................................	(203)	1	15	(395)	(1)	(583)
Other changes ...........................................	74	41	(4)	(88)	-	23

At 31 December 2011 ...............................	3,537	1,800	3,872	11,579	71	20,859

Accumulated depreciation and impairment
At 1 January 2011 .....................................	(586)	(307)	(1,268)	(8,506)	(23)	(10,690)
Depreciation charge for the year ...............	(88)	(51)	(211)	(1,157)	(9)	(1,516)
Disposals ...................................................	60	2	262	1,319	-	1,643
Reclassified to held for sale ........................	133	13	80	138	-	364
Transfers ...................................................	5	35	(34)	(6)	-	-
Impairment losses recognised ....................	(13)	-	(16)	(25)	-	(54)
Exchange differences .................................	18	(1)	8	260	1	286
Other changes ...........................................	(73)	(23)	(2)	68	3	(27)

At 31 December 2011 ...............................	(544)	(332)	(1,181)	(7,909)	(28)	(9,994)

Net carrying amount at 31 December 2011 ...............................................................	2,993	1,468	2,691	3,670	43	10,865

1 Including assets held on finance leases with a net book value of US$5m (2011: US$7m).

2 Including assets held on finance leases with a net book value of US$182m (2011: US$210m).

3 Including assets with a net book value of US$39m (2011: US$33m) pledged as security for liabilities.

4 At 31 December 2012, HSBC had US$412m (2011: US$517m) of contractual commitments to acquire property, plant and equipment.

Leasehold land and buildings

Leasehold land and buildings are considered to be held under finance lease contracts where the value of the land cannot reliably be separated from the value of the lease and the respective contracts do not meet the criteria for classification as operating leases. Included within 'Short leasehold land and buildings' are the following amounts in respect of assets classed as improvements to buildings, which are carried at depreciated historical cost:

Leasehold land and buildings

	2012		2011
	Cost	Accumulated depreciation	Cost	Accumulated depreciation
	US$m	US$m	US$m	US$m

At 1 January ......................................................................	1,669	(751)	1,944	(933)
Additions ...........................................................................	119	-	171	-
Disposals ............................................................................	(65)	47	(269)	262
Depreciation charge for the year ........................................	-	(133)	-	(139)
Impairment loss recognised ................................................	-	(6)	-	(15)
Exchange differences .........................................................	28	(13)	(13)	2
Reclassified as held for sale .................................................	(10)	(1)	(154)	73
Other changes ....................................................................	(23)	(9)	(10)	(1)

At 31 December .................................................................	1,718	(866)	1,669	(751)

Net carrying amount at 31 December .................................	852		918

Investment properties

Movement on the fair value of investment properties

	Freehold land and buildings	Long leasehold land and buildings	Short leasehold land and buildings	Total
	US$m	US$m	US$m	US$m
Fair value
At 1 January 2012 .............................................................	745	192	402	1,339
Additions at cost ................................................................	9	-	-	9
Fair value adjustments ........................................................	(35)	31	76	72
Reclassified to held for sale ................................................	-	(29)	-	(29)
Exchange differences .........................................................	(64)	-	1	(63)
Other changes ....................................................................	(3)	1	8	6
p
At 31 December 2012 ........................................................	652	195	487	1,334

Fair value
At 1 January 2011 .............................................................	667	156	310	1,133
Additions at cost ................................................................	242	-	-	242
Fair value adjustments ........................................................	(15)	44	89	118
Disposals ............................................................................	(47)	(17)	-	(64)
Exchange differences .........................................................	(22)	1	1	(20)
Other changes ....................................................................	(80)	8	2	(70)

At 31 December 2011 ........................................................	745	192	402	1,339

Investment properties are valued on a market value basis as at 31 December each year by independent professional valuers who have recent experience in the location and type of properties. Investment properties in Hong Kong, the Macau Special Administrative Region and mainland China, which represent more than 51% by value of HSBC's investment properties subject to revaluation, were valued by DTZ Debenham Tie Leung Limited whose valuers are members of the Hong Kong Institute of Surveyors. Properties in other countries, which represent 49% by value of HSBC's investment properties, were valued by different independent professionally qualified valuers.

HSBC Holdings had no investment properties at 31 December 2012 or 2011.

HSBC properties leased to customers

HSBC properties leased to customers included US$694m at 31 December 2012 (2011: US$618m) let under operating leases, net of accumulated depreciation of US$16m (2011: US$12m). None was held by HSBC Holdings.

At 31 December 2012, the classification of land and buildings in Hong Kong in accordance with Hong Kong Companies Ordinance requirements was freehold nil (2011: nil), long leasehold US$1,319m (2011: US$1,363m), medium leasehold US$1,600m (2011: US$1,484m) and short leasehold US$3m (2011: US$4m).

25 Investments in subsidiaries

Principal subsidiaries of HSBC Holdings

	At 31 December 2012
	Country of incorporation or registration	HSBC's interest in equity capital %	Issuedequitycapital	Share class
Europe
HSBC Asset Finance (UK) Limited ........................	England	100	£265m	Ordinary £1
HSBC Bank A.S. ....................................................	Turkey	100	TRL652m	A-Common TRL1 B-Common TRL1
HSBC Bank Malta p.l.c. .........................................	Malta	70.03	€88m	Ordinary €0.30
HSBC Bank plc ......................................................	England	100	£797m	Ordinary £1 Preferred Ordinary £1 Series 2 Third DollarPreference US$0.01 Third DollarPreference US$0.01
HSBC France .........................................................	France	99.99	€337m	Shares €5.00
HSBC Bank International Limited .........................	Jersey	100	£1m	Ordinary £1
HSBC Life (UK) Limited .......................................	England	100	£94m	Ordinary £1
HSBC Private Banking Holdings (Suisse) SA ..........	Switzerland	100	CHF1,363m	Ordinary CHF1,000
HSBC Trinkaus & Burkhardt AG ...........................	Germany	80.62	€28m	Shares of no par value
Marks and Spencer Retail Financial ServicesHoldings Limited ...............................................	England	100	£67m	Ordinary £1

Hong Kong
Hang Seng Bank Limited1 ......................................	Hong Kong	62.14	HK$9,559m	Ordinary HK$5.00
HSBC Insurance (Asia) Limited .............................	Hong Kong	100	HK$2,798m	Ordinary HK$1,000
HSBC Life (International) Limited ........................	Bermuda	100	HK$2,778m	Ordinary HK$1.00
The Hongkong and Shanghai Banking Corporation Limited ..............................................................	Hong Kong	100	HK$58,969m	Ordinary HK$2.50 CIP2 US$1.00 CRP3 US$1.00 NIP4 US$1.00

Rest of Asia-Pacific
HSBC Bank Australia Limited ................................	Australia	100	A$751m	Ordinary no par value
			A$60m	Pref shares of no par value
HSBC Bank (China) Company Limited ..................	PRC5	100	RMB12,400m	Ordinary CNY1.00
HSBC Bank Malaysia Berhad .................................	Malaysia	100	RM115m	Ordinary RM0.50

Middle East and North Africa
HSBC Bank Middle East Limited ...........................	Jersey	100	US$931m	Ordinary US$1.00 CRP3 US$1.00
HSBC Bank Egypt S.A.E. ......................................	Egypt	94.53	EGP2,079m	Ordinary EGP84.00

North America
HSBC Bank Bermuda Limited ................................	Bermuda	100	BMD30m	Common BMD1.00
HSBC Bank Canada ...............................................	Canada	100	C$1,571m	Class 1 Pref of NPV6 Class 2 Pref of NPV6 Common of NPV6
HSBC Bank USA, N.A. ..........................................	US	100	US$2m	Common US$100
HSBC Finance Corporation ...................................	US	100	-7	Common US$0.01
HSBC Securities (USA) Inc. ...................................	US	100	-7	Common US$0.05

Latin America
HSBC Bank Argentina S.A. ....................................	Argentina	99.99	ARS1,244m	Ordinary-A ARS1.00 Ordinary-B ARS1.00
HSBC Bank Brasil S.A. - Banco Múltiplo ..............	Brazil	100	BRL5,994m	Shares of no par value
HSBC Mexico, S.A., Institución de Banca Múltiple,Grupo Financiero HSBC .....................................	Mexico	99.99	MXN5,261m	Ordinary MXN2.00
HSBC Bank (Panama) S.A. ....................................	Panama	100	US$10m	Ordinary PAB1.00

1 Listed in Hong Kong.		5 People's Republic of China.
2 Cumulative Irredeemable Preference shares.		6 Preference shares of nil par value.
3 Cumulative Redeemable Preference shares.		7 Issued equity capital is less than US$1m.
4 Non-cumulative Irredeemable Preference shares.

Details of the debt, subordinated debt and preference shares issued by the principal subsidiaries to parties external to the Group are included in the Notes 29 'Debt securities in issue', 33 'Subordinated liabilities' and 37 'Non-controlling interests', respectively.

All the above subsidiaries are included in the HSBC consolidated financial statements.

Details of all HSBC subsidiaries will be annexed to the next Annual Return of HSBC Holdings filed with the UK Registrar of Companies.

All the above make their financial statements up to 31 December except for HSBC Bank Argentina S.A., whose financial statements are made up to 30 June annually.

The principal countries of operation are the same as the countries of incorporation except for HSBC Bank Middle East Limited which operates mainly in the Middle East and North Africa and HSBC Life (International) Limited which operates mainly in Hong Kong.

In February 2013, we announced an agreement to sell HSBC Bank (Panama) S.A. to Bancolombia S.A. For further details see Note 45.

During 2012 and 2011, none of the Group's subsidiaries experienced significant restrictions on paying dividends or repaying loans and advances.

Acquisitions

In June 2012, HSBC merged its operations in Oman with the Oman International Bank S.A.O.G. for total consideration of US$0.2bn. HSBC owns 51% of the combined entity, HSBC Bank Oman S.A.O.G., which had net assets of US$0.8bn immediately following the merger.

In October 2012, HSBC acquired the onshore retail and commercial banking business of Lloyds Banking Group in the United Arab Emirates for a total consideration of US$0.1bn. As a result of the transaction HSBC acquired net assets of US$0.2bn.

SPEs consolidated by HSBC where HSBC owns less than 50% of the voting rights

	Carrying value of totalconsolidated assets		Nature of SPE
	2012	2011
	US$bn	US$bn

Barion Funding Limited .......................................................	3.9	3.8	Securities investment conduit
Bryant Park Funding LLC ...................................................	0.9	2.8	Conduit
HSBC Home Equity Loan Corporation I ..............................	2.0	2.1	Securitisation
HSBC Home Equity Loan Corporation II ............................	2.2	2.4	Securitisation
HSBC Receivables Funding, Inc. II .......................................	-	1.9	Securitisation
Malachite Funding Limited ..................................................	3.4	3.6	Securities investment conduit
Mazarin Funding Limited .....................................................	8.0	8.0	Securities investment conduit
Metrix Funding Ltd .............................................................	-	0.7	Securitisation
Metrix Securities plc ............................................................	-	0.4	Securitisation
Regency Assets Limited .......................................................	10.1	7.5	Conduit
Solitaire Funding Ltd ...........................................................	11.3	12.5	Securities investment conduit

In addition to the above, HSBC consolidates a number of individually insignificant SPEs with total assets of US$17bn. For further details, see Note 42.

In each of the above cases, HSBC has less than 50% of the voting rights, but consolidates because it has the majority of risks and rewards of ownership of the SPE, or the substance of the relationship with the SPE is such that its activities are conducted on behalf of HSBC according to its specific business needs so that HSBC obtains benefit from the SPE's operation. The consolidation of SPEs sponsored by HSBC is discussed on page 384.

26 Assets held for sale and other assets

Assets held for sale

	2012	2011
	US$m	US$m

Disposal groups .......................................................................................................................	5,797	38,903
Non-current assets held for sale:	13,472	655
- property, plant and equipment ............................................................................................	500	589
- investment in Ping An ........................................................................................................	8,168	-
- loans and advances to customers .........................................................................................	3,893	-
- other ...................................................................................................................................	911	66


	19,269	39,558

Disposal groups

At 31 December 2012, the following businesses represented the majority of disposal groups held for sale:

·; Latin American businesses, which include banking operations in Peru, Colombia and Paraguay.

·; US life insurance businesses.

The following significant businesses that were held for sale at 31 December 2011 were sold in 2012:

·; The sale of the US Card and Retail Services business that was completed on 1 May 2012 with a gain on disposal of US$3.1bn.

·; The sale of 195 US branches were completed in several stages in 2012. 138 branches were sold on 18 May 2012, recognising a gain of US$661m. The remaining branches were sold in the third quarter of 2012 with a gain of US$203m.

·; Central American businesses, which include banking operations in Costa Rica, El Salvador and Honduras were sold in November and December 2012 with a loss on disposal of US$62m.

The major classes of assets and associated liabilities of disposal groups held for sale were as follows:

	At 31 December 2012
	South America businesses	US life insurance businesses	Other	Total
	US$m	US$m	US$m	US$m
Assets of disposal groups held for sale
Trading assets .................................................	4	-	-	4
Loans and advances to banks ..........................	344	-	164	508
Loans and advances to customers ...................	1,929	-	302	2,231
Financial investments .....................................	364	1,396	229	1,989
Prepayments and accrued income ...................	27	15	5	47
Goodwill and intangible assets .........................	33	53	60	146
Other assets of disposal groups .......................	622	109	141	872

Total assets ....................................................	3,323	1,573	901	5,797

Liabilities of disposal groups held for sale (Note 30)
Deposits by banks ...........................................	26	-	10	36
Customer accounts .........................................	2,154	-	836	2,990
Debt securities in issue ....................................	566	-	(1)	565
Liabilities under insurance contracts ...............	-	998	162	1,160
Other liabilities of disposal groups ..................	132	39	96	267

Total liabilities ...............................................	2,878	1,037	1,103	5,018

Net unrealised losses recognised in 'other operating income' as a result of reclassification to held for sale ...............	(96)	-	-	(96)

Expected date of completion ..........................	Q4 2013	Q1 2013
Operating segment .........................................	Latin America	North America

Property, plant and equipment

The property, plant and equipment classified as held for sale is the result of repossession of property that had been pledged as collateral by customers. Substantially all of these assets are disposed of within 12 months of acquisition. The majority arose within the North America operating segment.

Investment in Ping An

On 5 December 2012, we entered into an agreement to dispose of our entire 15.57% shareholding in Ping An for US$9.4bn. The disposal was carried out in two tranches, an initial tranche of 256,694,218 shares representing 3.24% of Ping An's issued share capital, then the remaining 976,121,395 shares representing 12.33% of Ping An's issued share capital. The selling price for both the tranches was fixed at HK$59 per share.

The first tranche of shares was disposed on 7 December 2012. Following this disposal, HSBC no longer had significant influence over Ping An and ceased to account for it as an associate. The gain from the disposal of the first tranche of shares and the gain from the consequent discontinuance of associate accounting for the remaining 12.33% shareholding in Ping An totalled US$3bn, and was recognised in the income statement. The remaining 12.33% shareholding was recognised as an available-for-sale investment, measured initially at fair value on the date of discontinuance of associate accounting, and thereafter carried at fair value with unrealised gains or losses recorded in other comprehensive income.

The fixing of the sale price gave rise to a contingent forward sale contract, the fair value of which at year end was based on the difference between the agreed sale price and the market price for the shares, adjusted for an assessment of the probability of the transaction being completed. The adverse fair value of this contract was US$553m at 31 December 2012, recorded in net trading income.

At 31 December 2012, the fair value of our 12.33% shareholding in Ping An was US$8.2bn included within 'Assets held for sale' above, with US$737m accumulated unrealised gains in other comprehensive income which arose after the date of the agreement and represent the difference between Ping An's share price at the year-end and the share price on the date of recognition as an available-for-sale investment.

The sale of the second tranche was completed on 6 February 2013 where the net impact of the change in fair value of the contingent forward sale contract to the point of delivery of the shares and the derecognition of the available-for-sale investment resulted in an income statement gain before tax in 2013 of US$553m.

Loans and advances to customers

Loans and advances to customers held for sale at 31 December 2012 include US personal loan balances of US$3.4bn, net of impairment allowances.

Other assets

	At 31 December
	2012	2011
	US$m	US$m

Bullion ....................................................................................................................................	26,508	19,824
Reinsurers' share of liabilities under insurance contracts (Note 31) ..........................................	1,407	1,801
Endorsements and acceptances ................................................................................................	12,032	11,010
Retirement benefit assets ........................................................................................................	2,846	2,497
Other accounts ........................................................................................................................	11,923	13,567

	54,716	48,699

27 Trading liabilities

	At 31 December
	2012 US$m	2011 US$m

Deposits by banks ...................................................................................................................	61,686	47,506
Customer accounts ..................................................................................................................	150,705	123,344
Other debt securities in issue (Note 29) ...................................................................................	31,198	29,987
Other liabilities - net short positions in securities ...................................................................	60,974	64,355

	304,563	265,192

At 31 December 2012, the cumulative amount of change in fair value attributable to changes in HSBC credit risk was a loss of US$29m (2011: gain of US$599m).

Deposits by banks held for trading

	At 31 December
	2012 US$m	2011 US$m

Repos ......................................................................................................................................	26,740	16,687
Settlement accounts ................................................................................................................	7,647	7,221
Stock lending ..........................................................................................................................	4,523	2,821
Other ......................................................................................................................................	22,776	20,777

	61,686	47,506

Customer accounts held for trading

	At 31 December
	2012 US$m	2011 US$m


Repos ......................................................................................................................................	103,483	70,151
Settlement accounts ................................................................................................................	9,461	6,909
Stock lending ..........................................................................................................................	2,295	1,774
Other ......................................................................................................................................	35,466	44,510

	150,705	123,344

28 Financial liabilities designated at fair value

HSBC

	At 31 December
	2012	2011
	US$m	US$m

Deposits by banks and customer accounts ................................................................................	496	517
Liabilities to customers under investment contracts ................................................................	12,456	11,399
Debt securities in issue (Note 29) ............................................................................................	53,209	52,197
Subordinated liabilities (Note 33) .............................................................................................	16,863	17,503
Preferred securities (Note 33) .................................................................................................	4,696	4,108

	87,720	85,724

The carrying amount at 31 December 2012 of financial liabilities designated at fair value was US$7,032m more than the contractual amount at maturity (2011: US$1,377m more). The cumulative amount of the change in fair value attributable to changes in credit risk was a loss of US$88m (2011: gain of US$5,118m).

HSBC Holdings

	At 31 December
	2012	2011
	US$m	US$m
Debt securities in issue (Note 29):
- owed to third parties .........................................................................................................	8,577	5,753
Subordinated liabilities (Note 33):
- owed to third parties .........................................................................................................	10,358	11,443
- owed to HSBC undertakings ..............................................................................................	4,260	3,955

	23,195	21,151

The carrying amount at 31 December 2012 of financial liabilities designated at fair value was US$3,199m more than the contractual amount at maturity (2011: US$722m more). The cumulative amount of the change in fair value attributable to changes in credit risk was a loss of US$164m (2011: gain of US$2,096m).

29 Debt securities in issue

	At 31 December
	2012	2011
	US$m	US$m

Bonds and medium-term notes ................................................................................................	155,661	151,367
Other debt securities in issue ....................................................................................................	48,207	61,830

	203,868	213,197
Of which debt securities in issue reported as:
- trading liabilities (Note 27) ...............................................................................................	(31,198)	(29,987)
- financial liabilities designated at fair value (Note 28) ........................................................	(53,209)	(52,197)

	119,461	131,013

Certain debt securities in issue are managed on a fair value basis as part of HSBC's interest rate risk management policies. The debt securities being hedged are presented within the balance sheet caption 'Financial liabilities designated at fair value', with the remaining debt securities included within 'Trading liabilities'. The following table analyses the carrying amount of bonds and medium-term notes in issue at 31 December with original maturities greater than one year:

Bonds and medium-term notes

HSBC

	At 31 December
	2012	2011
	US$m	US$m
Fixed rate
Secured financing:
0.01% to 3.99%: until 2056 ................................................................................................	7,514	8,259
4.00% to 4.99%: until 2013 ................................................................................................	231	1,307
5.00% to 5.99%: until 2019 ................................................................................................	189	332
8.00% to 9.99%: until 2028 ................................................................................................	252	276
Other fixed rate senior debt:
0.01% to 3.99%: until 2078 ................................................................................................	48,620	38,346
4.00% to 4.99%: until 2046 ................................................................................................	18,722	15,515
5.00% to 5.99%: until 2041 ................................................................................................	14,766	17,525
6.00% to 6.99%: until 2046 ................................................................................................	5,207	7,056
7.00% to 7.99%: until 2026 ................................................................................................	713	3,083
8.00% to 9.99%: until 2036 ................................................................................................	199	379
10.00% or higher: until 2028 ..............................................................................................	108	437

	96,521	92,515

Variable interest rate
Secured financings - 0.01% to 13.99%: until 2068 ..................................................................	7,897	7,279
FHLB advances - 0.01% to 0.99%: until 2036 ........................................................................	1,000	1,000
Other variable interest rate senior debt - 0.01% to 12.99%: until 2057 ..................................	43,104	47,393

	52,001	55,672

	At 31 December
	2012	2011
	US$m	US$m

Brought forward ......................................................................................................................	148,522	148,187

Structured notes
Interest rate, equity, equity index or credit-linked ...................................................................	7,139	3,180

	155,661	151,367

HSBC Holdings

	At 31 December
	2012	2011
	US$m	US$m

Debt securities .........................................................................................................................	11,268	8,366
Of which debt securities in issue reported as:
- financial liabilities designated at fair value (Note 28) .......................................................	(8,577)	(5,753)

	2,691	2,613
Fixed rate senior debt, unsecured
3.00% to 3.99%: until 2016 ................................................................................................	1,258	1,177
4.00% to 4.99%: until 2022 ................................................................................................	4,945	2,573
5.00% to 5.99%: until 2021 ................................................................................................	2,990	2,730
6.00% to 6.99%: until 2042 ................................................................................................	2,075	1,886

	11,268	8,366

30 Liabilities of disposal groups held for sale and other liabilities

Liabilities of disposal groups held for sale

	HSBC
	2012	2011
	US$m	US$m

Liabilities of disposal groups held for sale1 ...............................................................................	5,018	22,200

1 An analysis of liabilities of disposal groups held for sale is provided on page 471.

Other liabilities

	HSBC		HSBC Holdings
	2012	2011	2012	2011
	US$m	US$m	US$m	US$m

Amounts due to investors in funds consolidated by HSBC ...	564	720	-	-
Obligations under finance leases (Note 41) .........................	304	428	-	-
Dividend declared and payable by HSBC Holdings (Note 10) .......................................................................................	-	885	-	885
Endorsements and acceptances ...........................................	12,031	11,009	-	-
Other liabilities ..................................................................	20,963	14,925	30	26

	33,862	27,967	30	911

31 Liabilities under insurance contracts

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m
At 31 December 2012
Non-life insurance liabilities
Unearned premium provision .......................................................................	34	(6)	28
Notified claims .............................................................................................	29	(6)	23
Claims incurred but not reported ...................................................................	12	-	12
Other ...........................................................................................................	6	(2)	4

	81	(14)	67

Liabilities under insurance contracts (continued)

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m

Brought forward ...........................................................................................	81	(14)	67

Life insurance liabilities to policyholders
Life (non-linked) ..........................................................................................	30,684	(938)	29,746
Investment contracts with discretionary participation features1 ....................	24,374	-	24,374
Life (linked) .................................................................................................	13,056	(455)	12,601

	68,114	(1,393)	66,721

	68,195	(1,407)	66,788

At 31 December 2011
Non-life insurance liabilities
Unearned premium provision .......................................................................	621	(112)	509
Notified claims .............................................................................................	510	(91)	419
Claims incurred but not reported ...................................................................	449	(51)	398
Other ...........................................................................................................	55	4	59

	1,635	(250)	1,385

Life insurance liabilities to policyholders
Life (non-linked) ..........................................................................................	26,926	(649)	26,277
Investment contracts with discretionary participation features1 ....................	21,488	-	21,488
Life (linked) .................................................................................................	11,210	(903)	10,307

	59,624	(1,552)	58,072

	61,259	(1,802)	59,457

1 Though investment contracts with discretionary participation features are financial instruments, HSBC treats them as insurance contracts as permitted by IFRS 4.

Movement on non-life insurance liabilities

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m
2012
Unearned premium reserve ('UPR')
At 1 January .................................................................................................	621	(112)	509
Changes in UPR recognised as (income)/expense ..........................................	44	3	47
Gross written premiums ............................................................................	760	(104)	656
Gross earned premiums .............................................................................	(716)	107	(609)

Disposals.......................................................................................................	(497)	91	(406)
Exchange differences and other movements .................................................	(134)	12	(122)

At 31 December ...........................................................................................	34	(6)	28

Notified and incurred but not reported claims
At 1 January .................................................................................................	959	(142)	817
Notified claims .........................................................................................	510	(91)	419
Claims incurred but not reported ...............................................................	449	(51)	398

Claims paid in current year ...........................................................................	(339)	57	(282)
Claims incurred in respect of current year .....................................................	341	(53)	288
Claims incurred in respect of prior years .......................................................	1	(5)	(4)
Disposals.......................................................................................................	(486)	137	(349)
Exchange differences and other movements .................................................	(435)	-	(435)

At 31 December ...........................................................................................	41	(6)	35
Notified claims .........................................................................................	29	(6)	23
Claims incurred but not reported ...............................................................	12	-	12

Other ...........................................................................................................	6	(2)	4

Total non-life insurance liabilities ................................................................	81	(14)	67

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m
2011
Unearned premium reserve ('UPR')
At 1 January .................................................................................................	727	(129)	598
Changes in UPR recognised as (income)/expense ..........................................	31	(2)	29
Gross written premiums ............................................................................	1,175	(182)	993
Gross earned premiums .............................................................................	(1,144)	180	(964)

Exchange differences and other movements .................................................	(137)	19	(118)

At 31 December ...........................................................................................	621	(112)	509

Notified and incurred but not reported claims
At 1 January .................................................................................................	1,624	(305)	1,319
Notified claims .........................................................................................	879	(230)	649
Claims incurred but not reported ...............................................................	745	(75)	670

Claims paid in current year ...........................................................................	(631)	81	(550)
Claims incurred in respect of current year .....................................................	481	(99)	382
Claims incurred in respect of prior years .......................................................	(46)	14	(32)
Disposals ......................................................................................................	(317)	129	(188)
Exchange differences and other movements .................................................	(152)	38	(114)

At 31 December ...........................................................................................	959	(142)	817
Notified claims .........................................................................................	510	(91)	419
Claims incurred but not reported ...............................................................	449	(51)	398

Other ...........................................................................................................	55	4	59

Total non-life insurance liabilities ................................................................	1,635	(250)	1,385

Life insurance liabilities to policyholders

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m
2012
Life (non-linked)
At 1 January .................................................................................................	26,926	(649)	26,277
Benefits paid ................................................................................................	(1,566)	160	(1,406)
Increase in liabilities to policyholders ...........................................................	6,558	(479)	6,079
Exchange differences and other movements .................................................	(1,234)	30	(1,204)

At 31 December ...........................................................................................	30,684	(938)	29,746

Investment contracts with discretionary participation features
At 1 January .................................................................................................	21,488	-	21,488
Benefits paid ................................................................................................	(2,525)	-	(2,525)
Increase in liabilities to policyholders ...........................................................	3,645	-	3,645
Exchange differences and other movements1 ................................................	1,766	-	1,766

At 31 December ...........................................................................................	24,374	-	24,374

Life (linked)
At 1 January .................................................................................................	11,210	(903)	10,307
Benefits paid ................................................................................................	(1,810)	681	(1,129)
Increase in liabilities to policyholders ...........................................................	3,984	223	4,207
Exchange differences and other movements2 ................................................	(328)	(456)	(784)

At 31 December ...........................................................................................	13,056	(455)	12,601

Total liabilities to policyholders ...................................................................	68,114	(1,393)	66,721

Life insurance liabilities to policyholders (continued)

	Gross	Reinsurers' share	Net
	US$m	US$m	US$m
2011
Life (non-linked)
At 1 January .................................................................................................	23,583	(673)	22,910
Benefits paid ................................................................................................	(1,793)	164	(1,629)
Increase in liabilities to policyholders ...........................................................	5,729	(254)	5,475
Exchange differences and other movements .................................................	(593)	114	(479)

At 31 December ...........................................................................................	26,926	(649)	26,277

Investment contracts with discretionary participation features
At 1 January .................................................................................................	22,074	-	22,074
Benefits paid ................................................................................................	(2,628)	-	(2,628)
Increase in liabilities to policyholders ...........................................................	3,005	-	3,005
Exchange differences and other movements1 ................................................	(963)	-	(963)

At 31 December ...........................................................................................	21,488	-	21,488

Life (linked)
At 1 January .................................................................................................	10,496	(760)	9,736
Benefits paid ................................................................................................	(1,129)	56	(1,073)
Increase in liabilities to policyholders ...........................................................	2,462	(111)	2,351
Exchange differences and other movements2 ................................................	(619)	(88)	(707)

At 31 December ...........................................................................................	11,210	(903)	10,307

Total liabilities to policyholders ...................................................................	59,624	(1,552)	58,072

1 Includes movement in liabilities relating to discretionary profit participation benefits due to policyholders arising from net unrealised investment gains recognised in other comprehensive income.

2 Includes amounts arising under reinsurance agreements.

The increase in liabilities to policyholders represents the aggregate of all events giving rise to additional liabilities to policyholders in the year. The key factors contributing to the movement in liabilities to policyholders include death claims, surrenders, lapses, liabilities to policyholders created at the initial inception of the policies, the declaration of bonuses and other amounts attributable to policyholders.

32 Provisions

	Restruc- turing costs	Contingent liabilities andcontractualcommitments	Legal proceedings and regulatory matters	Customer remediation	Other provisions	Total
	US$m	US$m	US$m	US$m	US$m	US$m

At 1 January 2012 ........................	169	206	1,473	1,067	409	3,324
Additional provisions/increasein provisions .............................	434	73	2,779	2,473	376	6,135
Provisions utilised ........................	(320)	(2)	(2,510)	(1,022)	(153)	(4,007)
Amounts reversed .........................	(89)	(58)	(104)	(137)	(63)	(451)
Unwinding of discounts .................	-	-	42	1	5	48
Exchange differences and other movements ...............................	57	82	(13)	5	72	203

At 31 December 2012 ................	251	301	1,667	2,387	646	5,252

At 1 January 2011 ........................	21	405	969	442	301	2,138
Additional provisions/increasein provisions .............................	221	14	896	1,078	184	2,393
Provisions utilised ........................	(58)	(5)	(367)	(386)	(71)	(887)
Amounts reversed .........................	(14)	(41)	(28)	(87)	(86)	(256)
Unwinding of discounts .................	-	1	56	-	5	62
Exchange differences and other movements ...............................	(1)	(168)	(53)	20	76	(126)

At 31 December 2011 ..................	169	206	1,473	1,067	409	3,324

Further details of legal proceedings and regulatory matters are set out in Note 43. Legal proceedings include civil court, arbitration or tribunal proceedings brought against HSBC companies (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, regulators or law enforcement agencies in connection with alleged wrongdoing by HSBC. In December 2012, HSBC made payments totalling US$1,921m to US authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws. Further details of the agreements reached with the US authorities are set out on page 510.

Customer remediation refers to activities carried out by HSBC to compensate customers for losses or damages associated with a failure to comply with regulations or to treat customers fairly. Customer remediation is initiated by HSBC in response to customer complaints and/or industry developments in sales practices, and not necessarily initiated by regulatory action.

Payment protection insurance

An increase in provisions of US$1,681m was recognised during the year 2012 in respect of the estimated liability for redress regarding the mis-selling of payment protection insurance ('PPI') policies in previous years. Cumulative provisions made since the Judicial Review ruling in 2011 amount to US$2,397m, of which US$957m has been paid in 2012 (2011: US$325m). At 31 December 2012, the provision amounted to US$1,321m (2011: US$506m).

The estimated liability for redress is calculated based on the total premiums paid by the customer plus simple interest of 8% per annum (or the rate inherent in the related loan product where higher). The basis for calculating the redress liability is the same for single premium and regular premium policies. Future estimated redress levels are based on historically observed redress per policy.

A total of 5.4 million PPI policies have been sold by HSBC since 2000, which generated estimated revenues of US$4.1bn at 2012 average exchange rates. The gross written premiums on these polices was approximately US$5.1bn at 2012 average exchange rates. At 31 December 2012, the estimated total complaints expected to be received was 1.4 million, representing 25% of total policies sold. It is estimated that contact will be made with regard to 1.8 million policies, representing 33% of total policies sold. This estimate includes inbound complaints as well as HSBC's proactive contact exercise on certain policies ('outbound contact').

During 2012, we increased the estimate of the total number of policies to be ultimately redressed, as the level of complaints received was higher in volume and over a more sustained period than previously assumed. This change in assumptions contributed approximately US$1.2bn to the increased provision for the year with the balance consisting of US$0.2bn attributable to regulatory changes and US$0.3bn other assumption and model changes.

The following table details the cumulative number of complaints received at 31 December 2012 and the number of claims expected in the future:

	Cumulative to 31 December 2012	Future expected

Inbound complaints1 (000s of policies) ..................................................................................	801	348
Outbound contact (000s of policies) ......................................................................................	43	547
Response rate to outbound contact ........................................................................................	37%	38%
Average uphold rate per claim2 ..............................................................................................	78%	79%
Average redress per claim (US$) ............................................................................................	2,325	2,290

1 Excludes invalid claims where the complainant has not held a PPI policy.

2 Claims include inbound and responses to outbound contact.

The main assumptions involved in calculating the redress liability are the volume of inbound complaints, the projected period of inbound complaints, the decay rate of complaint volumes, the population identified as systemically mis-sold and the number of policies per customer complaint. The main assumptions are likely to evolve over time as root cause analysis continues, more experience is available regarding customer initiated complaint volumes received, and we handle responses to our ongoing outbound contact.

A 100,000 increase/decrease in the total inbound complaints would increase/decrease the redress provision by approximately US$180m. Each 1% increase/decrease in the response rate to our outbound contact exercise would increase/decrease the redress provision by approximately US$10m.

In addition to these factors and assumptions, the extent of the required redress will also depend on the facts and circumstances of each individual customer's case. For these reasons, there is currently a high degree of uncertainty as to the eventual costs of redress for this matter.

Interest rate derivatives

A provision of US$598m was recognised relating to the estimated liability for redress in respect of the possible mis-selling of interest rate derivatives in the UK. Of this provision, US$272m related to the estimated redress payable to customers in respect of historical payments under derivative contracts, US$254m covered the expected write-off by the bank of open derivative contracts balances, and US$72m covers estimated project costs.

Following an FSA review of the sale of interest rate derivatives, HSBC agreed to pay redress to customers where mis-selling of these products has occurred under the FSA's criteria. On 31 January 2013, the FSA announced the findings from their review of pilot cases completed by the banks. Following its review, the FSA clarified the eligibility criteria to ensure the programme is focused on those small businesses that were unlikely to understand the risks associated with those products. HSBC has also been working with the FSA and an independent 'skilled person' adviser to clarify the standards against which it should assess sales, and how redress should be calculated (for example, when it would be appropriate to assume a customer would have taken an alternative interest rate product).

The extent to which HSBC is required to pay redress depends on the responses of contacted and other customers during the review period and the facts and circumstances of each individual case. For these reasons, there is currently a high degree of uncertainty as to the eventual costs of redress related to this programme.

Brazilian labour, civil and fiscal claims

Within 'legal proceedings and regulatory matters' above are labour, civil and fiscal litigation provisions of US$506m (2011: US$481m) which includes provisions in respect of labour and overtime litigation claims brought by past employees against HSBC operations in Brazil following their departure from the bank. The main assumptions involved in estimating the liability are the expected number of departing employees, individual salary levels and the facts and circumstances of each individual case.

33 Subordinated liabilities

HSBC

	At 31 December
	2012	2011
	US$m	US$m
Subordinated liabilities
At amortised cost ..........................................................................................................................	29,479	30,606
- subordinated liabilities ................................................................................................................	25,119	25,543
- preferred securities ....................................................................................................................	4,360	5,063

Designated at fair value (Note 28) .................................................................................................	21,559	21,611
- subordinated liabilities ................................................................................................................	16,863	17,503
- preferred securities ....................................................................................................................	4,696	4,108


	51,038	52,217

Subordinated liabilities
HSBC Holdings ..............................................................................................................................	20,569	21,456
Other HSBC ..................................................................................................................................	30,469	30,761

	51,038	52,217

Subordinated liabilities are capital securities which have been included in the capital base of HSBC and were issued in accordance with the rules and guidance in the FSA's General Prudential Sourcebook ('GENPRU'). Where applicable, these capital securities may be called and redeemed by HSBC subject to prior notification to the FSA and, where relevant, the consent of the local banking regulator. If not redeemed at the first call date, interest coupons payable may step-up or become floating rate related to interbank rates, and in some cases may be subject to a floor.

Interest rates on the floating rate capital securities are generally related to interbank offered rates. On the remaining capital securities, interest is payable at fixed rates of up to 10.176%.

The balance sheet amounts disclosed below are presented on an IFRSs basis and do not reflect the amount that the instruments contribute to regulatory capital. The IFRSs accounting and regulatory treatments differ due to the inclusion of issuance costs and regulatory amortisation.

HSBC's subordinated liabilities

Tier 1 capital securities

Tier 1 capital securities are perpetual subordinated securities on which investors are entitled, subject to certain conditions, to receive distributions which are non-cumulative. Such securities do not generally carry voting rights but rank above ordinary shares for coupon payments and in the event of a winding-up.

HSBC has the following qualifying tier 1 capital securities in issue which are accounted for as liabilities:

			At 31 December
		First call date	2012 US$m	2011 US$m
Tier 1 capital securities guaranteed by HSBC Holdings1
€600m	8.03% non-cumulative step-up perpetual preferred securities2 ...............	Jun 2012	-	776
US$1,250m	4.61% non-cumulative step-up perpetual preferred securities ................	Jun 2013	1,250	1,163
€1,400m	5.3687% non-cumulative step-up perpetual preferred securities ............	Mar 2014	1,933	1,693
£500m	8.208% non-cumulative step-up perpetual preferred securities ..............	Jun 2015	806	771
€750m	5.13% non-cumulative step-up perpetual preferred securities ................	Mar 2016	1,033	872
US$900m	10.176% non-cumulative step-up perpetual preferred securities, series 2 ..............................................................................................................	Jun 2030	891	891

			5,913	6,166

Tier 1 capital securities guaranteed by HSBC Bank plc1
£300m	5.862% non-cumulative step-up perpetual preferred securities ..............	Apr 2020	480	378
£700m	5.844% non-cumulative step-up perpetual preferred securities ..............	Nov 2031	1,131	1,084

			1,611	1,462

1 See paragraph below, 'Guaranteed by HSBC Holdings or HSBC Bank plc'.

2 In June 2012, HSBC redeemed these securities at par.

Guaranteed by HSBC Holdings or HSBC Bank plc

The five capital securities guaranteed, on a subordinated basis, by HSBC Holdings and the two capital securities guaranteed, on a subordinated basis, by HSBC Bank are non-cumulative step-up perpetual preferred securities issued by Jersey limited partnerships. The proceeds of the issues were on-lent to the respective guarantor by the limited partnerships in the form of subordinated notes. The above preferred securities qualify as tier 1 capital for HSBC Group and the two capital securities guaranteed by HSBC Bank also qualify as tier 1 capital for HSBC Bank (on a solo and consolidated basis).

These preferred securities, together with the guarantee, are intended to provide investors with rights to income and capital distributions, and distributions upon liquidation of the relevant issuer that are equivalent to the rights that they would have had if they had purchased non-cumulative perpetual preference shares of the relevant issuer.

There are limitations on the payment of distributions if such payments are prohibited under UK banking regulations or other requirements, if a payment would cause a breach of HSBC's capital adequacy requirements, or if HSBC Holdings or HSBC Bank has insufficient distributable reserves (as defined) respectively.

HSBC Holdings and HSBC Bank have individually covenanted that if prevented under certain circumstances from paying distributions on the preferred securities in full, they will not pay dividends or other distributions in respect of its ordinary shares, or effect repurchases or redemptions of its ordinary shares, until the distribution on preferred securities has been paid in full.

With respect to preferred securities guaranteed by HSBC Holdings - if (i) HSBC's total capital ratio falls below the regulatory minimum ratio required, or (ii) the Directors expect that, in view of the deteriorating financial condition of HSBC Holdings, that (i) will occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Holdings which have economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together.

With respect to preferred securities guaranteed by HSBC Bank - if (i) any of the two issues of preferred securities are outstanding in April 2049 or November 2048, respectively, or (ii) the total capital ratio of HSBC Bank on a solo and consolidated basis falls below the regulatory minimum ratio required, or (iii) in view of the deteriorating financial condition of HSBC Bank, the Directors expect (ii) to occur in the near term, then the preferred securities will be substituted by preference shares of HSBC Bank having economic terms which are in all material respects equivalent to those of the preferred securities and the guarantee taken together.

Upper tier 2 capital securities

Upper tier 2 capital securities are perpetual subordinated securities on which there is an obligation to pay coupons. Such securities rank below lower tier 2 securities for coupon payments and in the event of a winding-up.

HSBC has the following qualifying upper tier 2 securities in issue:

			At 31 December
		First call date	2012 US$m	2011 US$m
HSBC Bank plc
US$750m	Undated floating rate primary capital notes ..........................................	Jun 1990	750	750
US$500m	Undated floating rate primary capital notes ..........................................	Sep 1990	499	500
US$300m	Undated floating rate primary capital notes, series 3 .............................	Jun 1992	301	300

			1,550	1,550

The Hongkong and Shanghai Banking Corporation Ltd
US$400m	Primary capital undated floating rate notes ...........................................	Aug 1990	405	406
US$400m	Primary capital undated floating rate notes (second series) ....................	Dec 1990	402	403
US$400m	Primary capital undated floating rate notes (third series) .......................	Aug 1991	400	400

			1,207	1,209

Other HSBC subsidiaries
	Other perpetual subordinated loan capital less than US$100m ...............		21	21

Lower tier 2 capital securities

Lower tier 2 capital securities are dated securities on which there is an obligation to pay coupons. In accordance with the FSA's GENPRU, the capital contribution of lower tier 2 securities is amortised for regulatory purposes on a straight-line basis in their final five years before maturity.

HSBC has the following qualifying lower tier 2 securities in issue:

				At 31 December
		First call date	Maturity date	2012 US$m	2011 US$m
HSBC Bank plc
£350m	Callable subordinated variable coupon notes1 ...................	Jun 2012	Jun 2017	-	550
£500m	4.75% callable subordinated notes2 ..................................	Sep 2015	Sep 2020	844	759
£350m	5.00% callable subordinated notes3 ..................................	Mar 2018	Mar 2023	630	533
£300m	6.50% subordinated notes ................................................	-	Jul 2023	483	463
£350m	5.375% callable subordinated step-up notes4 ....................	Nov 2025	Nov 2030	630	493
£500m	5.375% subordinated notes ..............................................	-	Aug 2033	925	678
£225m	6.25% subordinated notes ................................................	-	Jan 2041	362	346
£600m	4.75% subordinated notes ................................................	-	Mar 2046	958	917
€500m	Callable subordinated floating rate notes5 .........................	Sep 2015	Sep 2020	606	550
US$300m	7.65% subordinated notes ................................................	-	May 2025	394	374

				5,832	5,663

Hang Seng Bank Limited
US$300m	Callable subordinated floating rate notes1 .........................	Jul 2012	Jul 2017	-	300

				-	300

HSBC Bank Australia Limited
AUD200m	Callable subordinated floating rate notes ..........................	Nov 2015	Nov 2020	207	203
AUD42m	Callable subordinated floating rate notes6 .........................	Mar 2013	Mar 2018	44	42

				251	245

HSBC Bank Malaysia Berhad
MYR500m	4.35% subordinated bonds ................................................	Jun 2017	Jun 2022	164	158
MYR500m	5.05% subordinated bonds ................................................	Nov 2022	Nov 2027	168	162

				332	320

				At 31 December
		First call date	Maturity date	2012 US$m	2011 US$m

HSBC USA Inc.
US$200m	7.808% capital securities .................................................	Dec 2006	Dec 2026	200	200
US$200m	8.38% capital securities ...................................................	May 2007	May 2027	200	200
US$150m	9.50% subordinated debt ..................................................	-	Apr 2014	152	154
US$150m	7.75% Capital Trust pass through securities .....................	Nov 2016	Nov 2026	150	150
US$750m	5.00% subordinated notes ................................................	-	Sep 2020	745	744
US$250m	7.20% subordinated debentures ........................................	-	Jul 2097	214	214
	Other subordinated liabilities each less than US$150m .....			302	394

				1,963	2,056

HSBC Bank USA, N.A.
US$1,000m	4.625% subordinated notes ..............................................	-	Apr 2014	1,002	1,009
US$500m	6.00% subordinated notes ...............................................	-	Aug 2017	516	505
US$1,250m	4.875% subordinated notes ..............................................	-	Aug 2020	1,263	1,259
US$1,000m	5.875% subordinated notes .............................................	-	Nov 2034	1,151	951
US$750m	5.625% subordinated notes .............................................	-	Aug 2035	864	712
US$700m	7.00% subordinated notes ...............................................	-	Jan 2039	694	681

				5,490	5,117

HSBC Finance Corporation
US$1,000m	5.911% trust preferred securities7 ....................................	Nov 2015	Nov 2035	995	994
US$2,939m	6.676% senior subordinated notes8 ..................................	-	Jan 2021	2,180	2,177

				3,175	3,171

HSBC Bank Brazil S.A.
BRL383m	Subordinated certificates of deposit ..................................	-	Feb 2015	289	206
BRL500m	Subordinated floating rate certificates of deposit ..............	-	Dec 2016	464	268
	Other subordinated liabilities each less than US$150m9 ....			491	1,156

				1,244	1,630

HSBC Mexico, S.A.
MXN1,818m	Non-convertible subordinated obligations10 ......................	-	Sep 2018	139	130
MXN2,273m	Non-convertible subordinated obligations10 ......................	-	Dec 2018	173	162
US$300m	Non-convertible subordinated obligations10,11 ..................	-	Jun 2019	240	232

				552	524

HSBC Bank Canada
CAD400m	4.80% subordinated notes ................................................	Apr 2017	Apr 2022	438	417
CAD200m	4.94% subordinated debentures ........................................	-	Mar 2021	201	195
CAD39m	Floating rate debentures ...................................................	-	Nov 2083	39	39

				678	651
Other HSBC subsidiaries
	Other subordinated liabilities each less than US$200m9 ....			650	676

				650	676

Total of subordinated liabilities issued by HSBC subsidiaries ...............................................................				30,469	30,761

Amounts owed to third parties by HSBC Holdings (page 480) ............................................................				20,569	21,456

				51,038	52,217

1 In June2012 and July 2012, HSBC redeemed its £350m callable subordinated variable coupon note and its US$300m callable subordinated floating rate notes respectively at par.

2 The interest rate payable after September 2015 is the sum of the three-month sterling Libor plus 0.82%.

3 The interest rate payable after March 2018 is the sum of the gross redemption yield of the then prevailing five-year UK gilt plus 1.80%.

4 The interest rate payable after November 2025 is the sum of the three-month sterling Libor plus 1.50%.

5 The interest margin increases by 0.5% from September 2015.

6 In February 2013, HSBC gave notice that it will call and redeem the notes at par in March 2013.

7 The distributions change in November 2015 to three-month dollar Libor plus 1.926%.

8 Approximately 25% of the senior subordinated notes is held by HSBC Holdings.

9 Some securities included here are ineligible for inclusion in the capital base of HSBC in accordance with guidance in FSA's GENPRU.

10 These securities are ineligible for inclusion in the capital base of HSBC in accordance with FSA's GENPRU.

11 Approximately US$60m of the subordinated obligations are held by HSBC Holdings.

HSBC Holdings

	At 31 December
	2012	2011
	US$m	US$m
Subordinated liabilities:
-. at amortised cost .......................................................................................................................	11,907	12,450
-. designated at fair value (Note 28) ..............................................................................................	14,618	15,398

	26,525	27,848

HSBC Holdings' subordinated liabilities

				At 31 December
		First call date	Maturity date	2012 US$m	2011 US$m
Amounts owed to third parties1
US$1,400m	5.25% subordinated notes ................................................	-	Dec 2012	-	1,438
US$488m	7.625% subordinated notes ..............................................	-	May 2032	579	578
US$222m	7.35% subordinated notes ................................................	-	Nov 2032	258	257
US$2,000m	6.5% subordinated notes ..................................................	-	May 2036	2,034	2,048
US$2,500m	6.5% subordinated notes ..................................................	-	Sep 2037	3,202	2,634
US$1,500m	6.8% subordinated notes ..................................................	-	Jun 2038	1,486	1,486
£250m	9.875% subordinated bonds2 ............................................	Apr 2013	Apr 2018	442	445
£900m	6.375% callable subordinated notes3 ................................	Oct 2017	Oct 2022	1,648	1,416
£650m	5.75% subordinated notes ................................................	-	Dec 2027	1,210	926
£650m	6.75% subordinated notes ................................................	-	Sep 2028	1,041	997
£750m	7.0% subordinated notes ..................................................	-	Apr 2038	1,264	1,205
£900m	6.0% subordinated notes ..................................................	-	Mar 2040	1,431	1,369
€1,000m	5.375% subordinated notes ..............................................	-	Dec 2012	-	1,327
€1,600m	6.25% subordinated notes ................................................	-	Mar 2018	2,118	2,073
€1,750m	6.0% subordinated notes ..................................................	-	Jun 2019	2,882	2,388
€700m	3.625% callable subordinated notes4 ................................	Jun 2015	Jun 2020	974	869

				20,569	21,456

Amounts owed to HSBC undertakings
€600m	8.03% subordinated step-up cumulative notes5 .................	Jun 2012	Jun 2040	-	775
US$1,250m	4.61% fixed/floating subordinated notes ..........................	Jun 2013	Jun 2043	1,264	1,223
€1,400m	5.3687% fixed/floating subordinated notes ......................	Mar 2014	Dec 2043	1,952	1,791
£500m	8.208% subordinated step-up cumulative notes ................	Jun 2015	Jun 2040	806	771
€750m	5.13% fixed/floating subordinated notes ..........................	Mar 2016	Dec 2044	1,043	941
US$900m	10.176% subordinated step-up cumulative notes ..............	Jun 2030	Jun 2040	891	891

				5,956	6,392

				26,525	27,848

1 Amounts owed to third parties represent securities included in the capital base of HSBC as lower tier 2 securities in accordance with guidance in the FSA's GENPRU.

2 In February 2013, HSBC Holdings gave notice that it will call and redeem the bonds at par in April 2013.

3 The interest rate payable after October 2017 is the sum of the three-month sterling Libor plus 1.3%.

4 The interest rate payable after June 2015 is the sum of the three-month Euribor plus 0.93%.

5 In June 2012, HSBC Holdings redeemed its €600m 8.03% subordinated step-up cumulative notes at par.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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