Hbce 2020 Annual Report en

HSBC Continental Europe
Universal registration document and Annual Financial

Report 2020
Contents
Page
Highlights 3
Presentation of activity and strategy 4
HSBC Continental Europe Consolidated Results 13
Other information on HSBC Continental Europe 21
Corporate governance report 22
Statutory Auditors‘ special report on related-party agreements 50
Sustainability 53
Risks 80
Consolidated financial statements 164
Parent company financial statements 237
HSBC Continental Europe’s principal subsidiaries and investment policy 272
Proposed resolutions to the Combined General Meeting to be held on
11 March 2021 276
Information on HSBC Continental Europe and its share capital 277
Persons responsible of the Registration Document and for auditing
the financial statements 280
Cross-reference table 282
Network of offices 284
Universal registration document and Annual Financial Report 2020 1

Highlights
Presentation of information Cautionary statement regarding forward-

This universal registration document was filed on 24 February
looking statements
2021 with the Autorité des Marchés Financiers (‘AMF’), as the This Universal Registration Document 2020 contains certain
competent authority under Regulation (EU) n°2017/1129, without forward-looking statements with respect to the financial condition,
prior approval in accordance with Article 9 of that Regulation. results of operations and business of the group. Statements that
The universal registration document may be used for the purposes are not historical facts, including statements about the group’s
of an offer to the public of securities or the admission of securities beliefs and expectations, are forward-looking statements. Words
to trading on a regulated market if supplemented by a securities such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’,
note and if necessary, a summary and any amendments to the ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’,
universal registration document. The whole is approved by the variations of these words and similar expressions are intended to
AMF according to the regulation (UE) n°2017/1129. identify forward-looking statements.
These statements are based on current plans, estimates and
projections, and therefore undue reliance should not be placed on
them. Forward-looking statements speak only as of the date they
are made. HSBC Continental Europe makes no commitment to
revise or update any forward-looking statements to reflect events
or circumstances occurring or existing after the date of any
forward-looking statement.
Forward-looking statements involve inherent risks and
Declaration (Annex II - 1.2) uncertainties. Readers are cautioned that a number of factors
The current universal registration document was filed with the could cause actual results to differ, in some instances materially,
Autorité des Marchés Financiers (‘AMF’), as the competent from those anticipated or implied in any forward-looking
authority under Regulation (EU) n°2017/1129, without prior statements.
approval in accordance with Article 9 of that Regulation.
Disclaimer about translation
The current universal registration document may be used for the
purposes of an offer to the public of securities or the admission of The translation in English of the universal registration document
securities to trading on a regulated market if it is approved by the and annual financial report 2020, filed with the Autorité des
AMF including any amendments, and supplemented by a Marchés Financiers (‘AMF’) on 24 February 2021 under reference
securities note and a summary approved according to the number D.21-0075, is an accurate and faithful translation of the
regulation (UE) n°2017/1129. French version, with the exception of errors or translation
discrepancies that may not constitute significant omissions or
Reference to the Registration Document inaccuracies within the meaning of Article 212-3 of the AMF
General Regulations.
This document, named Universal Registration Document, refers to
the Registration Document (Annual Report and Accounts) filed with
the AMF on 19 February 2020 under reference number
D.20-0071.
2 Universal registration document and Annual Financial Report 2020

Highlights
Footnotes 31 Dec 2020 31 Dec 2019 31 Dec 2018
For the year (€m)
Profit/(loss) before tax (reported basis) (945) (22) 45
Profit/(loss) before tax (adjusted basis) 1 (331) 240 89
Net operating income before change in expected credit losses and other credit risk provisions (reported
basis) 2 2,121 2,227 1,736
Profit/(loss) attributable to shareholders of the parent company (reported basis) (1,022) (39) (17)
At year end (€m)
Total equity attributable to shareholders of the parent company 7,434 8,443 6,555
Total assets 237,099 237,680 180,946
Risk-weighted assets 46,113 48,051 36,248
Loans and advances to customers (net of impairment allowances) 56,225 56,956 46,997
Customer accounts 61,393 57,550 41,906
Capital ratios %
Common equity tier 1 12.6 13.5 13.1
Tier 1 14.2 15.0 14.5
Total capital 17.3 16.9 15.7
Performance, efficiency and other ratios (annualised %)
Annualised return on average shareholders’ equity 3 (12.5) (0.5) (0.6)
Pre-tax return on average risk-weighted assets (adjusted basis) (0.7) 0.5 0.3
Cost efficiency ratio (adjusted basis) 4 98.8 83.5 95.4
Liquidity Coverage Ratio (‘LCR’) 5 143 152 128
Net stable Funding Ratio (‘NSFR‘) 6 136 127 113
1 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 12 to 15.
2 Net operating income before change in expected credit losses and other credit and other credit risk provisions is also referred to as revenue.
3 The return on average total shareholders’ equity is defined as profit attributable to shareholders of the parent company divided by the average
total shareholders’ equity.
4 Adjusted cost efficiency is defined as total operating expenses (adjusted) divided by net operating income before change in expected credit losses
and other credit and other credit risk provisions (adjusted).
5 While HQLA increased due to deposit growth, the LCR for HSBC Continental Europe declined, reflecting a reassessment of potential LCR
outflows, particularly with respect to committed facilities.
6 Computed in respect of CRR II guidelines. 2018 ratio was calculated based on interpretation of BCBS 295.
Performance highlights
HSBC Continental Europe’s performance in 2020 was impacted by exceptional items, including the impairment of tangible and intangible
assets and significant restructuring costs, and by the downturn of the global economy caused by the Covid-19 pandemic, which resulted
in an increase in expected credit losses and other credit impairment charges. Historically-low interest rates in Europe and the cut in US
rates in March 2020 dampened the net interest margin, in spite of higher average loan and deposit balances over 2020.
Notwithstanding that context, customer revenue remained resilient, and HSBC Continental Europe continued to support its customers
and the wider economy, including through the granting of new loans under the French Government guarantee scheme and HSBC
specific schemes for a full-year amount of EUR 6 billion. HSBC also improved its market share in debt capital markets and confirmed its
position as a leading bank in Europe, ranking 2nd in the ‘European Sovereign Bonds’ category (Source: Dealogic). Moreover, HSBC’s
expertise was underlined in 2020 as it was conferred ‘Western Europe Transaction Banking Award’ from The Banker.
Reported consolidated loss before tax was EUR 945 million, down from a loss of EUR 22 million in 2019, including the impairment
of tangible and intangible assets (EUR 500 million), significant restructuring costs (EUR 258 million), an unfavourable PVIF (Present Value
of In-Force long term insurance business) movement (EUR 123 million), higher operating expenses and an increased cost of risk
(EUR 289 million).
Reported net operating income before change in expected credit losses and other credit impairment charges was EUR
2,121 million, down from EUR 2,227 million in 2019. The decrease was driven by an unfavourable PVIF movement in Life Insurance of
EUR 123 million. In addition, Wealth and Personal Banking income was impacted by persistently low rates and a decrease in net fee
income as a consequence of adverse market conditions and lower customer activity in the context of the Covid-19 pandemic. This was
offset by growth in Markets and Securities Services, corporate lending to Global Banking clients and a resilient performance in
Commercial Banking.
Reported change in expected credit losses and other credit impairment charges was a charge of EUR 289 million, compared
with a charge of EUR 128 million in 2019. The increase in the cost of risk was a direct consequence of the effects of the Covid-19
pandemic and reflected the deterioration in the current economic environment and the forward outlook.
Reported operating expenses were EUR 2,777 million, up from EUR 2,121 million in 2019, including the impairment of tangible and
intangible assets for EUR 500 million, restructuring costs for EUR 258 million, and contributions to the Single Resolution Fund which
increased by EUR 49 million compared with prior year, partly offset by lower recurring expenses.
Reported loss attributable to shareholders of the parent company was EUR 1,022 million in 2020, compared with a loss of EUR
39 million in 2019.

Presentation of activity and strategy

Responding to the new environment
In February 2020, HSBC Group announced a business update to increase return by re-allocating capital out of low return franchises into
higher performing ones, reducing our cost base and streamlining our organisation.
For Europe, our strategy was adjusted in line with the business update to focus on international wholesale banking clients linked to our
global network and a targeted wealth franchise. HSBC Group has reorganised its operating model to create one integrated European
business spanning 20 markets, with a United Kingdom hub in London and a Continental Europe hub in Paris. To better reflect the
purpose and nature of its activities, HSBC France changed its name on 01 December 2020 to become HSBC Continental Europe, at the
same time as moving headquarters to 38 avenue Kléber in Paris.
We are continuing with the strategic review of our retail banking operations in France and are in negotiations in relation to a potential
sale although no decision has yet been taken. If any sale is implemented, given the underlying performance of the French retail business,
a loss on sale is expected.
The economic outlook deteriorated due to the outbreak of Covid-19 and a continued low interest rate environment. The health crisis
changed the external environment and the way in which we operate, with the Group’s resilience highlighted through a seamless
transition to remote working. The operating environment is difficult for our customers and our priority is to support them through a range
of initiatives such as local government lending schemes and payment holidays.
HSBC Continental Europe remains committed to HSBC Group’s strategy and business model outlined in February 2020. Changes to the
external landscape have further reinforced the transformation need for HSBC Continental Europe, aiming at becoming a simpler, more
efficient and leaner organisation, as well as better positioning the Group to achieve its ambition to be the preferred international financial
partner for our clients.
About HSBC Group

With assets of USD 3.0 trillion and operations in 64 countries and territories at 31 December 2020, HSBC is one of the largest banking
and financial services organisations in the world. More than 40 million customers bank with HSBC and the Group employs around
226,000 full-time equivalent staff. HSBC has around 194,000 shareholders in 130 countries and territories.
Our purpose and ambition
Our new purpose is ‘Opening up a world of opportunity’ and our ambition is to be the preferred international finance partner for our
clients.
HSBC values
HSBC values help define who we are as an organisation, and are key to our long-term success.
We value differences
Seeking out different perspectives.
We succeed together
Collaborating across boundaries.
We take responsibility
Holding ourselves accountable and taking the long view.
We get it done
Moving at pace and making things happen.
HSBC Group strategy
The Group's strategy focuses on four key areas: focus on our areas of strength, digitise at scale to adapt our operating model for the
future, become a leaner, simpler organisation that is energised for growth and lead the transition to net zero carbon emissions.
• Focus on our strengths: in each of our global businesses, we will focus on areas where we are strongest and have significant
opportunities for growth
• Digitise at scale: digitise to improve customer experience and reduce cost
• Energise for growth: we are moving to a leaner organisation with a dynamic culture where the best want to work
• Transition to net zero: we aim to be the leading bank for a transition to a sustainable future

About HSBC Bank Plc
With assets of GBP 681 billion at 31 December 2020, HSBC Bank plc is one of Europe’s largest banking and financial services
organisations. HSBC Bank plc employs around 16,300 people across its locations. HSBC Bank plc is the parent company of HSBC
Continental Europe.
HSBC in Europe
Europe is an important part of the global economy, accounting for over a third of global trade and a quarter of global Gross Domestic
Product (IHS Markit, 2020). In addition, Europe is the world’s largest exporter of manufactured goods and services (European
Commission, 2020).
HSBC operates in 20 markets in Europe. HSBC Bank plc is responsible for HSBC’s European business, (aside from United Kingdom retail
and most commercial banking activity which, post ring-fencing, are managed by HSBC UK Bank plc), facilitating trade within Europe and
to other countries where the HSBC Group has a presence. HSBC Bank Plc is managed as one integrated business with two main hubs in
London and Paris. HSBC Bank Plc is organised around the principal operating units detailed below.
• The London hub consists of the United Kingdom non-ring fenced bank, which provides overall governance and management for the
Europe region as a whole and is a global centre of excellence for wholesale banking for the Group. In addition, the management team
directly oversees our businesses in Armenia, Channel Islands & Isle of Man, and Malta;
• HSBC Continental Europe, comprises our Paris hub and its European Union branches (Belgium, Czech Republic, Greece, Ireland, Italy,
Luxembourg, Netherlands, Poland, Spain and Sweden). We are creating an integrated and simpler Continental European bank
anchored on Paris to better serve our clients;
• HSBC Germany Holdings GmbH serves the European Union’s largest economy and one of the leading export nations globally. HSBC
Germany’s business proposition mirrors the importance of trade and global connectivity.
HSBC Bank Plc’s strategy
In the February 2020 business update, the Group announced plans to remodel the European business to focus on its strengths. The aim is
to build a strong and successful European business, focused on international wholesale banking clients linked to our global network and
a targeted wealth franchise. HSBC Bank plc’s strategic vision is to be the leading international bank for international corporates in
Europe, focused primarily on clients that value our network with a focus on transactional banking and financing. This is complemented
by a targeted wealth offering, through Wealth and Personal Banking business.
The transformation of Europe has begun and is now in full implementation. HSBC Bank plc strives to closely support customers and
colleagues through this organisational change. Consistent with the Group, HSBC Bank plc paused client and employee transformation
actions from late March to mid-June 2020, as clients required support through a variety of funding mechanisms during the early stages
of the outbreak of Covid-19. Looking ahead, with continued low interest rates, anticipated increase in expected credit losses and
uncertainty on the unwinding of government support schemes, HSBC Bank plc expects to be operating in a more challenging
environment. Whilst Covid-19 has affected the phasing of HSBC Bank plc’s transformation activity, it has not altered its strategy. The
strategy involves a deep transformation of HSBC Group’s business in Europe. As a part of the plan to transform, HSBC Bank plc is now
managed as one integrated business with two main hubs in London and Paris. This aligns with United Kingdom and European Union
legal entity and regulatory requirements for financial services, following the United Kingdom’s withdrawal from the European Union.
HSBC Bank plc will remain a key centre of excellence for risk management and product expertise for the Group. Governments and
businesses across Europe are at the forefront of international efforts to combat climate change and are world leaders in sustainable
finance. HSBC shares these values and wants to help governments and businesses lead the transition to a sustainable future.

About HSBC Continental Europe

HSBC in Continental Europe

HSBC Continental Europe has a clear and focused strategy that is consistent with the HSBC Group’s strategy, which seeks to provide
clients with high value-added products and services while improving efficiency and implementing the highest standards in terms of
compliance.
HSBC Continental Europe’s strategy now integrates a broader European proposition that aims at helping clients achieve their goals,
whether it is growing their businesses in the single market or breaking into international markets, notably through new banking products
and services. HSBC France changed its name on 01 December 2020 to become HSBC Continental Europe, reflecting the purpose and
wider nature of its activities, namely an integrated Continental European bank connecting our customers to HSBC’s global network, and
providing access to Continental Europe for HSBC’s customers around the world.
HSBC strategy implemented in France and Continental Europe
The Group’s strategy presented in February 2020 aims to improve the profitability of its activities in Europe (including the United
Kingdom) by 2022, while reducing by 35 per cent its Risk Weighted Assets (‘RWAs’). To achieve this, we are considering our product mix
and are focusing on clients who value our international franchise.
Our transformation has focused on four pillars: (i) the strategic review of our retail operations which is ongoing and no decision has been
made; (ii) the repositioning of our Global Banking and Markets (‘GBM’) activities for which a social plan has been approved by the French
Ministry of Labour – associated employee exits will take place in 2021; (iii) the reshaping of our Commercial Banking (‘CMB’) activities
and support functions through a collective voluntary departure plan; and, (iv) the transformation of the HSBC Continental Europe
International / European Economic Area (‘EEA’) branches, which increases focus on client-related activities whilst better leveraging our
Paris hub and the Group’s Centres of Excellence. The adaptation of our operational model will enable a significant reduction of our cost
base across Continental Europe.
HSBC Continental Europe continues to invest in Transaction Banking (Global Liquidity and Cash Management ‘GLCM’, Global Trade and
Receivable Finance ‘GTRF’ and Foreign Exchange ‘FX’), which is central to its strategy. In September 2020, The Banker named HSBC as
‘Best Transaction Bank in Western Europe' in their annual Transaction Banking Awards.
This new structure for Continental Europe reflects a strong ambition: that of building a simpler and more efficient bank in Continental
Europe, better connected to HSBC’s global network, and offering cutting-edge transactional banking and financing services to the clients
that value our network
HSBC Continental Europe’s key principles to support this strategy
Europe is home to some of the best performing, forward thinking companies, ranging from entrepreneurial start-ups to large
multinationals. The European Union is the world’s largest trading bloc set in a dynamic market of approximately 450 million consumers.
Europe’s largest trade corridor is with Asia, which accounts for more than a third (35 per cent) of its total trade; and Europe-US is the
largest bilateral trade and investment relationship in the world. Within this framework, HSBC Continental Europe’s strategic vision is
based on the following key principles.
Supporting our clients
HSBC Continental Europe supports businesses of all sizes across France and Continental Europe. HSBC Continental Europe offers a wide
range of banking services including retail and private banking, corporate and investment banking, transaction banking, foreign exchange
and fixed income. HSBC Continental Europe has c. 7,238 employees (‘FTE’s) in France and 1,279 employees in Continental Europe
supporting HSBC Group and HSBC Continental Europe clients’ needs. Further information as to how we have and will continue to
support our stakeholders can be found on page 10 (‘Supporting our clients throughout the Covid-19 outbreak’).
Connecting to the world
HSBC Group’s global network enables us to connect HSBC Continental Europe’s clients with opportunities in Continental Europe and
across the world’s trade corridors. The Group’s history and heritage gives HSBC an unrivalled ability to provide a bridge to Asia, the
Middle East and the US for European businesses. HSBC helps Asian, Middle Eastern and US businesses navigate growth opportunities in
Europe.
Strengthening international connectivity
HSBC Continental Europe is committed to helping customers in the region thrive. With dedicated teams in France and 10 European
markets, HSBC Continental Europe has extensive European capability across traditional trade and structured trade finance, cash
management, payments and financing to serve the needs of all customers from Small Medium Enterprises (‘SME’s) to global
multinationals.
Driving sustainable growth
Europe is at the forefront of international efforts to fight climate change and is a world leader in sustainable finance. HSBC Continental
Europe shares these commitments and wants to help governments and businesses achieve their aims of developing a sustainable future
for all. HSBC Continental Europe supports its clients, corporates, retail and investors, in transitioning to a low carbon economy, through
the deployment of dedicated products and services. In addition to 25 green, socially responsible and sustainability bond issues, managed
or co-managed by HSBC Continental Europe in 2020, a dedicated origination team works with our Commercial Banking customers to
structures sustainable finance transactions, including through green and impact lending. This helps HSBC Continental Europe to align its
financing and investment portfolio to the standards set by the Paris Agreement. Further discussion of our sustainable financing and
Environmental, Social and Governance (‘ESG’) activities can be found on pages 53 to 79.

Impact of UK’s withdrawal from the European Union on HSBC Continental Europe
The United Kingdom left the European Union on 31 January 2020 at midnight following the withdrawal agreement ratification, and
entered a transition period until 31 December 2020. The transition period aimed at preparing the implementation of the withdrawal
agreement and at negotiating an agreement on the future relationship between the European Union and the United Kingdom. A Trade
and Cooperation Agreement between the European Union and the United Kingdom was agreed on 24 December 2020, signed by the
Presidents of the European Union Commission and Council and the British Prime Minister on 30 December 2020, and ratified by the
British Parliament on the same day. Prior to European Parliament ratification (expected in early 2021), the Trade and Cooperation
Agreement provisionally comes into effect from 1 January 2021 onwards. The deal mainly focused on goods and services but also
covered a wide range of other areas. However, it included limited elements on financial services.
The European Union and the United Kingdom agreed through a joint declaration to establish structured regulatory cooperation on
financial services, with the aim of establishing a durable and stable relationship between autonomous jurisdictions. Based on a shared
commitment to preserve financial stability, market integrity, and the protection of investors and consumers, these arrangements are
expected to allow for: bilateral exchanges of views and analysis relating to regulatory initiatives and other issues of interest; transparency
and appropriate dialogue in the process of adoption, suspension and withdrawal of equivalence decisions; and enhanced cooperation
and coordination including in international bodies as appropriate. Both parties are expected by March 2021 to agree a Memorandum of
Understanding establishing the framework for this cooperation. The parties are expected to discuss, inter alia, how to move forward on
both sides with financial equivalence determinations between the European Union and United Kingdom.
As a result, HSBC Group did not change its approach in relation to the United Kingdom’s withdrawal from the European Union, and
HSBC Group’s programme – mainly impacting HSBC Continental Europe – has now been largely completed. It has focused on four main
components: legal entity restructuring; product offering; customer migrations; and employees.
Legal entity restructuring
HSBC Group has worked on the assumption that passporting will no longer be possible following the United Kingdom’s departure from
the European Union and therefore transferred HSBC Bank plc branch business across the EEA to newly established branches of HSBC
Continental Europe. This was completed in the first half of 2019. The Equities and Equity Research businesses have also been transferred
from HSBC Bank plc Paris Branch to HSBC Continental Europe on 1 February 2020.
Product offering
To accommodate for customer migrations and new business after the United Kingdom’s departure from the European Union, HSBC
Continental Europe expanded its product offering in a wide range of areas such as in its Markets & Securities services franchise as well
as in its Global Trade business. HSBC Continental Europe also enhanced its Cash Management solutions in France, the Netherlands and
Ireland. A new branch has been created in Sweden to service our customers in the Nordic region.
Customer migrations
The United Kingdom’s departure from the European Union has had an impact on EEA incorporated clients’ operating models, including
their working capital requirements, investment decisions and their access to financial markets infrastructure. HSBC Group’s priority is to
provide continuity of service, and while the Group’s intention is to minimise the level of change for its customers, some EEA-incorporated
clients are required to move from HSBC Bank plc in the United Kingdom to HSBC Continental Europe, or another EEA entity. HSBC
Continental Europe has now onboarded almost all clients who we believe could no longer be serviced out of the United Kingdom.
Employees
The migration of EEA-incorporated clients from HSBC Bank plc required us to strengthen HSBC Continental Europe’s local teams, and
France in particular. This has been achieved largely through local hiring and transferring some staff from London to Paris to fill the
required roles.
Our Global Businesses seamless services that meet the needs of clients across the bank.
GBM operates as an integral part of the global business and also
The Group manages its products and services through its three contributes significant revenues to other regions through our
global businesses: Global Banking and Markets (‘GBM’), European client base. HSBC Continental Europe continues to play
Commercial Banking (‘CMB’), and Wealth Personal its role as the strategic platform for euro-denominated rates
Banking 1(‘WPB’); and Corporate Centre (Corporate Centre products. Priorities for GBM in France are to be positioned as a top
comprises Central Treasury, certain legacy assets, central bank in key advisory and financing mandates and help clients
stewardship costs, and interests in our associates and joint seize international growth opportunities, leveraging its expertise
ventures). HSBC Continental Europe’s businesses are supported and global network, connecting emerging and developed
by HSBC Operations, Services and Technology, and 11 global economies. We remain committed to deepening client
functions, including Risk, Finance, Compliance, Legal, Marketing
and Human Resources.
Global Banking and Markets (‘GBM’)
HSBC Global Banking and Markets delivers tailored financial
solutions to major government, corporate and institutional clients
worldwide. We provide a comprehensive suite of services across
lending, advisory and capital markets, trade services, research,
securities services and global liquidity and cash management.
Operating in 11 markets (France, Spain, Italy, Belgium, the
Netherlands, Ireland, Greece, the Czech Republic, Poland,
Luxembourg and Sweden) GBM brings together relationship
managers and product specialists, to deliver financial solutions
customised to suit our clients’ business specific growth ambitions
and financial objectives. We continue to work closely with
colleagues in CMB, to provide a range of tailored products and
1
Effective from the second quarter of 2020, Group HSBC’s matrix organisational structure has been simplified by merging GPB and
RBWM to form Wealth and Personal Banking (‘WPB’).

relationships, improving synergies across HSBC global businesses. Wealth Solutions, and bespoke lending for customers with more
GBM is underpinned by a focus on the highest standards of sophisticated and international requirements.
conduct and financial crime risk management. The strategic review of the retail operations is ongoing. No
In July 2020, a social plan was presented for the GBM business in decision has been made.
France. Its objective is to preserve the bank’s future
competitiveness on the large corporate and financial market
Supporting our stakeholders through Covid-19
segment, to focus on our strategic positioning, while reducing the The Covid-19 outbreak has created a great deal of uncertainty and
size of GBM business in France. disruption for the people, businesses and communities we serve
around the world. It is affecting everyone in different ways. We are
Commercial Banking (‘CMB’)
tailoring our response to the different circumstances and
HSBC Continental Europe’s Commercial Banking serves customers situations in which our stakeholders find themselves.
in 10 markets (France, Spain, Italy, Belgium, the Netherlands,
Ireland, Greece, the Czech Republic, Sweden and Poland), ranging
Customers
from small enterprises in France focused on their local market to The Covid-19 outbreak has posed significant challenges to our
corporates operating across borders. Whether it is an SME customers worldwide. Our immediate priority is to do what we can
banking at one of HSBC Continental Europe’s business centres in to provide them with support and flexibility. This has included
key cities in France, or one of the multinationals HSBC Continental offering payment relief, assisting our customers to restructure
Europe helps support across the region, CMB provides the tools their balance sheets and providing access to local government
and expertise that European businesses need to thrive. lending schemes.
Our network of relationship managers and product specialists We granted new loans under the French Government guarantee
work closely to meet customer needs, from term loans to region- scheme and HSBC specific schemes for a full-year amount of EUR
wide treasury and trade solutions. We are fully committed to 6 billion. In CMB, we provided EUR 2.2 billion of facilities through
helping European businesses navigate change and seize export market-wide schemes (5,100 requests approved), and helped them
opportunities as the European Union strikes new trade to navigate the current environment. CMB and GBM largely
agreements. With the importance of the United Kingdom and deployed electronic signature solutions, and Global Markets
European Union trade relations to our customers, we are also ensured a continuous coverage from its sales and traders. With
providing guidance and continuity to assist businesses in adapting customers doing more of their banking online, CMB and GBM
to changes brought by the United Kingdom’s exit from the have also extended their permanent remote services, including
European Union. video calls with business relationship managers. In WPB, we put
Commercial Banking is at the centre of creating revenue synergies in place approximately 3,900 payment holidays corresponding to a
within the Group. We work closely with our Global Banking and balance of circa EUR 700 million of home loans and professional
Markets colleagues to provide expertise in capital finance and loans. The business has also granted circa 640 loans guaranteed
advisory solutions to support our Commercial Banking clients. Our by the state (‘PGE’) corresponding to approximately EUR 37
trade teams within Commercial Banking also provide import and million outstanding loans. Business continuity and high service
export finance solutions to Global Banking and Markets clients. quality have been ensured throughout the period, with most of our
branches open (following strict health guidelines protecting
Leveraging major operations in France and full-service centres in customers and colleagues) and enhanced technology to enable
hubs such as Ireland and the Netherlands, we provide corporates them to interact with us through digital tools (e-signature, video
with the means to consolidate and simplify their European calls, webinars).
operations, enabling our customers to have greater visibility over
their liquidity position and unlock efficiencies in their treasury Employees
structures. Our customers expect us to be innovative, whether it is The Covid-19 outbreak tested our employees in many ways and
a receivables finance solution to optimise working capital or they adapted quickly to the fast-changing environment. We
support in pursuing the sustainability agenda. One way we are provided new and enhanced support to ensure the well-being of
helping customers in their sustainability efforts is through their employees and have encouraged a culture of looking out for each
supply chains, by developing green financing solutions that are other. Our priorities for our employees are mental health and
beneficial for buyer and seller alike. flexible working.
CMB will continue to focus on its return on capital employed by Regulators and governments
repositioning its business to focus on strategic activities and
We have proactively engaged with regulators and governments in
clients valuing our international franchise. In order to improve
Europe, regarding the policy changes issued in response to the
operational efficiency, simplify processes and better leveraging the
Covid-19 outbreak, to help our customers and to contribute to an
Group’s Centres of Excellence, HSBC Continental Europe is also
economic recovery.
reshaping its CMB activities through a collective voluntary
departure plan.
Wealth and Personal Banking (‘WPB’)
In France and Greece, WPB helps more than 0.9 million customers
with their financial needs through Retail Banking, Wealth
Management, Insurance, Asset Management and Private Banking.
HSBC Continental Europe offers a full range of products and
services to meet the personal banking and wealth management
needs of customers from personal banking to ultra-high net worth
individuals.
Our core retail proposition offers a full suite of products including
personal banking products, such as current and savings accounts,
mortgages and unsecured loans, credit cards (only applicable in
Greece), debit cards and local and international payment services.
Alongside this, WPB offers various propositions, including Jade,
Premier, and Advance, as well as wealth solutions, financial
planning and international services.
Our Private Banking proposition serves high net worth and ultra-
high net worth clients with investment management, Private

management of the pandemic thanks to vaccines could represent
Geopolitical, economic and regulatory an upside risk to the future economic growth, but the deal
background and outlook concluded end 2020 between the European Union and the United
Kingdom did not address all remaining issues among partners.
Economic background Last, the reinforced precautionary stance anticipated regarding
In 2020, the Covid-19 pandemic led to a sudden and consumption and investment over the coming quarters could give
unprecedented recession in Europe of a magnitude not seen since more importance to economic policies and reforms, whether
WWII. After a resilient first quarter, lockdowns decided by several French or European, which could be put in place over the same
countries during the second quarter and the stop of many horizon.
productive activities have translated into an historical trough for Regulatory environment
the economies.
Covid-19
However, in March, fiscal national authorities and the European
Central Bank (ECB) have taken strong measures to support The Covid-19 outbreak has created an unprecedented challenge to
companies and jobs, but also to ensure that the financing of the the global economy. Governments, central banks and regulatory
real economy did not encounter particular issues. Massive public authorities have responded to this challenge with a number of
expenditure has been undertaken, pushing fiscal deficit and public regulatory measures related to customer support, operational
debt to historical levels in many cases, while the ECB, being aware capacity and amendments to the RWAs, capital and liquidity
of the risk of a weak inflation, has made liquidity provisions more frameworks.
profitable for banks (TLTRO III) and has reinforced its quantitative In the EU, measures included a package known as the ‘CRR Quick
easing policy by creating a purchase programme to urgently face Fixes’ enacted in June 2020. This represents an acceleration of
the pandemic (Pandemic Emergency Purchase Programme, some of the beneficial elements of the amendments to the Capital
(‘PEPP’). Requirements Regulation (‘CRR2’), which were originally
After an improvement in the health situation at the early summer, scheduled for June 2021, together with other amendments to
which led to a very sharp rebound in the economic activity during mitigate the potential volatility in capital ratios arising from the
the third quarter of 2020 (but also with an historical rise in French pandemic. The amendments came into effect in June 2020, with
unemployment rate over the same period), the spread of the virus the exception of the changes to the rules on software assets
accelerated once again during the autumn in Europe. In addition, which came into effect on December 2020 following adoption by
new lockdowns have been put in place from October 2020, the European Commission of the European Banking Authority’s
affecting again the domestic economic activity (albeit less severely (‘EBA’) regulatory technical standards.
than during the spring). Under previous rules, software assets were deducted in full from
The support provided by public authorities has been substantial.At common equity tier 1 (‘CET1’). Under the new rules, a portion of
a European level, beyond the recovery plan worth 750 billion euros the asset is risk-weighted at 100 per cent and the remainder is
agreed by the Heads of state in July, the ECB, on 10 December subject to a CET1 deduction.
2020, expanded and extended the PEPP, while the The European Central Bank (‘ECB’) made use of the new provision
accommodative stance of TLTROs III has been prolonged by introduced in the CRR Quick Fixes and declared on September
mid-2022. 2020 that exceptional measures justify the temporary exclusion of
At the end of the year, hopes stemming from incoming certain central bank exposures from the leverage ratio exposure
vaccination campaigns and the economic recovery already in measure until 27 June 2021.
place in several Asian countries did not impede uncertainties from The Basel Committee
staying at an abnormally high level: the pandemic was still
ongoing in many countries and, in France, corporate and The Basel Committee (‘Basel’) completed the Basel III Reforms in
consumer confidence indices have remained below their historical July 2020 when it published the final revisions to credit valuation
average. In Europe, productive investment has thus been impacted adjustment (‘CVA’) framework. The package is scheduled to be
by the decrease in companies’ profit margin ratio, while implemented on 1 January 2023, with a five-year transitional
households’ precautionary savings has been weighing on private provision for the output floor. This floor ensures that, at the end of
consumption. Over the long run, potential growth risks being the transitional period, banks’ total RWAs will be no lower than
hampered in many economies by the expected rise in corporate 72.5 per cent of those generated by the standardised approaches.
bankruptcies and in jobseekers. The final standards will need to be transposed into the relevant
local law before coming into effect.
As a whole, despite support policies launched by national
authorities to sustain the sectors hit by the pandemic (tourism, There remains a significant degree of uncertainty about the impact
aeronautic industry and automobile in particular in France), the of these changes due to the number of national discretions within
persistence of high uncertainties regarding the health situation Basel’s reforms and the need for further supporting technical
makes a scenario of a V-shaped strong economic rebound standards to be developed.
unlikely.The decrease in the economic activity observed during the The Capital Requirements Regulation amendments
last quarter of 2020 will negatively impact the 2021 economic
growth, against a backdrop where the room for manoeuvre for In June 2019, the EU enacted amendments to the Capital
governments to protect companies and the job market have now Requirements Regulation (‘CRR2’). This included the EU’s
become more limited. implementation of the financial stability Board’s (‘FSB’)
requirements for total loss-absorbing capacity (‘TLAC’), known in
Economic outlook the EU as the minimum requirements for own funds and eligible
Despite a less deteriorated economic outlook in Asia than initially liabilities (‘MREL’), introducing changes to the own funds regime
anticipated, 2021 may begin in Europe with a lower than expected
growth. More importantly, uncertainties are growing regarding the
scarring to be left by the recession on the medium-term potential
growth rate of the economies, on public finances or private
indebtedness, which have been significantly deteriorated in
several countries.In spite of the progressive recovery in
international trade and interest rates at historically low levels in
some cases, the increase in households’ saving ratio and the
worsening in labour markets in Europe suggest that the level of
the economic activity reached end 2019 may not be obtained
again before 2022, or even after. A potentially more efficient

as well. The CRR2 will also implement the first tranche of changes reflect the activities it undertakes more accurately and its
to the EU’s legislation to reflect the Basel III Reforms, including the relationship to our Treasury function more broadly. This followed
changes to market risk (‘FRTB’) rules, revisions to the standardised realignments within our internal reporting and includes the
approach for measuring counterparty risk and the new leverage reallocation of Markets Treasury from Corporate Centre to the
ratio rules. The CRR2 rules will follow a phased implementation global businesses. Comparative data has been re-presented
with significant elements entering into force in 2021, in advance of accordingly and reflected in all the business performance
Basel’s timeline. commentary. The global business segmental results are presented
on an adjusted basis in accordance with IFRS 8 ‘Operating
The implementation of the remaining Basel III Reforms
Segments’, as detailed in ‘Basis of preparation’ in Note 1.1.(f):
The remaining elements of the Basel III Reforms will be Segmental Analysis. Reconciliation of reported and adjusted
implemented in the EU by a further set of amendments to the performance are presented on pages 14 to 15.
Capital Requirements Regulation. The EBA responded to the
Adjusted performance
European Commission’s request to update its previous advice on
the impact of the package, taking into account the effect of the Adjusted performance is computed by adjusting reported results
Covid-19 outbreak. Two scenarios have been considered. One for the year-on-year effects of significant items that distort year-
scenario entails implementing the reforms in EU legislation in full on-year comparisons. We use ‘significant items’ to describe
alignment with Basel’s standards and timeline i.e. 1 January 2023. collectively the group of individual adjustments excluded from
The second scenario entails the implementation of the reforms in reported results when arriving at adjusted performance. These
line with Basel’s timeline but with CVA exemptions, the SME and items are ones that management and investors would ordinarily
infrastructure factors, and the historical loss multipliers set to 1 for identify and consider separately when assessing performance to
operational risk. The subsequent EU implementation will be understand better the underlying trends in the business.We
subject to an extensive negotiation process with the EU Council consider adjusted performance provides useful information for
and Parliament. investors by aligning internal and external reporting, identifying
and quantifying items management believes to be significant and
The UK’s withdrawal from the EU
providing insight into how management assesses year-on-year
As a result of the decision of the referendum on 23 June 2016, the performance.
UK left the EU on 31 January 2020. In order to smooth the
transition, the UK remained subject to EU law during a transition
period, which ended on 31 December 2020.
The agreement reached between the UK and the EU on
24 December 2020 (‘EU-UK Trade and Cooperation Agreement’)
sets out preferential arrangements in various areas excluding
financial services and related equivalences. As a result, the UK will
be treated from 1 January 2021 onwards as a non-EU third
country, the treatment of which is subject to equivalence
assessments. In September 2020, the EU declared the UK CCP
framework as temporarily equivalent (until 30 June 2022).
The end of the transition period also triggers an additional MREL
requirement under CRR2 for HSBC Continental Europe as it
becomes a subsidiary of a third-country parent entity.
Other developments
In November 2020, the ECB published its final guide on climate-
related and environmental risks laying out its associated
supervisory expectations on risk management and disclosures and
will start the associated dialogue with banks from 2021.
Also in November 2020, the European Banking Authority (‘EBA’)
published a consultation to incorporate Environmental Social and
Governance (‘ESG’) risks into the governance, risk management
and supervision of credit institutions and investment firms. This
will inform the EBA’s report on management and supervision of
ESG risks and the EBA’s assessment of the need for a dedicated
prudential treatment.
Management report
Scope of the performance review
Use of non-GAAP financial measures
Our reported results are prepared in accordance with International
Financial Reporting Standards ('IFRS'), as detailed in the Financial
Statements starting on page 164. In measuring our performance,
the financial measures that we use include those derived from our
reported results in order to eliminate factors that distort year-on-
year comparisons. These are considered non-GAAP financial
measures. Non-GAAP financial measures are described and
reconciled to the closest reported financial measure when used.
Change in reportable segments since year end 2019
Effective from the second quarter in 2020, we simplified our
organisation structure by merging Global Private Banking (‘GPB’)
and Retail Banking and Wealth Management (‘RBWM’) to form
Wealth and Personal Banking (‘WPB’). We also renamed our
Balance Sheet Management function as Markets Treasury to

HSBC Continental Europe Consolidated Results
Summary consolidated income statement for the year ended
31 Dec 31 Dec
2020 2019
Footnotes €m €m
Net interest income 1,053 1,095
Net fee income 858 778
Net income from financial instruments held for trading or managed on a fair value basis 72 30
Net income from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through
profit and loss 161 1,277
Changes in fair value of long-term debt and related derivatives (4) (1)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit and loss 87 153
Gains less losses from financial investments 14 12
Net insurance premium income 1,367 2,076
Other operating income/(expense) 84 187
Total operating income 1 3,692 5,607
Net insurance claims and benefits paid and movement in liabilities to policyholders (1,571) (3,380)
Net operating income before change in expected credit losses and other credit impairment charges 1 2,121 2,227
Change in expected credit losses and other credit impairment charges (289) (128)
Net operating income 1,832 2,099
Total operating expenses 1 (2,777) (2,121)
Operating profit/(loss) (945) (22)
Share of profit in associates and joint ventures — —
Profit/(loss) before tax (945) (22)
Tax expense (80) (17)
Profit/(loss) for the period (1,025) (39)
– shareholders of the parent company (1,022) (39)
– non-controlling interests (3) —
1 Total operating income and expenses include significant items as detailed on pages 12 to 15.
Net interest income was EUR 1,053 million in 2020, down from Net insurance premium income was EUR 1,367 million in
EUR 1,095 million in the previous year. Interest income decreased 2020, down from EUR 2,076 million in 2019. This decrease was
by EUR 90 million, from EUR 1,951 million to EUR 1,861 million. In mainly related to reduction in insurance inflows particularly on
an environment of persisting low and even negative interest rates, Eurofund contracts during the year, in a context of deteriorated
income on loans and interest income on bond portfolios of the life markets conditions due to Covid-19.
insurance subsidiary continued to be pressured downward. This Other operating income was EUR 84 million down from EUR
was partly offset by the favourable decrease in interest expense of 187 million the previous year, impacted by the adverse variation of
EUR 48 million to EUR -808 million compared with EUR -856 PVIF (‘Present Value of In-force insurance long-term business’)
million last year, reflecting lower funding costs. driven by adverse market conditions and lower interest rates.The
Net fee income was EUR 858 million in 2020, up from EUR 778 variation of the accounting PVIF was a decrease of EUR 123
million in 2019. The increase was mainly due to higher fees from million in 2020 compared to an increase of EUR 113 million in
GBM with a good volume of transactions in the Capital Markets 2019. This was partly offset by a EUR 100 million exceptional
businesses and favourable fees from Equity activities. This was revenue booked in Corporate Centre and the reclassification of
partly offset by a decrease in fee income on Wealth & Personal some intragroup recoveries from operating expenses to other
Banking driven by lower levels of customer activity and assets operating income.
under management reflecting the impact of the Covid-19 Net insurance claims incurred, benefits paid and movement
pandemic. in liabilities to policyholders were EUR -1,571 million in 2020,
Net income from financial instruments held for trading or up from EUR -3,380 million in 2019. This increase is mainly driven
managed on a fair value basis was EUR 72 million in 2020, up by the change in the market value of assets recognised at fair
from EUR 30 million in 2019. This increase was mainly driven by value by the insurance subsidiary for both unit-linked and
the favourable market variation of options instruments held by the Eurofund contracts, and in relation with lower net insurance
insurance company and the increase in Markets & Securities premiums.
Services activities partly offset by an operational loss in the first Reported net operating income before change in expected
half of year. credit losses and other credit impairment charges was EUR
Net income from assets and liabilities of insurance 2,121 million, down from EUR 2,227 million in 2019. This decrease
measured at fair value through profit and loss was EUR 161 is mainly due to the adverse impact of the persistent low interest
million down from EUR 1,277 million in 2019. The reduction environment on net interest income, and the unfavourable
reflected the change in the market value of assets held by the variation of PVIF driven by both interest rates and markets
insurance company on behalf of its customers with respect to conditions.
both unit-linked policies and Eurofund contracts. The counterpart
of this decrease was the change in liabilities to policyholders.
Changes in fair value of other financial instruments
mandatorily measured at fair value through profit and loss
totalled EUR 87 million in 2020, compared to EUR 153 million in
2019. Compared to prior year, the decrease was mainly due to
unfavourable movements in the insurance portfolio.
Gains less losses from financial investments were broadly
unchanged at EUR 14 million compared to EUR 12 million in 2019.

Change in expected credit losses and other credit perimeter effect related to both the integration of EEA branches
impairment charges ('ECL') was EUR 289 million up from EUR last year and the transfer of Structured Equity Derivatives activities
128 million in 2019. ECL increased in all Global Businesses, mainly from HSBC Bank plc to HSBC Continental Europe this year.
driven by stage 3 provisions and from charges relating to the Loss before tax was EUR 945 million, sharply down from a EUR
global impact of the Covid-19 outbreak on the deteriorated 22 million loss in 2019, and included impairments of tangible and
forward economic outlook. intangible assets, restructuring costs, an adverse PVIF movement
Operating expenses amounted to EUR 2,777 million in 2020 up and a incremental ECL charges.
from EUR 2,121 million in 2019. This cost increase was mainly Loss attributable to shareholders of the parent company in
driven by the impairment of tangible and intangible assets for EUR 2020 was EUR 1,022 million, down from EUR 39 million in the
500 million, restructuring costs for EUR 258 million, Single previous year.
Resolution Fund contribution for EUR 106 million (increasing by
EUR 49 million compared with 2019) and the unfavourable
Significant revenue items by business segment – (gains)/losses

Year ended 31 Dec 2020
Wealth and Commercial Global Banking Corporate
Personal Banking Banking and Markets Centre Total
€m €m €m €m €m
Reported revenue 622 700 664 135 2,121
Significant revenue items1 — — 31 (99) (68)
Adjusted revenue 622 700 695 36 2,053

Reported revenue 885 689 639 14 2,227
Significant revenue items — — 1 1 2
Adjusted revenue 885 689 640 15 2,229
1 In 2020, significant items include EUR 31 million revenue loss related to GBM RWA reduction initiatives, EUR 100 million exceptional revenue
recognised in other operating income and a negative EUR 1 million fair value movement on non qualifying hedges. In 2019, they included
EUR 1 million debit valuation adjustment in GBM and EUR 1 million fair value movement on non qualifying hedges.
2 A change in reportable segments was made during 2020. Comparative data have been re-presented accordingly.
Significant cost items by business segment – (recoveries)/charges

€m €m €m €m €m
Reported operating expenses (918) (557) (875) (427) (2,777)
Significant cost items 38 110 184 350 682
– impairment of goodwill, intangibles and tangibles 36 30 53 253 372
– restructuring cost and other significant items 2 80 131 97 310
Adjusted operating expenses (880) (447) (691) (77) (2,095)
Year ended 31 Dec 2019 1

Reported operating expenses (840) (606) (583) (92) (2,121)
– impairment of goodwill — 169 — — 169
– restructuring cost and other significant items 8 4 16 16 44
– costs associated with UK's exit from the EU — 1 14 32 47
Adjusted operating expenses (832) (432) (553) (44) (1,861)

Net impact on profit before tax by business segment
€m €m €m €m €m
Reported profit/(loss) before tax (318) (47) (288) (292) (945)
Significant revenue items — — 31 (99) (68)
Adjusted profit/(loss) before tax (280) 63 (73) (41) (331)
Net impact on reported profit and loss 38 110 215 251 614

Reported profit/(loss) before tax 45 14 (3) (78) (22)
Significant revenue items — — 1 1 2
Adjusted profit/(loss) before tax 53 188 28 (29) 240
Net impact on reported profit and loss 8 174 31 49 262
Adjusted profit/(loss) for the period

€m €m €m €m €m
Net operating income before expected credit loss and other credit
risk provisions 622 700 695 36 2,053
Change in expected credit loss and other credit risk provisions (22) (190) (77) — (289)
Net operating income 600 510 618 36 1,764
Total operating expenses (880) (447) (691) (77) (2,095)
Operating profit (280) 63 (73) (41) (331)
Share of profit in associates and joint ventures — — — — —
Adjusted profit before tax (280) 63 (73) (41) (331)

Net operating income before expected credit loss and other credit
risk provisions 885 689 640 15 2,229
Change in expected credit loss and other credit risk provisions — (69) (59) — (128)
Net operating income 885 620 581 15 2,101
Total operating expenses (832) (432) (553) (44) (1,861)
Operating profit 53 188 28 (29) 240
Share of profit in associates and joint ventures — — — — —
Adjusted profit before tax 53 188 28 (29) 240
Adjusted loss before tax in 2020 stood at EUR -331 million, Adjusted operating expenses were EUR 2,095 million in 2020,
compared to a profit of EUR 240 million in 2019. This evolution up from EUR 1,861 million in 2019. The variation was mainly
was mainly driven by the impairment on tangible assets, the driven by the impairment of tangible assets for EUR 133 million,
increase in expected credit losses and other credit impairment the increase by EUR 49 million of the contribution to the Single
charges, the unfavourable PVIF movement and the higher Resolution Fund and the unfavourable perimeter effect related to
contribution to the Single Resolution Fund and the impairment on the transfer to HSBC Continental Europe of the European branches
tangible assets. during 2019 and of the Structured Equity Derivatives activity in
2020.
Adjusted net operating income before change in expected
credit losses and other credit impairment charges was EUR
2,053 million in 2020, down from EUR 2,229 million in 2019. This
was mainly driven by the unfavourable insurance PVIF variation,
with a decrease of EUR 123 million in 2020 down from an increase
of EUR 113 million in 2019, by the effect of persisting low and
negative interest rates on the net interest margin and by the
repercussions of the deteriorated economic and markets
conditions particularly on wealth activities. This was partly offset
by growing GBM revenues with an improved performance of
Markets & Securities Services activities, along with favourable
perimeter effect related to the transfer to HSBC Continental
Europe of the European branches during 2019 and of the
Structured Equity Derivatives activity in 2020.
Adjusted change in expected credit losses and other credit
impairment charges was EUR 289 million up from EUR 128
million in 2019. ECL increased in all Global Businesses, mainly
driven by stage 3 provisions and from charges relating to the
global impact of the Covid-19 outbreak on the deteriorated
forward economic outlook.

Wealth and Personal Banking and Euroclearing businesses, all benefiting from the broader scope
of European clients served and increased activity.
Adjusted loss before tax at EUR 280 million was EUR 333 million
below the 2019 profit reflecting a fall in net operating income Adjusted change in expected credit losses and other credit
before change in expected credit losses mainly explained by the impairment charges remained high at EUR 77 million, with EUR 18
adverse variation of PVIF, an increase in expected credit losses million unfavourable variation vs prior year mainly driven by Stage
reflecting the impact of the Covid-19 outbreak and an increase in 2 provision, while Stage 3 remained high in the context of the
operating expenses primarily due to the impairment of tangible Covid-19 crisis.
assets. Adjusted operating expenses amounted to EUR -691 million, up
Adjusted net operating income before expected credit losses and EUR 138 million compared to prior year, due to a significant
other credit impairment charges was EUR 622 million down from increase in the contribution to the European Single Resolution
EUR 885 million in December 2019. This was mainly the result of Fund, higher IT costs and unfavourable impact of perimeter
the adverse market impact in life insurance manufacturing change related to the transfer of Structured Equity Derivatives
(change in the PVIF movement of EUR -237 million). Interest activity headcount from HSBC Bank plc Paris Branch to HSBC
income was below prior year with lower and negative interest Continental Europe.
rates pressuring the income on assets downward despite Loans and Advances to Customers decreased by EUR 0.9 billion in
increased loans volumes and lower funding costs. Net fee income comparison with end of 2019 as lower business activity in certain
was also below prior year with negative impact of Covid-19 lending products more than offset the increased corporate lending
restrictions on customer activity penalising banking fees and in response to Covid-19. GBM supported its clients through the
wealth management fees. Covid-19 crisis, notably participating in significant state backed
Change in Expected Credit Losses and other credit impairment facilities with more than EUR 2 billion of lending provided.
charges increased by EUR 22 million mainly from deterioration in Customer Deposits decreased by EUR 0.9 billion in comparison
the forward economic outlook due to the Covid-19 pandemic. with end of 2019, predominantly driven by lower term deposits.
Adjusted Operating Expenses increased by EUR 48million to EUR Corporate Centre
880 million primarily due to the impairment of tangible assets in
part offset by productivity gains and cost management measures. Adjusted loss before tax was EUR 41 million in 2020 compared to
EUR 29 million loss in 2019.
Loans and advances to customers, at EUR 24 billion in December
2020, increased by 1.8 per cent compared to December 2019 Adjusted net operating income before expected credit losses and
driven by new home loans business in spite of lower customer other credit impairment charge was EUR 36 million in 2020 versus
activity. EUR 15 million in 2019. The increase reflected higher recharges to
other entities in HSBC Group.
Total Assets under Management from customers were EUR 53
billion in December 2020, broadly stable compared to December Adjusted operating expenses were EUR 77 million in 2020
2019. The growth was mainly driven by increased customer compared with EUR 44 million in 2019, driven by the impairment
deposits, with customer deposits at EUR 21 billion growing by 6 of tangible assets.
per cent compared to December 2019.This increase was partly
offset by lower assets under management caused by the adverse
equity market evolution since the beginning of the year.
Commercial Banking
Adjusted profit before tax was EUR 63 million down from EUR 188
million in 2019.
Adjusted net operating income before expected credit losses and
other credit impairment charges amounted to EUR 700 million,
increasing by EUR 11 million compared to 2019 on income from
lending partly offset by the unfavourable impact of historically low
interest rates.
Adjusted change in expected credit losses and other credit
impairment charges was EUR 190 million, up from from EUR 69
million in 2019 as the Covid-19 pandemic impacted customers.
Adjusted operating expenses rose by EUR 15 million to EUR 447
million, mainly due to higher IT, Risk and Compliance costs.
In 2020, loans and advances to customers remained broadly
unchanged. Loan balances of EUR 18.1 billion included EUR 2.2
billion of new loans under the French Government guarantee
scheme. The slight decrease was mainly driven by short term
loans and lower drawings on revolving credit facilities.
Deposits grew 14 per cent to EUR 27 billion, with significant
inflows linked to the Covid-19 pandemic.
Global Banking and Markets

Adjusted loss before tax in Global Banking and Markets was EUR
73 million compared to a profit of EUR 28 million last year.
Adjusted revenue increased to EUR 695 million compared to EUR
640 million last year. Markets & Securities Services revenue grew
compared to 2019 driven by improved performance on Securities
Financing and Debt Trading and Financing. Banking revenues
declined due to lower business activity in certain lending products
and higher Credit default swaps ('CDS') premiums, partly offset by
strong performances in corporate lending activity, Capital Markets

Summary consolidated balance sheet
At
31 Dec 2020 31 Dec 2019
Footnotes €m €m
Total assets 237,099 237,680
Cash and balances at central banks 29,508 19,463
Trading assets 12,954 14,837
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss 11,648 11,957
Derivatives 56,475 45,724
Loans and advances to banks 6,781 6,798
Loans and advances to customers 56,225 56,956
Reverse repurchase agreements – non-trading 21,522 45,973
Financial investments 19,167 16,987
Other assets 22,816 18,982
Assets held for sale 3 3
Total liabilities 229,640 229,209
Deposits by banks 17,204 12,113
Customer accounts 61,393 57,550
Repurchase agreements – non-trading 10,984 20,213
Trading liabilities 17,828 23,262
Financial liabilities designated at fair value 16,892 18,953
Derivatives 55,714 45,115
Debt securities in issue 3,605 9,782
Liabilities under insurance contracts 23,228 23,292
Other liabilities 22,792 18,929
Total equity 7,459 8,471
Total shareholders’ equity 7,434 8,443
Non-controlling interests 25 28
Total assets were EUR 237 billion at 31 December 2020, broadly mainly driven by the growing deposits from WPB and CMB
stable compared to 31 December 2019. customers in France.
Assets Repo securities, at EUR 11 billion, decreased by EUR 9 billion due
to reduced positions on banks and customers.
HSBC Continental Europe’s deposits at the central banks grew by
EUR 10 billion to EUR 29.5 billion in 2020 following an increase of Derivatives, at EUR 55.7 billion, increased by EUR 10.6 billion, due
customer deposits and the issuance of TLTRO III funding. to the interest rate decrease.
The trading portfolio was reduced by EUR 2 billion to EUR 13 Equity
billion. Financial assets mandatorily measured at fair value through Shareholders’ equity stood at EUR 7.4 billion, down from EUR 8.4
profit and loss remained stable at EUR 12 billion. billion in 2019.
Derivative instruments were EUR 10.7 billion higher at EUR 56.5 The CET1 (Common Equity Tier 1) ratio was 12.6 per cent at 31
billion resulting from lower interest rate. December 2020 and a total capital ratio was 17.3 per cent.
Loans and advances to customers remained broadly steady at
Liquidity and funding
EUR 56 billion.
Outstanding medium- and long-term funding and the bank’s main
Reverse repurchase agreements – non trading – stood at EUR 22
financing transactions in 2020 are presented in the liquidity and
billion in 2020 compared to EUR 46 billion in 2019, due to reduced
financing management section on pages 132 to 135.
positions with banks and customers.
The short-term ratio (liquidity coverage ratio or LCR) was 143 per
Liabilities cent and the long-term ratio (net stable funding ratio or NSFR) was
Deposits by banks increased by EUR 5 billion to EUR 17.2 billion, 136 per cent.
mainly driven by the issuance of TLTRO III and repayment of
TLTRO II.
Customer deposits rose from EUR 57.6 billion to EUR 61.4 billion,
Balance Sheet Information

€m €m €m €m €m
At 31 Dec 2020
Loans and advances to customers 24,204 18,075 14,523 (577) 56,225
Customers accounts 21,038 27,023 14,065 (733) 61,393
At 31 Dec 2019 1
Loans and advances to customers 23,773 18,378 15,411 (606) 56,956
Customers accounts 19,887 23,655 14,986 (978) 57,550

Profit before tax by country

At 31 Dec 2020
€m €m €m €m €m
France (303) (148) (292) (270) (1,013)
Belgium — 1 1 — 2
Czech Rep — 16 1 (1) 16
Greece (15) — (7) (1) (23)
Ireland — 17 6 (1) 22
Italy — 1 2 (6) (3)
Luxembourg — — (6) (1) (7)
Netherlands — 39 4 — 43
Poland — 10 10 (1) 19
Spain — 17 14 (11) 20
Sweden — — (2) — (2)
United Kingdom — — — — —
Others — — (19) — (19)
Profit/(loss) before tax (318) (47) (288) (292) (945)
At 31 Dec.20191
France 51 (63) (77) (65) (154)
Belgium — — 1 — 1
Czech Rep — 27 1 (1) 27
Greece (7) (2) 17 (4) 4
Ireland — 16 9 — 25
Italy — 3 8 (1) 10
Luxembourg — — 8 — 8
Netherlands — 26 4 (1) 29
Poland — (8) 8 (4) (4)
Spain — 15 22 (1) 36
Sweden — — (1) — (1)
United Kingdom — — (4) — (4)
Others 1 — 1 (1) 1
Profit/(loss) before tax 45 14 (3) (78) (22)
Net Interest Margin

Net interest margin is calculated by dividing net interest income as reported in the income statement by the average balance of interest-
earning assets.
Net interest margin was 69 basis points ('bps') in 2020 compared with 78 bps in 2019. The persisting low and even negative interest rate
environment pushed the gross interest yield downward, which was only partly offset by lower cost of funds.
Net Interest Income

2020 2019
€m €m
Interest income 1,861 1,951
Interest expense (808) (856)
Average interest-earning Assets 153,191 140,493
% %
Net interest margin 1 0.69 0.78
1 Net interest margin is net interest income expressed as an annualised percentage of average interest-earning assets.

Summary of interest income by asset type
2020 2019
Average Interest Average Interest
balance income Yield1 balance income Yield1
€m €m % €m €m %
Short term funds and loans and advances to banks 34,734 (117) (0.34) 22,933 (60) (0.26)
Loans and advances to customers 58,805 898 1.53 55,116 969 1.76
Reverse repurchase agreements – non trading 27,987 (412) (1.47) 34,308 (472) (1.38)
Financial investments 19,156 283 1.47 16,917 325 1.92
Other interest-earning assets 12,509 7 0.05 11,219 33 0.30
Total interest-earning assets 153,191 659 0.43 140,494 795 0.57
Trading assets and financial assets designated or mandatorily
measured at fair value 2 19,535 204 1.04 22,083 300 1.36
Expected credit losses provision (770) — (690)
Non-interest-earning assets 77,328 — 68,442
Total 249,284 863 0.35 230,328 1,095 0.48
1 Yield has been calculated taking into account negative interest on assets recognised as interest expense in the income statement. 2019 yield have
been re-presented accordingly.
2 Interest income arising from trading assets is included within 'Net trading income' in the income statement.
Summary of interest expense by type of liability and equity

2020 2019
Average Interest Average Interest
balance expense Cost1 balances expense Cost1
€m €m % €m €m %
Deposits by banks 16,748 (87) (0.52) 12,569 (7) (0.05)
Customer accounts 23,456 28 0.12 20,176 100 0.50
Repurchase agreements – non trading 12,659 (356) (2.82) 18,160 (433) (2.39)
Financial liabilities designated at fair value – own debt issued 11,544 (20) (0.18) 11,023 (3) (0.03)
Debt securities in issue and subordinated debts 8,075 6 0.08 6,596 9 0.13
Other interest-bearing liabilities 13,264 35 0.26 10,174 33 0.33
Total interest-bearing liabilities 85,746 (394) (0.46) 78,697 (301) (0.38)
Trading liabilities and financial liabilities designated at fair value
(excluding own debt issued) 2 28,048 444 1.58 30,547 480 1.57
Non-interest-bearing current accounts 39,430 32,825
Total equity and other non-interest bearing liabilities 96,060 88,259
Total 249,284 50 0.02 230,328 179 0.08
1 Cost has been calculated taking into account negative interest on liabilities recognised as interest income in the income statement. 2019 cost have
been re-presented accordingly.
2 Interest expense arising from trading liabilities is included within 'Net trading income' in the income statement.
Post-balance sheet events

New products and services are offered to customers of the HSBC Group in Continental Europe on a regular basis. Information is available
on the Group’s websites, in particular in the press releases posted at www.hsbc.fr.
There has been no significant change affecting the financial or sales situation of HSBC Continental Europe or its subsidiaries since
31 December 2020 until the Board of Directors of 23 February 2021 which approves these financial statements.

Historical data (unaudited)

2020 2019 2018 2017 2016
€m €m €m €m €m
Profit before tax (945) (22) 45 219 432
Profit attributable to shareholders (1,022) (39) (17) 177 310
At 31 Dec
Shareholders’ equity 7,434 8,443 6,555 5,676 5,842
Loans and advances to customers and banks 63,006 63,754 53,194 49,699 44,706
Customer accounts and deposits by banks 78,597 69,663 52,734 51,574 46,281
Total Balance Sheet 237,099 237,680 180,946 167,544 169,423
Number of employees (full-time equivalents)3 8,517 9,472 8,829 8,337 8,647
Ratios
– Total capital ratio1 17.3% 16.9% 15.7% 14.1% 13.2%
– Common Equity Tier One Ratio1 12.6% 13.5% 13.1% 13.1% 13.2%
– Cost efficiency ratio (reported basis)2 130.9% 95.2% 98.3% 78.6% 72.7%
1 Capital ratios from 2018 are reported under fully loaded and no longer under transitional.
2 The cost efficiency ratio in 2016 does not include the depreciation of goodwill.
3 The increase in 2019 is due to acquisition of seven branches: Madrid branch, Milan branch, Ireland branch, Netherlands branch Belgium branch,
Prague branch with effect from 1 February 2019 and Luxembourg branch from 1 March 2019.
During the year 2020:

Credit ratings
• Fitch has put a number of HSBC entities including HSBC
HSBC Continental Europe is rated by three major agencies: Continental Europe under negative outlook in relation with the
Standard & Poor’s, Moody’s and FitchRatings. Covid-19 outbreak. At the same time, according to a
methodology change, the senior long term ratings of operating
Standard &
Poor’s Moody’s FitchRatings
entities including HSBC Continental Europe have been
upgraded to AA- from A.
Long-term Senior preferred A+ Aa3 AA-
Outlook Stable Negative Negative • S&P has downgraded the long term ratings of certain HSBC
Short term A-1 P-1 F1+ entities including HSBC Continental Europe on lowered
earnings prospects and expected extensive restructuring.

Other information on HSBC Continental Europe
Information on supplier payable amounts schedule

(Articles L. 441-14 and D. 441-4 of the French Commercial code)
Article D.441 – II: Received invoices by HSBC Continental Europe S.A.1 subject to late payment delays during the year
0 day (for Total (1 day and
information) 1 to 30 days 31 to 60 days 61 to 90 days over 91 days more)
(A) Late payment buckets
Number of invoices 31,716 5,942
Amount of invoices including VAT
(in €k) 742,730 83,438 24,140 8,367 27,359 143,303
Percentage of total purchasing in the
year 84% 9% 3% 1% 3% 16%
(B) Invoices excluded from (A) in respect of litigations or not accounted
Number of invoices excluded 2,566
Amount of excluded invoices
including VAT (in €k) 61,541
(C) Suppliers' payment terms (contractual or legal terms)
Payment terms used to assess the late
payments Contractual terms: 45 days
1 Excluding the European branches of HSBC Continental Europe SA.
Information on client receivable amounts schedule

(Articles L. 441-14 and D. 441-4 of the French Commercial code)
Article D.441 – I: Issued invoices by HSBC Continental Europe S.A.1 subject to late payment delays at year-end
0 day (for Total (1 day and
information) 1 to 30 days 31 to 60 days 61 to 90 days over 91 days more)
(A) Late payment buckets
Number of invoices 93 695
Amount of invoices excluding VAT
(in €k) 27,109 18,157 6,348 263 4,708 29,476
Percentage of total revenue of the
year 1.88% 1.25% 0.44% 0.02% 0.33% 2.04%
(B) Invoices excluded from (A) in respect of litigations or not accounted
Number of invoices excluded —
Amount of excluded invoices
excluding VAT (in €k) —
(C) Clients' payment terms (contractual or legal terms)
Payment terms used to assess the
late payments Contractual terms: 30 to 45 days
1 Excluding the European branches of HSBC Continental Europe SA.
This information does not include banking transactions and certain related transactions as HSBC Continental Europe considers that they
do not fall within the scope of the information to be produced.

Corporate governance report
to the management report referred to in article L. 225-100 to the

Corporate Governance report shareholders’ general meeting.
Under article L. 225-37 of the French Commercial Code, the Board This report was submitted to the Board Committees at their
of Directors presents a report on Corporate Governance attached meetings held on 29 January, 9 February and 10 February 2021.
Corporate governance bodies and regime

Governance bodies structure
HSBC Continental
Europe
Board of Directors
p
Remuneration
u Risk Committee
Committee
u Audit Committee Nomination Committee
General Management
Financial Crime Risk

Risk Management
Meeting u Executive Committee t Management
Committee
p p p
Asset & Liability Committee
Businesses' Risk
Financial Crime
Committees & Main ad hoc Businesses'
Operational Risks Financial Risks Compliance
international Committees Committees
Governance Structure
locations
Forums and Working Groups
Board composition is detailed and commented on pages 23 and In particular regarding the information flow on risk, the HSBC
following of this Corporate Governance report. Continental Europe Risk Management Meeting, which is chaired
by the Chief Risk Officer and includes the Chief Executive Officer,
Membership, duties and work of the Board Committees are
the Deputy Chief Executive Officers and other members of the
presented in relevant sections of this Corporate Governance report
Executive Committee, is the overarching Committee overseeing
(see pages 33 to 37).
risk management and permanent control. Next to it, the
General Management and Executive Committee membership is committee in charge of overseeing more specifically the Financial
detailed on page 37 and following of this Corporate Governance Crime Risk, Sanctions Risk and Fraud Risk, is the Financial Crime
report. Risk Management Committee.
Risks, issues or other matters requiring attention from the Relevant information, in particular on risk, is shared on a quarterly
management body may be escalated through line management, or basis with the Board and its Audit and Risk Committees by the
through the committee structure described above. bank’s senior management.

Corporate Governance code Number of positions held within the meaning of L. 511-52 of the
French Monetary and Financial Code: one directorship as member
In accordance with the requirements under article L. 22-10-10 of of a Board of Directors or a Supervisory Board.
the French Commercial Code, it is stated that, given the HSBC
Continental Europe's specific situation of 99.9 per cent owned Skills and experience: Born in 1960. Master's degree in Banking
subsidiary of the HSBC Group and which capital securities are not and Finance from the Panthéon-Sorbonne University and
admitted to trading on a regulated market, HSBC Continental graduated from the Institut d'Etudes Politiques de Paris. He joined
Europe does not refer to any corporate governance code drawn up CCF in 1994 from Total Group, where he was Head of Treasury. At
by business representative organisations, but refers to the CCF, he was appointed Head of Markets in 1998. He joined HSBC
Corporate Governance Code for HSBC Group companies in 2000 when the bank acquired CCF. He started at HSBC as Head
(the ‘Code’), adopted by HSBC Continental Europe Board of of Global Markets at HSBC Continental Europe and Head of Fixed
Directors at its meeting of 14 February 2014. The aim of this code Income Trading, Europe. In 2006, he was promoted to Head of
is to provide consistent and high standard Corporate Governance Global Markets, Europe and Middle-East and in 2007 he became
practices throughout the HSBC Group. Deputy Head of HSBC Group Global Markets. In 2008, he became
Head of Global Markets and a Group General Manager. He took
Information on governance structure, Chairman’s role, on Board’s the managerial direction of the Global Research in 2009 and
composition, functioning, organisation and work, and on Executive extended his responsibilities to Securities Services in 2010. From
Directors’ compensation are presented in the relevant sections of 2011 to March 2020, he served as Group Managing Director, a
this report. member of the Group Management Board and Chief Executive
Officer Global Banking and Markets, HSBC Group. Since
Board of Directors2 November 2012, he has been the Chairman of the Board of
Directors of HSBC Continental Europe. He was also a founding
Board of Directors’ internal rules member of the Association of the Financial Markets in Europe and,
since 2012, a member of the Financial Markets Advisory
The Board of Directors’ internal rules were first established in
Committee of the International Monetary Fund. Since 1 March
1996, and have been updated several times since their
2020, he has been Chairman of Corporate and Institutional
implementation. In 2020, the Board reviewed and updated these
Banking of the HSBC Group.
internal rules at its meeting held on 6 February.
The Board’s internal rules define the composition, the duty and the 2019 Directorships in the HSBC Group:
conducting of the Board meetings and the information to the Chairman of the Board of Directors: HSBC Continental
Board of Directors. They indicate the main duties and Europe. Director: The Saudi British Bank. Member of the
arrangements for exercising the function of Chairman, and the Supervisory Board: HSBC Trinkaus & Burkhardt AG.
main duties of the Chief Executive Officer and of the Effective Directorship outside of the HSBC Group:
Managers. Furthermore, the Board’s internal rules define, in Board member: Alfanar.
accordance with the HSBC Group rules, the duties and
responsibilities of the Audit Committee, the Risk Committee, the 2018 Directorships in the HSBC Group:
Nomination Committee and the Remuneration Committee (as Chairman of the Board of Directors: HSBC Continental
stipulated below in the parts related to each of these Committees’ Europe. Director: The Saudi British Bank. Member of the
assignments). They also incorporate ethical rules and rules Supervisory Board: HSBC Trinkaus & Burkhardt AG.
regarding conflicts of interest prevention and management to be 2017 Directorships in the HSBC Group:
followed by the Directors of HSBC Continental Europe, setting out Chairman of the Board of Directors: HSBC Continental
their rights and duties. Europe. Director: The Saudi British Bank. Member of the
Supervisory Board: HSBC Trinkaus & Burkhardt AG.
Chair of the Board of Directors
2016 Directorships in the HSBC Group:
Duties of the Chairman of the Board Chairman of the Board of Directors: HSBC Continental
The Chairman of the Board has a duty to ensure the proper Europe. Director: The Saudi British Bank. Member of the
functioning of HSBC Continental Europe’s governing bodies. In Supervisory Board: HSBC Trinkaus & Burkhardt AG.
particular, he conducts the work of the Board and coordinates it
with that of the specialised Committees. He ensures that the Composition of the Board
Directors are in a position to perform their duty, and in particular,
On 31 December 2020, the Board of Directors comprised
ensures that they are in possession of all of the information they
15 Directors, of which 12 were appointed by the Shareholders’
require for the discharge of their duties.
General Meeting and three were elected by employees. A
Presentation of the Chairman of the Board of Directors representative of the Social and Economic Council attends Board
meetings, without voting rights.
Samir Assaf The Directors were elected by Shareholders’ General Meeting or
Chairman of the Board of Directors by employees have a three-year term of office.
Member of the Nomination Committee and of the Remuneration
Committee
First elected: 2012. Last re-elected: 2019. Term ends: 2022
Principal position: Group Managing Director, Chairman of
Corporate and Institutional Banking, HSBC Group3.
Other directorships in the HSBC Group: Director, The Saudi
British Bank3. Directorship expired in 2020: Member of the
Supervisory Board, HSBC Trinkaus & Burkhardt AG3.
Other directorships outside of the HSBC Group: Board
member, Alfanar. Montaigne London, Board member (since June
2020).
2
As far as their direstorship at HSBC Continental Europe is concerned, the address of HSBC Continental Europe's Directors and Senior Executives
is the company's registered office, 38 avenue Kléber, 75116 Paris, France.
3
Listed company.

The Board membership complies with the policies the Board had He was appointed Co-Head of Corporate Investment Banking and
implemented on the assessment of the suitability of members of Markets, mainly in charge of Corporate and Investment Banking in
the management body and key function holders and on diversity. 2004. In 2005, he was appointed Senior Corporate Vice-President.
In 2007, he was appointed Head of Global Banking and Markets of
Changes occurred in the Board composition during
HSBC Continental Europe. In 2010, he was appointed Deputy CEO,
2020 and early 2021
in addition to his role as Head of Global Banking and Markets
At its meeting on 6 February 2020, the Board took note of the France. The same year, he was appointed Head of Global Banking,
resignation of Jacques Veyrat from his directorship. Continental Europe, HSBC Group. His direct responsibilities within
The Nomination Committee reviewed the position of the Directors Global Banking and Markets ended in 2019. Since January 2012,
whose term of office expired at the Annual General Meeting on he has been CEO of HSBC Continental Europe.
13 March 2020: Jean Beunardeau and Lucile Ribot. Further to the 2019 Directorships in the HSBC Group:
reassessment of their suitability and upon recommendation of the Director and CEO: HSBC Continental Europe. Chairman of
Board, the Board decided to propose their renewal. the Board: HSBC Global Asset Management (France),
At the Annual General Meeting held on 13 March 2020, HSBC Assurances Vie (France). Director: Valeurs
shareholders re-elected those Directors. Mobilières Elysées. Chairman: Fondation HSBC pour
l'Education.
Further to James Emmett's resignation from his directorship,
Directorships outside of the HSBC Group:
the Board co-opted Nuno Matos as a Director at its meeting
Director: Institut de la Gestion Déléguée. Member of the
on 30 April 2020. The Shareholders' General Meeting on
Supervisory Board: Société Anonyme des Galeries
12 November 2020 ratified this co-optation.
Lafayette, Fonds de garantie des dépôts et de résolution
On 23 October 2020, the Board took note of the death of Philippe (permanent representative of HSBC Continental Europe).
Purdy, a Director elected by employees, on 9 September 2020. Chairman: Académie France-Chine. Director, Fondation de
At its meeting on 12 February 2021, the Board took note of the France (permanent representative of HSBC Continental
resignation of Laurence Rogier from her directorship. Europe). Treasurer: Association du Golf de Saint-Cloud.
Further to Nuno Matos's resignation from his directorship, 2018 Directorships in the HSBC Group:
the Board co-opted Stephen O'Connor as a Director at its meeting Director and CEO: HSBC Continental Europe. Chairman of
on 12 February 2021. This co-optation will be submitted to the the Board: HSBC Global Asset Management (France),
ratification of the Annual General Meeting to be held on 11 March HSBC Assurances Vie (France). Director: Valeurs
2021. Mobilières Elysées. Chairman: Fondation HSBC pour
l'Education.
Presentation of the Directors as of 13 February 2021 Directorships outside of the HSBC Group:
Director: Institut de la Gestion Déléguée. Member of the
Jean Beunardeau Supervisory Board: Société Anonyme des Galeries
Director and Chief Executive Officer Lafayette, Fonds de garantie des dépôts et de résolution
(permanent representative of HSBC Continental Europe).
First elected: 2008. Last re-elected: 2020. Term ends: 2023 Chairman: Académie France-Chine. Director, Fondation de
Principal position: Chief Executive Officer, HSBC Continental France (permanent representative of HSBC Continental
Europe. Group General Manager, HSBC Group4. Europe). Treasurer: Association du Golf de Saint-Cloud.
Other directorships in the HSBC Group: Chairman of the 2017 Directorships in the HSBC Group:
Board, HSBC Global Asset Management (France). Director, HSBC Director and CEO: HSBC Continental Europe. Chairman of
Assurances Vie (France). Director, Valeurs Mobilières Elysées. the Board: HSBC Global Asset Management (France),
Chairman, Fondation HSBC pour l'Education. Directorship expired HSBC Assurances Vie (France). Director: Valeurs
in 2020: Chairman of the Board, HSBC Assurances Vie (France). Mobilières Elysées. Chairman: Fondation HSBC pour
l'Education.
Other directorships outside of the HSBC Group: Member of Directorships outside of the HSBC Group:
the Supervisory Board, Société Anonyme des Galeries Lafayette. Director: Institut de la Gestion Déléguée. Member of the
Chairman Académie France-Chine. Director, Fondation de France Supervisory Board: Société Anonyme des Galeries
(permanent representative of HSBC Continental Europe). Lafayette, Fonds de garantie des dépôts et de résolution
Treasurer, Association du Golf de Saint-Cloud. Member of the Great (permanent representative of HSBC Continental Europe).
Council, Cercle de l'Union Interalliée. Directorship expired Chairman: Académie France-Chine.Director, Fondation de
in 2020: Member of the Supervisory Board, Fonds de garantie France (permanent representative of HSBC Continental
des dépôts et de résolution (permanent representative of Europe).
HSBC Continental Europe).
.
Number of positions held within the meaning of L. 511-52 of the
French Monetary and Financial Code: one directorship as
executive and one directorship as member of a Board of Directors
or a Supervisory Board.
Skills and experience: Born in 1962. Graduated from Ecole
Polytechnique, Telecom Engineer and Master of Economics, he
began his career at the Ministry of Finance, at the Forecasting
Department then at the Treasury. He became Technical Advisor to
the Prime Minister in 1995. He joined HSBC Continental Europe in
1997 in Corporate Finance and became Managing Director in
2000.
4
Listed company.

2016 Directorships in the HSBC Group: Skills and experience: Born in 1971. Graduated with a
Director and CEO: HSBC Continental Europe. Chairman of Professional Certificate in ‘Banking’. Master's degree in applied
the Board: HSBC Global Asset Management (France), foreign languages English/Spanish, business and commerce. Since
HSBC Assurances Vie (France). Director: Valeurs she joined HSBC in 2003, she held positions as Branch Supervisor,
Mobilières Elysées. Chairman: Fondation HSBC pour Sales Assistant and Relationship Manager within the Retail
l'Education. Banking and Commercial Banking networks.
Directorships outside of the HSBC Group: 2019 Directorship in the HSBC Group:
Director: Institut de la Gestion Déléguée. Member of the Director elected by employees: HSBC Continental Europe.
Supervisory Board: Société Anonyme des Galeries
Lafayette, Fonds de garantie des dépôts et de résolution 2018 –
(permanent representative of HSBC Continental Europe). 2017 –
Chairman: Académie France-Chine. 2016 –
Paule Cellard Lindsay Gordon

Independent Director Independent Director
Member of the Risk Committee Chairman of the Risk Committee and Member of the Audit
Committee
Other directorships: Director, CA Indosuez Wealth Management
(Europe). Member of the Supervisory Board, Damartex5. Member Other directorship in the HSBC Group: Director, HSBC Bank
of the Supervisory Board, Somfy5. Bermuda Limited.
Number of positions held within the meaning of L. 511-52 of the Other directorships outside of the HSBC Group: Governor
French Monetary and Financial Code: four directorships as and Co-Founder, C.H.I.L.D. Foundation. Director, Export
member of a Board of Directors or a Supervisory Board. Development Canada. Directorship expired in 2020: Chancellor,
University of British Columbia.
Skills and experience: Born in 1955. Graduated from the Ecole
Supérieure de Commerce de Paris (‘ESCP’ Europe). Degree in Number of positions held within the meaning of L. 511-52 of the
International Law from the University Paris II-Assas and Corporate French Monetary and Financial Code: one directorship as member
Director Certificate from the French Institute of Directors, issued of a Board of Directors or a Supervisory Board.
by the Institut d'Etudes Politiques de Paris. After having held Skills and experience: Born in 1952. British and Canadian
various operational responsibilities within Investment Banking and nationality. Graduate of an M.B.A. in Finance and International
Markets activities at Banque Indosuez, The Chase Manhattan Bank Business at the Sauder School of Business of the University of
and then at Crédit Agricole group, she was Head of the central British Colombia and BA in Economics from the University of
team of Calyon’s Inspection Générale between 2000 and 2005, British Colombia. He joined HSBC Bank Canada in 1987 and has
Chief Executive Officer of Gestion Privée Indosuez between 2006 served in various roles in Toronto and Vancouver including Senior
and 2009, and subsequently Global Head of Compliance for Crédit Executive Vice-President, Chief Credit Officer, Senior Vice-
Agricole Corporate & Investment Bank until 2013, when she President and Head of Special Credit, and Vice-President at
retired. Since 2013, she has been holding several directorships in Commercial Banking in Toronto. He was appointed Chief
boards and board committees. Operating Officer in 1999 then President and Chief Executive
2019 Directorship in the HSBC Group: Officer from 2003 to 2013, date of his retirement.
Independent Director: HSBC Continental Europe. 2019 Directorships in the HSBC Group:
Directorships outside of the HSBC Group: Independent Director: HSBC Continental Europe. Director:
Director: CA Indosuez Wealth Management (Europe). HSBC Bank Bermuda Limited.
Member of the Supervisory Board: Damartex, Somfy. Directorships outside of the HSBC Group:
2018 Directorship in the HSBC Group: Chancellor: University of British Columbia. Governor and
Independent Director: HSBC Continental Europe. Co-Founder: C.H.I.L.D. Foundation. Director: Export
Directorships outside of the HSBC Group: Development Canada.
Director: CA Indosuez Wealth Management (Europe).
Member of the Supervisory Board: Damartex, Somfy.
2017 Directorship in the HSBC Group:
Independent Director: HSBC Continental Europe.
Chairman: Klefi Conseil. Director: CA Indosuez Wealth
Management (Europe). Member of the Supervisory Board:
Damartex, Somfy.
2016 –
Christine D'Amore
Director elected by employees
First elected: 2019. Term ends: 2022

Principal position: Deputy GRM, South West Corporate Banking
Centre, Commercial Banking, HSBC Continental Europe.
of a Board of Directors or a Supervisory Board.
5
Listed company

2018 Directorships in the HSBC Group: 2019 Directorship in the HSBC Group:
Independent Director: HSBC Continental Europe. Director: Independent Director: HSBC Continental Europe.
HSBC Bank Bermuda Limited. Directorships outside of the HSBC Group:
Directorships outside of the HSBC Group: Chairman of the Management Board: Galeries Lafayette
Chancellor: University of British Columbia. Governor and Group. Deputy Chairman and Chief Executive Officer:
Co-Founder: C.H.I.L.D. Foundation. Director: Clear Seas Motier. Chairman: Motier Domaines, Guérin Joaillerie.
Centre for Responsible Marine Shipping, Export Lead Director: Carrefour. Director: Lafayette Anticipation-
Development Canada, Canadian Institute for Advanced Fondation d’entreprise Galeries Lafayette (Founders
Research. College), INSEAD, Institut Français de la Mode. Chairman
2017 Directorships in the HSBC Group: of the Supervisory Board: La Redoute. Member of the
Independent Director: HSBC Continental Europe. Director: Steering Committee: Union du Grand Commerce de
HSBC Bank Bermuda Limited. Centre-Ville (‘UCV’). Elected member: Chambre de
Directorships outside of the HSBC Group: Commerce et d’Industrie de la région Paris Ile-de-France.
Chancellor: University of British Columbia. Governor and Member of the Supervisory Committee: BHV Exploitation.
Co-Founder: C.H.I.L.D. Foundation. Director: Clear Seas Chairman of the France Council: INSEAD. Chairman of the
Centre for Responsible Marine Shipping, Export Board of the consular higher education institution, ESCP.
Development Canada, Canadian Institute for Advanced Deputy Chairman: Association Alliance 46.2 Entreprendre
Research. en France pour le Tourisme. Member of the Great Council:
Cercle de l'Union Interalliée.
Independent Director: HSBC Continental Europe. Director: 2018 Directorship in the HSBC Group:
HSBC Bank Bermuda Limited. Independent Director: HSBC Continental Europe.
Directorships outside of the HSBC Group: Directorships outside of the HSBC Group:
Chancellor: University of British Columbia. Governor and Chairman of the Management Board: Galeries Lafayette
Co-Founder: C.H.I.L.D. Foundation. Director: Clear Seas Group. Deputy Chairman and Chief Executive Officer:
Centre for Responsible Marine Shipping, Export Motier. Chairman: Motier Domaines, Guérin Joaillerie.
Development Canada, Canadian Institute for Advanced Lead Director: Carrefour. Director: Lafayette Anticipation-
Research. Fondation d’entreprise Galeries Lafayette (Founders
College), INSEAD, Institut Français de la Mode. Chairman
of the Supervisory Board: La Redoute. Member of the
Philippe Houzé Steering Committee: Union du Grand Commerce de
Independent Director Centre-Ville (‘UCV’). Elected member: Chambre de
Commerce et d’Industrie de la région Paris Ile-de-France.
Chairman of the Nomination Committee and of the Remuneration Member of the Supervisory Committee: BHV Exploitation.
Committee Chairman of the France Council: INSEAD. Deputy
First elected: 1999. Last re-elected: 2019. Term ends: 2022 Chairman: Association Alliance 46.2 Entreprendre en
France pour le Tourisme. Chairman of the Board of the
Principal position: Chairman of the Management Board, Galeries consular higher education institution, ESCP. Member of
Lafayette Group. the Great Council, Cercle de l'Union Interalliée.
Other directorships: Deputy Chairman, Chief Executive Officer 2017 Directorship in the HSBC Group:
and member of the Supervisory Board, Motier. Chairman of the Independent Director: HSBC Continental Europe.
Supervisory Board, La Redoute. Lead Director then Deputy Directorships outside of the HSBC Group:
Chairman (since April 2020), Carrefour6. Director, Lafayette Chairman of the Management Board: Galeries Lafayette
Anticipation – Fondation d’entreprise Galeries Lafayette (Founders Group. Deputy Chairman and Chief Executive Officer:
College). Member of the Board, INSEAD. Member of the Steering Motier. Chairman: Motier Domaines, Guérin Joaillerie.
Committee, Union du Grand Commerce de Centre-Ville (‘UCV’). Lead Director: Carrefour. Director: Lafayette Anticipation-
Elected Member, Chambre de Commerce et d’Industrie de la région Fondation d’entreprise Galeries Lafayette (Founders
Paris Ile-de-France. Member of the Great Council, Cercle de l'Union College), INSEAD, Expofrance 2025, EESC ESCP, Institut
Interalliée. Chairman of the France Council, INSEAD. Chairman of Français de la Mode. Member of the Steering Committee:
the Board of the consular higher education institution, ESCP. Union du Grand Commerce de Centre-Ville (‘UCV’). Elected
Deputy Chairman, Association Alliance 46.2 Entreprendre en member: Chambre de Commerce et d’Industrie de la
France pour le Tourisme. Directorships expired in 2020: Member of région Paris Ile-de-France. Member of the Supervisory
the Supervisory Committee, BHV Exploitation. Chairman, Motier Committee: BHV Exploitation. Deputy Chairman:
Domaines. Association Alliance 46.2 Entreprendre en France pour le
Number of positions held within the meaning of L. 511-52 of the Tourisme. Chairman of the France Council: INSEAD.
French Monetary and Financial Code: one directorship as Chairman of the France Board of Governors, ESCP Europe.
executive and one directorship as member of a Board of Directors Chairman of the Governing Board: Novancia Business
or a Supervisory Board. School. Member of the Great Council, Cercle de l'Union
Interalliée.
Skills and experience: Born in 1947. Graduate of a Bachelor
degree in Political Science and of an M.B.A. from the Institut
Européen d'Administration des Affaires (‘INSEAD‘). Director of
Galeries Lafayette since 1974 and Chairman of the Management
Board since 2003.
6
Listed company

2016 Directorship in the HSBC Group: Financial Officer, Member of the Executive Committee and of the
Independent Director: HSBC Continental Europe. Board of Directors of Nissan. Until 2010, Executive Vice-President
Directorships outside of the HSBC Group: and Chief Financial Officer of the Renault Group, and then, until
Chairman of the Management Board: Galeries Lafayette 2011, Director and Special Adviser to the President of the Renault-
Group. Deputy Chairman and Chief Executive Officer: Nissan Alliance.
Motier. Chairman: Motier Domaines, Guérin Joaillerie. 2019 Directorships in the HSBC Group: Independent
Lead Director: Carrefour. Director: Lafayette Anticipation- Director: HSBC Continental Europe.
Fondation d’entreprise Galeries Lafayette (Founders Directorships outside of the HSBC Group:
College), INSEAD, Expofrance 2025, EESC ESCP. Member Chairman and Chief Executive Officer then Managing
of the Steering Committee: Union du Grand Commerce de Director: Revue Des Deux Mondes. Vice-Chairman of
Centre-Ville (‘UCV’). Elected member: Chambre de the Supervisory Board: Webedia. Director: Fimalac,
Commerce et d’Industrie de la région Paris Ile-de-France. Groupe Lucien Barrière, Prodways Group, Valeo,
Member of the Supervisory Committee: BHV Exploitation. Fimalac Entertainment.
President of the Council: France INSEAD. Chairman of the
Governing Board: Novancia Business School. Deputy 2018 Directorships in the HSBC Group: Independent
Chairman: Association Alliance 46.2 Entreprendre en Director: HSBC Continental Europe, HSBC Bank plc.
France pour le Tourisme. Directorships outside of the HSBC Group:
Chairman and Chief Executive Officer then Managing
Director: Revue Des Deux Mondes. Vice-Chairman of
Laurent Lagueny the Supervisory Board: Webedia. Director: Fimalac,
Groupe Lucien Barrière, Prodways Group, Valeo,
Director elected by employees Fimalac Entertainment.
Member of the Remuneration Committee 2017 Directorships in the HSBC Group: Independent
Director: HSBC Continental Europe, HSBC Bank plc.
First elected: 2019. Term ends: 2022 Directorships outside of the HSBC Group:
Principal position: Head of Trade Finance Processing, Chairman and Chief Executive Officer: Revue Des
Commercial Banking, HSBC Continental Europe. Deux Mondes. Vice-Chairman of the Supervisory
Board: Webedia. Director: Fimalac, Groupe Lucien
Barrière, Prodways Group, Valeo, Trois-S
Entertainment.
of a Board of Directors or a Supervisory Board.
2016 Directorships in the HSBC Group: Independent
Skills and experience: Born in 1966. Graduated from the Institut Director: HSBC Continental Europe, HSBC Bank plc.
d’Etudes Politiques de Paris. He joined HSBC Continental Europe Directorships outside of the HSBC Group:
in 1998 and held branch and business centre management Chairman and Chief Executive Officer: Revue Des
positions within the Retail Banking and Commercial Banking Deux Mondes. Vice-Chairman of the Supervisory
networks then facilitator positions in the Training Department. Board: Webedia. Director: Fimalac, Groupe Lucien
After having exercised the functions of Head of Business Barrière, Prodways Group, Valeo, Trois-S
Development from 2009 to 2013 within the Trade and Supply Entertainment.
Chain department, he has been appointed Processing Trade
Finance Director in 2018.
Stephen O'Connor
Director elected by employees: HSBC Continental Europe. Independent Director
2018 – First elected: 2021. Term ends: 2022

2017 – Principal position: Chairman, HSBC Bank plc.
2016 –
Other directorships: Chairman and Founder, Quantile
Technologies Limited. Director, The London Stock Exchange
Thierry Moulonguet Group plc. Director, London Stock Exchange plc. Director, FICC
Markets Standards Board.
Independent Director
Chairman of the Audit Committee and member of the Risk French Monetary and Financial Code: three directorships as
Committee member of a Board of Directors or a Supervisory Board.
First elected: 2009. Last re-elected: 2019. Term ends: 2022 Skills and experience: Born in 1961. British nationality. BSc in
Other directorships: Managing Director, Revue Des Deux Mechanical Engineering from Imperial College and Chartered
Mondes7. Chairman of the Supervisory Board, Webedia7. Director, Accountant. After starting his career with PwC, he held various
Fimalac7,8. Director, Groupe Lucien Barrière7. positions in Markets activities, in particular derivatives, at Morgan
Stanley from 1988 to 2013. He was the non-executive Chairman of
Director, Valeo8. Director. Directorship expired in 2020: Fimalac OTC Deriv LTD from 2001 to 2011 and of International Swaps and
Entertainment7. Derivatives Association (ISDA) from 2009 to 2014. Since 2013, he
Number of positions held within the meaning of L. 511-52 of the has been a member of the Board of the London Stock Exchange
French Monetary and Financial Code: one directorship as Group where he is also Chair of the Board Risk Committee and a
executive and two directorships as member of a Board of Member of the Audit and Nominations Committees. He founded
Directors or a Supervisory Board. Quantile Technologies Ltd in 2015, where he is the Chair. Since
2018, he has been Chairman of the Board and of Chairman of the
Skills and experience: Born in 1951. Graduated from the Institut
Nominations, Remuneration and Governance Committee of HSBC
d'Etudes Politiques de Paris and Ecole Nationale d'Administration.
Bank plc.
Degree in Economic Science. After having held several positions in
the French public service, he joined the Finance Department of
Renault in 1991. From 1999 to 2003, Senior Vice-President, Chief
7
Company owned by the Fimalac group.
8
Listed company.

2019 – 2018 Directorship in the HSBC Group:

2018 – Independent Director: HSBC Continental Europe.
2017 – Directorship outside of the HSBC Group:
Chief Executive Officer: Nexans.
2016 –
Dominique Perrier Independent Director: HSBC Continental Europe.
Directorship outside of the HSBC Group:
Chief Executive Officer: Nexans.
Member of the Audit Committee 2016 Directorship in the HSBC Group:
First elected: 2018. Last re-elected: 2019. Term ends: 2022 Independent Director: HSBC Continental Europe.
Other directorships: Director, NaturaBuy. Chairman, Moncey Chief Executive Officer: Nexans.
Arbitrage et Conseil.
French Monetary and Financial Code: one directorship as Lucile Ribot
executive and two directorships as member of a Board of Independent Director
Directors or a Supervisory Board.
Member of the Audit Committee
Skills and experience: Born in 1954. Graduated from the French
Business School ESSEC and Certified Public Accountant. Mediator First elected: 2016. Last re-elected: 2020. Term ends: 2023
certified by Ecole Professionnelle de la Médiation et de la Other directorships: Director, Imerys9. Director, Kaufman &
Négociation. After practising as external auditor at Peat Marwick Broad SA9. Member of the Supervisory Board: Acropole Holding
and then, from 1988, as an audit and consulting partner at SAS (since May 2020). Member of the Supervisory Board: Siaci
PricewaterhouseCoopers Audit (‘PwC’), she took over the Saint Honoré (since June 2020).
development of PwC Dispute Analysis and Investigation
department from 2001 to 2016. From 2004 to 2008, she also
French Monetary and Financial Code: four directorships as
managed the PwC Restructuring activities. Retired since 2017, she
member of a Board of Directors or a Supervisory Board.
intervenes, on the one hand, as an independent director and, on
the other hand, as arbitrator, independent expert and mediator. Skills and experience: Born in 1966. Graduated from the Ecole
des Hautes Etudes Commerciales de Paris (‘HEC’). Senior Audit
2019 Directorships in the HSBC Group: Independent Director: Manager at Arthur Andersen (audit and consulting) from 1989 to
HSBC Continental Europe. 1994. She joined the Fives Group in 1995 as a Group Financial
Directorships outside of the HSBC Group: Chairman: Controller. From 1996 to 1997, Chief Financial and Administrative
Moncey Arbitrage et Conseil. Director: NaturaBuy. Officer of the subsidiary Five Solios. From 1998 to July 2017, Chief
2018 Directorships in the HSBC Group: Independent Director: Financial Officer of Fives and Member of the Management Board
HSBC Continental Europe. from 2002 to January 2017.
Directorships outside of the HSBC Group: Chairman:
Moncey Arbitrage et Conseil. Director: NaturaBuy.
2017 – Directorships outside of the HSBC Group: Director:
2016 – SoLocal Group, Imerys, Kaufman & Broad SA.
Arnaud Poupart-Lafarge Independent Director: HSBC Continental Europe.
Director: SoLocal Group, Imerys, Kaufman & Broad SA.
Member of the Nomination Committee and of the Remuneration 2017 Directorship in the HSBC Group:
Committee Independent Director: HSBC Continental Europe.
First elected: 2016. Last re-elected: 2019. Term ends: 2022 Directorships outside of the HSBC Group:
Member of the Management Board: Fives. Member of the
Principal position: Chief Executive Officer, Galliance (since Management Board and Chief Executive Officer:
October 2020). Novafives. Director: Fives DMS, Fives Pillard, FL Metal,
Other directorship: Chairman, Racilia. Fives Landis Limited, Fives UK Holding Limited.
Number of positions held within the meaning of L. 511-52 of the 2016 Directorship in the HSBC Group:
French Monetary and Financial Code: one directorship as Independent Director: HSBC Continental Europe.
executive and one directorship as member of a Board of Directors Directorships outside of the HSBC Group:
or a Supervisory Board. Member of the Management Board: Fives. Member of the
Management Board and Chief Executive Officer:
Skills and experience: Born in 1965. Engineer graduate from Novafives. Director: Fives DMS, Fives Pillard, FL Metal,
Ecole Polytechnique and Ecole Nationale des Ponts et Chaussées. Fives Landis Limited, Fives UK Holding Limited.
Master of Science in Engineering Management from the University
of Stanford. Within the ArcelorMittal group, he managed various
operations in Europe, Africa and CIS; he was a member of
ArcelorMittal Management Council until 2013. Chief Executive
Officer of Nexans from 2014 to 2018, after joining the company in
2013 as Chief Operating Officer. He is Chairman of Racilia since
July 2019 and was appointed Chief Executive Officer of Galliance
in October 2020.

Chairman: Racilia.
9
Listed Company

Carola von Schmettow Brigitte Taittinger
Director Independent Director
10
First elected: 2015. Last re-elected: 2018. Term ends: 2021 First elected: 2008. Last re-elected: 2019. Term ends: 2022
Principal position: Chairman of the Management Board, Other directorships: Member of the Board of Directors, Centre
11 Georges Pompidou. Director, Fnac Darty11. Director, Suez11.
HSBC Trinkaus & Burkhardt AG .
Other directorships outside of the HSBC Group: Chairman of
French Monetary and Financial Code: three directorships as
the Exchange Council, EUREX. Member of the Exchange Council,
member of a Board of Directors or a Supervisory Board.
Frankfurt Stock Exchange. Member of the Presidency, Association
of German Banks (since April 2020). Directorship expired in 2020: Skills and Experience: Born in 1959. Graduated from the Institut
Member of the Supervisory Board, ThyssenKrupp AG11. d'Etudes Politiques de Paris and degree in History. Advertising
Manager for Publicis from 1984 to 1988. Marketing Department of
Groupe du Louvre from 1988 to 1991. Chairman and CEO of
Annick Goutal from 1991 to 2012. From 2013 to 2017, Director of
executive.
Strategy and Development at Sciences Po, Paris.
Skills and Experience: Born in 1964. German nationality. Master
in Mathematics from the University Heinrich-Heine of Düsseldorf 2019 Directorship in the HSBC Group:
and Master in Music from the University Robert Schumann of Independent Director: HSBC Continental Europe.
Düsseldorf. Joined HSBC Trinkaus & Burkhardt AG in 1992 as Directorships outside of the HSBC Group:
Associate Trading. From 1995 to 1997, Head of Treasury then Member of the Board of Directors: Centre Georges
Head of Global Markets Coordination until 1999. From 1999 to Pompidou. Director: Fnac Darty, Suez.
2003, Chief Executive Officer of HSBC Trinkaus Capital 2018 Directorship in the HSBC Group:
Management GmbH (today, HSBC Global Asset Management Independent Director: HSBC Continental Europe.
Deutschland GmbH). She was also Member of the Executive Directorships outside of the HSBC Group:
Committee of HSBC Trinkaus & Burkhardt AG from 2001 to 2004, Member of the Board of Directors: Centre Georges
firstly as Responsible for Private Banking and Asset Management Pompidou. Director: Fnac Darty, Suez.
then as Responsible for Institutional Clients and Asset
Management. From 2004 to 2006, Managing Partner with
unlimited liability of HSBC Trinkaus & Burkhardt KGaA, company
for which she was Responsible for Institutional Clients and Asset
Member of the Board of Directors: Centre Georges
Management. Since 2006, a member of the Management Board of
Pompidou. Director: Fnac Darty.
HSBC Trinkaus & Burkhardt AG and Responsible for Global
Markets, Global Research and support functions. In 2015, she was 2016 Directorship in the HSBC Group:
appointed Chairman of the Management Board of HSBC Trinkaus Independent Director: HSBC Continental Europe.
& Burkhardt AG. Directorships outside of the HSBC Group:
Member of the Board of Directors: Centre Georges
2019 Directorships in the HSBC Group: Pompidou. Director: Groupe Fnac.
Director: HSBC Continental Europe. Chairman of the
Management Board: HSBC Trinkaus & Burkhardt AG.
Directorships outside of the HSBC Group: Lucie Thalamas Dit Barathe
Chairman of the Exchange Council: EUREX. Member of Director elected by employees
the Exchange Council: Frankfurt Stock Exchange. Member
of the Supervisory Board: ThyssenKrupp AG, BVV. First elected: 2019. Term ends: 2022
2018 Directorships in the HSBC Group: Principal position: Sales Assistant, North Business Banking
Director: HSBC Continental Europe. Chairman of the Centre, Commercial Banking, HSBC Continental Europe.
Management Board: HSBC Trinkaus & Burkhardt AG. Number of positions held within the meaning of L. 511-52 of the
Directorships outside of the HSBC Group: French Monetary and Financial Code: one directorship as member
Member of the Advisory Board: L-Bank. Chairman of the of a Board of Directors or a Supervisory Board.
Exchange Council: EUREX. Member of the Exchange
Council: Frankfurt Stock Exchange. Member of the Skills and experience: Born in 1966. Graduated of a BTS in
Supervisory Board: ThyssenKrupp AG, BVV. Executive Secretary. Since she joined HSBC in 1987, she held
positions as Branch Supervisor and Sales Assistant as well as
2017 Directorships in the HSBC Group: Back-Office Manager in the Commitments department within the
Director: HSBC Continental Europe. Chairman of the Retail Banking and Commercial Banking networks.
Directorships outside of the HSBC Group: 2019 Directorship in the HSBC Group:
Member of the Advisory Board: L-Bank. Chairman of the Director elected by employees: HSBC Continental Europe.
Exchange Council: EUREX. Member of the Exchange 2018 –
Council: Frankfurt Stock Exchange. Member of the 2017 –
Supervisory Board: ThyssenKrupp AG, BVV. 2016 –
Director: HSBC Continental Europe. Chairman of the Board diversity
Directorships outside of the HSBC Group: The diversity policy of the management body, updated by the
Member of the Advisory Board: L-Bank. Chairman of the Board at its meeting on 6 February 2020, aims to include a
Exchange Council: EUREX. Member of the Exchange balance and a complementarity of age, gender, geographic
Council: Frankfurt Stock Exchange. Member of the provenance, professional and educational, independence, seniority
Supervisory Board: ThyssenKrupp AG, BVV. in the mandate and representation of employees.
10
Director standing for re-election at the Annual General Meeting to be held on 11 March 2021
11
Listed Company

The profiles of the Directors are diverse and complementary and the role of directors, as well as the latest Registration Document
cover the spectrum of business lines and risks associated with the and minutes of Board meetings for the past 12 months. In
activities of HSBC Continental Europe. According to the Articles of addition, the Company Secretary organises, to the new Director’s
Association, the Board of Directors has four members elected by intent and depending on his/her needs and priorities, a programme
the employees. of training sessions with HSBC Continental Europe’s main
executives in the business lines and functions. It is also offered to
The Board includes four different nationalities and nearly two-
Directors in office to attend these sessions.
thirds of Directors have international experience. On 31 December
2020, the average age of the Directors in office is 60.6 and their In 2020, training sessions on the role and functioning of the
average seniority in the function is nearly seven years. Regulatory Affairs Department and Internal Audit were facilitated
by their respective Heads. In addition, Directors were invited to
Excluding Directors elected by employees, the Board comprises
attend to webinars organised by HSBC for the European week of
five women and seven men, i.e. 42 per cent of women and
sustainability and for the cyber awareness month. Furthermore,
58 per cent of men.
Directors took training in the form of e-learning on risk
Independent Directors management at HSBC, heath, safety and wellbeing, data privacy
and cybersecurity, financial crime risk, conduct and harassment at
With respect to the criteria on independence defined in the
work.
guidelines on the assessment of the suitability of members of the
management body issued by the European Banking Authority Meetings of the Board of Directors and of the Board’s Committees
(‘EBA’) and the European Securities and Markets Authority are also used as an opportunity to provide Directors with
(‘ESMA’) and by the HSBC Group, the Board of Directors information that is essential for them to carry out their duties, and
determines, on appointment and annually thereafter, whether each to update their knowledge.
non-executive Director may be considered as independent. To do Furthermore, a forum was organised for Audit and Risk
this, it examines whether there are relationships or circumstances Committees Chairs of the principal European entities of the HSBC
which are likely to affect, or could appear to affect, the Director’s Group.
judgement.
The Board should record its reasons if it determines that a Director
Directors’ remuneration
is independent notwithstanding the existence of relationships or The maximum total remuneration payable each year to Directors
circumstances which may appear relevant to its determination. was fixed at EUR 700,000, as decided by the Annual General
Meeting of 15 May 2017.
Based on the Nomination Committee’s report, the Board of
Directors reviewed the situation of each of its members as at This remuneration is allocated according to the following rules,
31 December 2020 in the light of these criteria. It considered that decided by the Board of Directors at its meeting on 6 February
eight Directors can be deemed independent. Nonetheless, two 2016 then modified on 8 February 2019:
Directors have served on the Board for more than 12 years. • each Director is allocated an annual flat fee of EUR 35,000, paid
Nevertheless, the Board of Directors found that this criterion alone at the conclusion of the Annual General Meeting;
did not call into question their independence vis-à-vis the
company. • the additional annual flat fee paid to Board Committees
members amounts to:
53.3 per cent of the Directors are independent; a higher proportion
than a third (excluding the Chairman of the Board), as – EUR 25,000 for the Chairmen of the Audit Committee and of
recommended by the Code. the Risk Committee;
Board evaluation – EUR 15,000 for the members of the Audit Committee and of
the Risk Committee;
Pursuant to the Code’s recommendations, a Board assessment
was conducted internally in July 2020, under the responsibility of – EUR 7,000 for the Chairmen of the Nomination Committee
the Nomination Committee and on the basis of a questionnaire and of the Remuneration Committee;
covering the following themes and covering the Board and the – EUR 6,000 for the members of the Nomination Committee
Board Committees: Strategy; risk and financial performance; and of the Remuneration Committee.
composition and structure; Executive oversight, talent and
Furthermore, within the HSBC Group, it is customary for Directors
succession; corporate culture and conduct; meeting process and
performing other executive duties in the Group and Executive
role of the Chair; role of the Company Secretary; self-assessment,
Directors to renounce their remuneration in respect of their
training and succession of Directors; behaviours; culture and
directorships held in HSBC Group companies. This
efficiency. Results of this evaluation and the update on main
recommendation has been implemented by the Directors and
actions implemented further to the evaluation conducted the year
Executive Directors of HSBC Continental Europe and its
before were discussed by the Nomination Committee and then by
subsidiaries.
the Board of Directors at its meeting of 24 July 2020.
In 2020, in respect of 2019, Jean Beunardeau, James Emmett,
The overall opinion regarding the Board and its Committees as
Laurence Rogier, Carola von Schmettow and Andrew Wild
well as their operations remains broadly positive. Proposals were
renounced the payment of their remuneration in respect of their
discussed by the Nomination Committee and the Board, which
directorship in HSBC Continental Europe. It has to be noted that,
decided to implement certain changes, including the lengthening
according to this rule, Samir Assaf, Chairman of the Board of
of the quarterly Board meetings.
HSBC Continental Europe, does not receive any remuneration from
Directors’ training and information HSBC Continental Europe for his office.
As required by the Board’s internal rules, Directors receive the
information they need to fulfil their duties and may ask to receive
any documents they deem useful. In particular, the Board and the
Board Committees may ask for a presentation on a particular
subject or issue at a future meeting.
Upon recommendation of the Nomination Committee, the Board
updated the policy on training of the management body's
members.
According to this policy, new Directors, when taking up duty,
receive an information pack on HSBC Continental Europe,
including, among others, legal information about the company and

Moreover, in order to comply with the rules applied by the HSBC income tax prepayment and withholding tax to be paid in 2021 in
Group, the Directors’ attendance record is not taken into account respect of 2020 amounts to EUR 0.44 million, to be compared to
in calculating Directors’ remuneration. EUR 0.47 million paid in 2020 in respect of 2019.
The total Directors’ remuneration net of social contributions,
Remunerations paid to Non-Executive Directors by HSBC Continental Europe, the companies it controls and the companies which
control it (the HSBC Group)
Remuneration in Remuneration in
respect of the respect of the
directorship directorship Other
paid in 2019 paid in 2020 in Other compensation compensation
in respect of 2018 respect of 2019 paid in 20191 paid in 20201
Directors performing their principal position in another entity of the
HSBC Group
James Emmett2,3,4 — — GBP 1,839,695 GBP 276,890
Nuno Matos3,5 — — — GBP 1,236,953
Carola von Schmettow6 — — — —
Directors elected by the employees
Ibtissam Bara7, 8 EUR 28,980 EUR 21,735 — —
Ludovic Bénard7,8 EUR 33,948 EUR 25,461 — —
Xavier Bertrand7,8 EUR 28,980 EUR 21,735 — —
Christine D'Amore8, 9 — EUR 7,245 — —
Laurent Lagueny8, 9 — EUR 7,245 — —
Philippe Purdy8,10 EUR 28,980 EUR 28,980 — —
Lucie Thalamas Dit Barathe8, 9 — EUR 7,245 — —
Directors not performing executive duties within the HSBC Group11
Paule Cellard EUR 45,500 EUR 41,125 — —
Lindsay Gordon EUR 63,200 EUR 65,400 — —
Philippe Houzé EUR 34,300 EUR 34,300 — —
Anne Méaux12 EUR 24,500 EUR 2,042 — —
Thierry Moulonguet EUR 50,750 EUR 52,500 — —
Dominique Perrier13 EUR 20,417 EUR 28,875 — —
Arnaud Poupart-Lafarge EUR 24,500 EUR 28,875 — —
Lucile Ribot EUR 45,500 EUR 41,125 — —
Brigitte Taittinger EUR 24,500 EUR 24,500 — —
Jacques Veyrat14 EUR 32,900 EUR 32,900 — —
1 Fixed and other fixed remuneration, variable remuneration and benefits in kind.
2 Co-optation on 26 October 2018.
3 Compensation shown are paid by other HSBC Group companies in respect of his/her executive functions within the Group.
4 Resignation from his directorship on 16 March 2020.
5 Co-optation on 30 April 2020.
6 Does not receive remuneration from controlled companies by HSBC Continental Europe nor from companies which control HSBC Continental
Europe.
7 End of Directorship on 26 September 2019.
8 Renounced remuneration to the benefit of a trade union organisation, net of social contributions.
9 Election by employees on 26 September 2019.
10 Died on 9 September 2020.
11 Amounts paid net of social contributions, income tax prepayment, and, where applicable, withholding tax.
12 Resignation from her directorship on 23 January 2019.
13 Co-optation on 20 February 2018.
14 Resignation from his directorship on 6 February 2020.

Duties and procedures of the Board of Directors Impacts of the Covid-19 pandemic on the Board's work
The Board internal rules govern Board’s functioning and include In 2020, the Board stepped up its work and concentrated on the
the main duties under Board’s responsibility. The Board's close monitoring of the evolution of the impacts and risks
functioning takes into account HSBC Continental Europe’s associated to the Covid-19 pandemic in particular in terms of
position, 99.9 per cent held by the HSBC Group: operational resilience, capital and liquidity, credit, market, fraud
and people risks. In total, it met ten times during the year, by
• it constructively challenges the strategy and determines
teleconference from March 2020, which did not have a negative
strategic orientations, on the basis of the strategy formulated
impact on its ability to carry out its work and to discharge its usual
by General Management and oversees and monitors their
responsibilities. Between these Board meetings, the Chief
implementation. It approves strategic investments/divestments
Executive Officer very regularly kept the Directors informed of
and all transactions liable to impact earnings significantly;
developments in the situation.
• it oversees and monitors management decision-making and
Businesses and strategy
actions and provides effective oversight of the effective
managers and constructively challenges and critically reviews At each meeting, the Board was informed of developments in
proposals and information provided by the effective managers, business activity, the group’s position, the important stakes for
as well as their decisions; each of its businesses, and transformation projects.
• it oversees and monitors that HSBC Continental Europe’s In the meeting held on 6 July 2020, the Board of Directors
strategic objectives, organisational structure and risk strategy, approved the company’s strategic directions. It took note of the
including its risk appetite and risk management framework, as opinions issued by the Social and Economic Council on the
well as other policies (e.g. remuneration policy) and the company’s economic and financial situation and on strategic
disclosure framework are implemented consistently. directions respectively at its meeting on 24 July and 23 October
2020.
• it monitors and supervises major risks and reviews regular risk
management reports, setting out the risks involved in the HSBC As part of the implementation of the strategy, the Board reviewed
Continental Europe’s business and results; and approved the repositioning projects of Global Banking and
Markets and Commercial Banking and of certain central functions
• it monitors that the risk culture is implemented consistently;
and the associated departure plans respectively at its meetings on
• it sets HSBC Continental Europe’s values and principles and 6 July and 4 December 2020. The transformation project for the
oversees the implementation and maintenance of a code of HSBC Continental Europe branches was presented to the Board at
conduct or similar and effective policies to identify, manage its meeting on 23 October 2020.
and mitigate actual and potential conflicts of interest;
The Board was kept regularly informed of the progress of the
• it oversees the integrity of financial information and reporting, strategic review of the retail banking activities.
and the internal control framework, including an effective and
After having approved the principle respectively at its meetings on
sound risk management framework;
16 October 2019 and 29 May 2020, the Board, at its meeting on
• it ensures that the heads of internal control functions, namely 23 October 2020, formally approved the change of the head office
the Chief Risk Officer, the Head of Regulatory Compliance, the and of the corporate name of the company from 1 December
Head of Financial Crime Compliance and the Head of Internal 2020. The change of corporate name was also approved by the
Audit, are able to act independently and, regardless the shareholders' general meeting held on 12 November 2020.
responsibility to report to other internal bodies, business lines
In 2020, The Board of Directors also continued its work on the
or units, can raise concerns and warn the Board where
impacts ot the United Kingdom's exit from the European Union,
necessary when adverse risk developments affect or may affect
which focused in particular on the booking models and the update
the institution;
of the outsourcing policy.
• it deliberates on all questions pertaining to its legal and
The Board regularly benefited from the comments and insight of
regulatory obligations and those stemming from its articles of
the Chairman of the Board, who is also Chairman of Corporate and
association;
Investment Banking of the HSBC Group, and Nuno Matos, who is
• it cares about HSBC Group's reputation in France. also Chief Executive Officer of the Europe region for the HSBC
In the week prior to the meeting, the Directors receive the meeting Group, on the HSBC Group’s development, results, strategy, latest
file, including the agenda, the draft minutes of the previous Board news, as well as trends in the world economic and regulatory
meeting and supporting papers to the agenda items to be environment. The Independent Directors, for their part, shared
discussed at the meeting. In the case of highly confidential with the Board their view of the economic situation and economic
matters, which cannot be disclosed in advance, the information is conditions in their business sector.
provided during the meeting itself. Furthermore, Directors are Finance
regularly advised of significant events affecting the company and
In 2020, the Board of Directors reviewed the quarterly, half-yearly
receive the relevant documents.
and annual financial statements and signed off the half-yearly and
Board of Directors’ work annual financial statements. At each of its meetings, the Board
reviewed HSBC Continental Europe’s revenue, costs, results and
The Board of Directors met ten times during 2020. The average
balance sheet. For each period reviewed, the Board heard the
attendance rate was 88 per cent, compared to 80 per cent in 2019:
conclusions of the Statutory Auditors, who were invited to attend
• 6 February 2020 (attendance rate: 94 per cent); all Board meetings.
• 18 February 2020 (attendance rate: 76 per cent);
• 30 March 2020 (attendance rate: 88 per cent);
• 30 April 2020 (attendance rate: 100 per cent);
• 29 May 2020 (attendance rate: 100 per cent);
• 6 July 2020 (attendance rate: 76 per cent);
• 23 October 2020 (attendance rate: 100 per cent);
• 4 December 2020 (attendance rate: 81 per cent).

At its meeting on 6 February 2020, the Board reviewed and At each Board meeting, a report was given on the action points
approved the budget, the capital and liquidity plans and the risk requested by the Board at previous meetings, with specific
appetite for 2020. At its meeting on 23 October 2020, it reviewed presentations where necessary.
an initial version of the risk appetite for 2021. In 2020, the Board updated the policies on corporate governance
The Board of Directors was informed of developments in under its responsibility, including the Board internal rules, the
regulatory capital and regulatory ratios, in particular capital, internal governance policy, the policy on individual and collective
liquidity, solvency and leverage ratios. At each of its regular assessment of the management body, the nomination procedure
meetings, the Board received information on the funding plan, of the management body, and the diversity policy of the
funding position and trends in medium- and long-term debt. management body. Apart from these issues, the Board also
discussed, on the basis of the works conducted by the Nomination
The Board also reviewed and approved the dividend policy and the
and Remuneration Committees, various other issues which are its
Internal Capital Adequacy Assessment Process (‘ICAAP’) and the
responsibility in accordance with the law and regulations in force,
Internal Liquidity Adequacy Assessment Process (‘ILAAP’) reports
in particular as regards compensation, suitability assessment of
(meeting on 30 April 2020) as well as the emergency liquidity plan
the management body, composition of the Board, of the General
(meeting on 23 October 2020).
Management and of the specialised Board committees,
Risk management assessment of Board practices and procedures, conflict of interest
At each meeting, the Board reviewed the Group’s risk position, prevention, and authorisation of non-audit services provided by
and in particular financial risks such as stress test, credit, market, the Statutory Auditors. In this respect, it approved the Board of
model, capital, liquidity and interest rate risk, as well as non- Directors’ reports to the General Meeting and on corporate
financial risk, including resilience, security and fraud, information governance for 2019 (meeting on 18 February 2020), the Board’s
systems, litigation, fiscal and people risks. In addition, it reviewed interim report at 30 June 2020 (meeting on 31 July 2020) as well
the updates to the risk management framework and decided to as releases in respect of annual and interim results during the
adjust certain risk appetite thresholds during the year. The same meetings. Likewise, the Board authorised a new related-
Directors have also access to the Risk Committee’s supporting party agreement (meetings on 23 October 2020) and reviewed
documentation. related-party agreements entered into and authorised by the Board
in prior years which remained valid in the current year in
Furthermore the Board was informed at each meeting of progress accordance with the provisions of article L. 225-40-1 of the French
made in the Financial Crime Compliance area. At the meeting on Commercial Code (meeting on 23 October 2020).
23 October 2020, the Head of Financial Crime Compliance
presented his annual report to the Board. Board Committees
As regards Regulatory Compliance, the Head of Regulatory
Compliance presented his annual report to the Board at the The Board is assisted by four specialised Committees: Audit
meeting held on 30 April 2020. Following the combination of the Committee, Risk Committee, Nomination Committee and
Financial Crime Compliance and Regulatory Compliance Remuneration Committee, the duties are defined in the Board’s
Departments, the Board approved the appointment of a new Head internal rules.
of Compliance (meeting on 23 October 2020). The Board also Audit Committee
reviewed the Ombudsman’s report on his activity in 2019 (meeting
on 23 October 2020). Composition of the Audit Committee
The Board reviewed and approved where necessary the annual Chairman
reports on internal control and on the organisation of the financial Thierry Moulonguet (independent) Appointed in 2010
crime internal control system (meeting on 30 April 2020), sent to (Member from 2009 to 2010)
the Autorité de contrôle prudentiel et de résolution. Members
Lindsay Gordon (independent) Appointed in 2013
The Chairman of the Audit Committee and the Chief Risk Officer
Dominique Perrier (independent) Appointed in 2019
regularly commented on the Internal Audit work, in particular audit
Lucile Ribot (independent) Appointed in 2017
reports adverse graded and changes in the number of open
recommendations. The Head of Internal Audit presented his
The Audit Committee members are highly qualified in banking,
annual report to the Board at its meeting on 18 February 2020.
financial, accounting and control areas, as they serve or have in
Regulatory environment and supervision the past served in the capacity of Chairman and Chief Executive
The Board was regularly informed of engagements with the Officer of a bank, Audit Committee member, including of banks,
various supervisors and of their duties and investigations, in Chief Financial Officer, or Statutory Auditor.
particular the European Central Bank, the Autorité de contrôle Cross-membership of the Audit and Risk Committees Chairs
prudentiel et de résolution and the Autorité des marchés financiers, allows to ensure an appropriate interaction between both
as well as their findings, follow-up letters received and HSBC committees.
Continental Europe's responses.
On 6 February 2020, the Joint Supervisory Team of the European
Central Bank and the Autorité de contrôle prudentiel et de
résolution presented to the Board the results of its work carried
out in 2019 and its priorities, its expectations and its supervisory
programme for 2020 then attended the Board meeting as
observers.
Governance
The work of the Board Committees was set out in regular, detailed
reports from their respective Chairmen and was debated during
Board meetings. In this regard, the Board was kept informed at
each meeting about the main topics discussed and points of
action identified by the Audit Committee and by the Risk
Committee, particularly with regards to supervision, accounting
projects and matters, risks, control and risk management system,
internal audit, compliance and permanent control.

Audit Committee’s duties letter and the aspects subject to particular attention at the time of
preparing the 2019 financial statements. The Committee discussed
The Audit Committee is accountable to the Board and has non-
the Statutory Auditors’ audit programme and independence,
executive responsibility for oversight of and advice to the Board on
approved the fees paid in 2019 by the HSBC Continental Europe
matters relating to the budget, financial reporting, internal control
group to the Statutory Auditors. The Committee reviewed and
of financial information, capital and liquidity ratios to support the
authorised as necessary the non-audit services rendered by the
Risk Committee, the dividend policy and capital allocation,
statutory auditors.
management of the Finance function and Internal Audit.
Statutory Auditors presented their diligences on the financial
The Committee in particular reviews:
statements at 31 March 2020, 30 June 2020 and 30 September
• the integrity of the financial statements, Pillar 3 disclosures, 2020 (meetings on 27 April, 17 July and 20 October 2020), as well
formal announcements and disclosures relating to financial as their annual audit plan (meeting on 17 July 2020).
performance;
The Committee was also informed of the results of controls
• the effectiveness of Internal Audit and the external audit conducted on financial statements, in particular regarding the
process; deficiencies identified by these controls and progress in action
• the effectiveness of internal financial control systems. plans. Within this framework, it reviewed the work carried out as
part of the application of Sarbanes-Oxley and reviewed the points
The Committee meets the Statutory Auditors and the Head of raised in the account controls certificates and by accounting
Internal Audit in private at least once per year to ensure that there assurance reviews, as well as implementation of the
are no unresolved issues or concerns. In carrying out these duties recommendations raised in the Statutory Auditors’ management
and responsibilities, the Committee may consult any adviser or letters.
expert as it deems appropriate.
In terms of data management, the Committee was kept regularly
To give itself sufficient time to review the accounts before they are informed of the progress of the development of the framework
reviewed by the Board, the Audit Committee meets a few days and action plans, in particular, in relation with BCBS 239
before the Board insofar as possible. application and reviewed the proposals relating to the introduction
Lastly, at the request of the HSBC Bank plc’s Audit Committee, the of indicators in the risk appetite monitoring dashboard.
HSBC Continental Europe’s Audit Committee Chairman provides a At its meeting on 20 October 2020, the Committee examined the
half-yearly certificate to the Audit Committee Chairman of HSBC list of the related-party agreements authorised previously by the
Bank plc, HSBC Continental Europe’s direct shareholder, Board and still in force and made recommendations to the Board
confirming, in particular, that the accounts were reviewed by the regarding the list update.
Committee and that the internal control system of financial At its meeting on 17 July 2020, the Committee was given a
reporting appears to be appropriate. presentation on the framework in place regarding whistleblowing
Audit Committee’s work in 2020 and its results.
The Audit Committee met four times in 2020, with an attendance The third aspect of the Committee work concerned the detailed
rate of 100 per cent, as in 2019: review, at each meeting, of Internal Audit work. It reviewed the
findings of the main audit duties, particularly those calling
• 4 February 2020; particular attention. The Committee remained extremely attentive
• 27 April 2020; to the proper implementation of the audit recommendations. It has
also approved the update of the audit charter and the 2020 annual
• 17 July 2020;
audit plan (meeting on 4 February 2020) and regularly discussed
• 20 October 2020. on Human Resources of Internal Audit.
Each meeting was also attended by the Statutory Auditors, the The Committee carried out the annual review of its terms of
Chief Financial Officer, the Chief Accounting Officer, the Head of reference (meeting on 4 February 2020).
Audit and the Chief Risk Officer. The Chief Executive Officer and
The Chairman of the Audit Committee reported on the key points
one of the two Deputy Chief Executive Officers also attended
discussed during Audit Committee meetings at the Board
Committee meetings to answer any questions. HSBC Continental
meetings held on 6 February, 30 April, 24 July and 23 October
Europe executives also attend Committee meetings covering any
2020.
subjects falling under their responsibility. The Committee
Chairman also met with the Statutory Auditors in private sessions Risk Committee
during the year.
Composition of the Risk Committee
The first aspect of the Committee’s work involved an in-depth
review of the annual, half-yearly and quarterly financial statements Chairman
prior to their presentation to the Board. The Audit Committee Lindsay Gordon (independent) Appointed in 2015
reviewed the parent-company and consolidated accounts. The (Member from 2013 to 2015)
Committee was informed by the Finance Department of the main Members
accounting and tax points of attention and discussed the choices Paule Cellard (independent) Appointed in 2017
made by the company in drawing up its financial statements and Thierry Moulonguet (independent) Appointed in 2009
verified the adequacy of provisions for identified risks. The (Chairman from 2010 to 2015)
Committee's work concentrated, in particular, on the impacts of Arnaud Poupart-Lafarge (independent) Appointed in 2019 – Resignation in
the Covid-19 pandemic on the accounting valuation of assets. October 2020
The Committee examined the budget for 2020 financial year The Committee members are highly qualified in the banking,
(meeting on 4 February 2020) and then the update of performance financial, risk and internal control areas, as they serve or have in
forecast at year-end. Once throughout the year, it paid careful the past served in the capacity of Chairman or Chief Executive
attention to monitoring the cost base and on recharges processes Officer of a bank, with operational responsibilities within a Global
in place in the HSBC Group. Banking activities or as Head of internal audit and compliance of a
At each meeting, the Committee was informed of the situation in bank, Risk Committee member, Chief Operating Officer or Chief
terms of solvability and capital of HSBC Assurances Vie (France) Financial Officer.
and of the changes in the models used to compute the Present
Value of In-Force (‘PVIF’) as well as their impact on the P&L.
The second area of the Committee’s work concerned controls. To
this end, the Statutory Auditors commented on their management

Cross-membership of the Audit and Risk Committees Chairs draft regarding risk appetite for the year 2021. In addition to a
allows to ensure an appropriate interaction between both summary on risks given by the Chief Risk Officer it reviewed at
committees. each of its meetings HSBC Continental Europe’s risk map, top and
emerging risks facing it, as well as their assessment and the action
Risk Committee’s duties
plans which had been identified. The Committee was informed of
The Risk Committee is accountable to the Board and has non- the changes to the risk management framework.
executive responsibility for oversight of and advice to the Board on
The Risk Committee also continued to carry out the usual review
risk related matters and the enterprise risks impacting HSBC
of financial risks, the presentation of which highlighted the
Continental Europe and its subsidiaries, including risk governance
impacts related to Covid-19 pandemic, each of the individuals in
and internal control systems (other than internal controls over
charge of controlling such risks spoke, in particular concerning:
financial reporting).
• Credit risks, with an individual review of major exposures,
The Committee collaborates with other Board committees whose
changes in outstanding credit and non-performing advances by
activities may have an impact on the risk strategy (in particular,
businesses, changes in risk-weighted assets and the evolution
audit and remuneration committees) and regularly communicate
of the cost of risk, and worrying exposures and sectors. The
with the HSBC Continental Europe’s internal control functions, in
Committee was informed of the communications with the
particular the risk management function.
supervisory authorities on credit;
The Committee meets the Statutory Auditors and the Head of
• Market risks, including their trends compared with limits,
Internal Audit in private at least once per year to ensure that there
changes in exposure, the setting of limits, changes in market
are no unresolved issues or concerns. In carrying out these duties
activities’ risk-weighted assets and the results of internal stress
and responsibilities, the Committee may consult any adviser or
tests;
expert as it deems appropriate.
• Risk models, in particular with the monitoring of progress made
At the request of the HSBC Bank plc’s Risk Committee,
in the programme in this area and of reviews and on-site
the HSBC Continental Europe’s Risk Committee Chairman
inspections on models performed by supervisory authorities as
provides a half-yearly certificate to the Risk Committee Chairman
well as their impact on risk-weighted assets and the content
of HSBC Bank plc, confirming, in particular, that the Committee
and implementation of the recommendations issued by the
examined the reports on risks and that no subject was brought to
various internal and external controlling bodies;
its attention other than those described in the supports.
• Liquidity, capital and interest rate in the banking book risks. In
Risk Committee’s work in 2020
particular, the Committee approved the Internal Capital
The Risk Committee met five times in 2020, with an attendance Adequacy Assessment Process (‘ICAAP’) and Internal Liquidity
rate of 90 per cent, compared with 100 per cent in 2019: Adequacy Assessment Process (‘ILAAP’) reports (meeting on
• 4 February 2020; 28 April 2020), after a session dedicated to the examination of
these draft reports (meeting on 15 April 2020), as well as the
• 15 April 2020; capital and liquidity plans (meeting on 4 February 2020) and
• 28 April 2020; their execution afterwards;
• 16 July 2020; • Stress testing, in particular the work carried out as part of the
internal stress testing programme and HSBC Continental
• 21 October 2020. Europe’s contribution to the HSBC Group stress tests
Each meeting was also attended by the Statutory Auditors, the performed by the Prudential Regulation Authority (‘PRA’), as
Chief Risk Officer, the Chief Financial Officer, the Chief Accounting well as the results of these tests.
Officer and the Head of Internal Audit. The Chief Executive Officer Likewise, at each meeting, the Risk Committee continued to carry
and one of the two Deputy Chief Executive Officers attended out a review of non-financial risks, each of the individuals in
Committee meetings to answer any questions. HSBC Continental charge of controlling such risks spoke, in particular concerning:
Europe executives also attend Committee meetings for subjects
falling under their responsibility. • Operational losses and progress and action plans relating to the
non-financial risks management framework;
At the end of its quarterly meetings and with the attendance of the
Audit Committee members, the Risk Committee held regularly in • Legal risks, included emerging risks, and legal disputes;
camera sessions without HSBC Continental Europe management • Security and fraud risk, including information security and
attending or with the Chief Risk Officer only. business continuity;
In 2020, the Committee concentrated its work on the impacts of • Information systems, including the main incidents and risks and
the Covid-19 pandemic on HSBC Continental Europe risks, in progress in the key projects.
particular in terms of credit, market, capital and liquidity,
operational resilience and business continuity, and on results of In relation to permanent control, compliance and relations with
the stress tests carried out using various economic recovery regulators, the Committee was informed, at each of its meetings,
scenarios. of the progress made as regards internal control plans and the
main areas of weakness identified, as well as the action plans
The Committee also paid particular attention to monitoring HSBC drawn up to deal with them.
Continental Europe's transformation projects and the risks they
entail. The Committee was informed of the work being carried out by
Operational Risk department, notably progress in and the results
Furthermore, the Committee maintained the deep dive sessions on of the control plans. In accordance with the French Government
a particular topic of its choice depending on the course of events Order of 3 November 2014, the Committee was informed of the
or the matters of particular attention. Matters covered under this changes to the management framework for outsourced services,
format in 2020 included Conduct, risks on banking book interest in particular those deemed essential, whether these services are
rates and the cryptocurrencies. sub-contracted within HSBC Group or to external suppliers as well
Despite the particular context of the 2020 year, the Committee as the results of controls carried out on outsourced essential
continued its usual work. It thus approved HSBC Continental services.
Europe’s risk appetite in the 2020 financial year (meeting on
4 February 2020) and its subsequent updates, and then examined,
at each of its meetings, the monitoring dashboard, in particular
indicators which were not in line with the thresholds that had been
set out. It also reviewed and approved the risk tolerance
framework. At its meeting on 21 October 2020, it examined a first

In the area of financial crime compliance, the Committee Nomination Committee’s work in 2020
continued in 2020 to monitor carefully the developments in works,
The Nomination Committee met four times in 2020, with an
organisation, tools and implementation of recommendations made
attendance rate of 100 per cent as in 2019. Its main work
by the various control bodies concerning anti-money laundering,
concerned:
international sanctions and anti-bribery and corruption, as well as
staffing changes, engagement with control and supervisory • the monitoring of the individual and collective suitability of the
authorities and duties performed by these authorities on these management body pursuant to the suitability assessment policy
matters. and assessments and reassessments required by the criteria
defined in this policy;
In the area of regulatory compliance, the Committee took note of
the quarterly reports, which set out the main new matters and • reflections, and recommendations to the Board, on the
updates on those already detailed in the course of previous membership of the management body in its supervisory
meetings. It also examined the progress made in action plans function – including that of the Board Committees – and
implemented under the HSBC Group’s Conduct programme as management function, based on the suitability assessment and
well as the Ombudsman’s annual report (meeting on 21 October diversity policies, following, in particular the resignations of
2020). James Emmett, Laurence Rogier and Jacques Veyrat, and the
death of Philippe Purdy, leading the Committee to propose to
The Committee approved the annual reports to the Autorité de
the Board the co-optation of a new Director: Nuno Matos;
contrôle prudentiel et de résolution on internal control and on the
organisation of the financial crime compliance framework • proposals to the Board on renewing Directors’ term of office at
(meeting on 28 April 2020) and took note of other reports intended the Annual General Meeting to be held in 2021 (meeting on
for the supervisory authorities. 9 December 2020);
The Committee was informed of communications with supervisory • the training plan of the management body for 2021 (meeting on
bodies and of the conclusions of various audits and reviews 9 December 2020);
carried out by supervisory and control bodies, such as the Autorité • the review of the results of the Board evaluation and proposal
des Marchés Financiers, the European Central Bank, the Autorité to the Board of actions to implement (meeting on 15 July
de Contrôle Prudentiel et de Résolution, the Prudential Regulation 2020);
Authority, or the Agence Française Anticorruption and received
reports and follow-up letters and replies to them in relation to • the review and proposal to the Board to approve the updated
these assignments, as well as action plans initiated to implement register of potential situations of conflict of interest (meeting on
their recommendations. 30 January 2020);
The Committee was informed of the works performed by HSBC • the review of the first part of the new report on corporate
Continental Europe regarding recovery and resolution and carried governance (meeting on 30 January 2020);
out as part of the HSBC Group's obligations towards the • the review and proposals to the Board for updating the Board
Prudential Regulation Authority or of its own ones towards the internal rules and the Board policies regarding assessment of
Single Resolution Committee. the suitability of the management body's members and key
Again in 2020, the Committee remained attentive to developments function holders, and diversity of the management body.
in the regulatory and supervisory environment in which HSBC The Chairman of the Nomination Committee reported to the Board
Continental Europe operates and to their impacts. on its work at the Board meetings on 6 February, 30 April and 24
In relation to other governance matters, the Committee reviewed July 2020. All of the Committee’s work was submitted to the
the remuneration policy and carried out the annual review of its Board for approval.
terms of reference (meeting on 4 February 2020). Remuneration Committee
The Chairman of the Risk Committee reported on the key points
discussed during Risk Committee meetings at the Board meetings Composition of the Remuneration Committee
held on 6 February, 30 April, 24 July and 23 October 2020. Chairman
. Philippe Houzé (independent) Appointed in 2009
Nomination Committee (Member from 1999 to 2009)
Members
Composition of the Nomination Committee Samir Assaf Appointed in 2012
Chairman Laurent Lagueny (elected by employees) Appointed in 2020
Philippe Houzé (independent) Appointed in 2009 Arnaud Poupart-Lafarge (independent) Appointed in 2020
(Member from 1999 to 2009)
Members
In accordance with the Governance Code for the companies of the
Samir Assaf Appointed in 2012
HSBC Group, at least two members of the Remuneration
Arnaud Poupart-Lafarge (independent) Appointed in 2020
Committee are independent non-executive Directors.
At its meeting on 6 February 2020 and upon recommendation
In accordance with the Governance Code for the companies of the from the Nomination Committee, the Board of Directors decided
HSBC Group, at least half of the Nomination Committee’s to appoint Laurent Lagueny and Arnaud Poupart-Lafarge as
membership are independent non-executive, non-employee members of the Remuneration Committee, replacing Ludovic
Directors. Bénard and Jacques Veyrat.
At its meeting on 6 February 2020 and upon recommendation
from the Nomination Committee, the Board of Directors decided
to appoint Arnaud Poupart-Lafarge as a member of the
Nomination Committee, replacing Jacques Veyrat.
Nomination Committee’s duties
The Nomination Committee reports to the Board and is
responsible for leading the process for Board and Board
Committees appointments and for identifying and nominating for
the approval of the Board, candidates for appointment to the
Board and its Committees.
In carrying out these duties and responsibilities, the Committee
may consult any adviser or expert as it deems appropriate.

Remuneration Committee’s duties comprises the three Effective managers, i.e. the Chief Executive
Officer, Jean Beunardeau, who is assisted by two Deputy Chief
The Remuneration Committee has non-executive responsibility for
Executive Officers:
matters related to remuneration. In exercising this responsibility, it
is responsible for: • Chris Davies, since 2019;
• supporting the Board in overseeing the implementation and • Andrew Wild, since 2015.
operation of the HSBC Continental Europe’s remuneration
Chief Executive Officer’s powers
policy (the ‘Policy’) in compliance with HSBC’s Group
remuneration policy, as approved by the Group Remuneration The CEO has the widest powers to act on the company’s behalf in
Committee and the shareholders of the HSBC Holdings plc in all circumstances within the limits of its corporate objects and
general meetings; subject to those powers expressly conferred by law on the
collective body of shareholders and the Board of Directors. At
• ensuring the Policy complies with all relevant local regulations;
present, there are no specific restrictions on the Chief Executive
• ensuring the Policy is appropriate to attract, retain and motivate Officer’s powers set by the Board or by the Articles of Association,
directors and senior management of the quality required to run but decisions involving the strategic orientation of company
HSBC Continental Europe successfully. activities and investments/divestments are submitted to the Board
The Committee collaborates with other Board committees whose of Directors for approval according to the Board Internal rules.
activities may have an impact on the design and proper Furthermore, the Board of Directors has delegated powers to issue
functioning of remuneration policies and practices (in particular, bonds to Jean Beunardeau (Chief Executive Officer), Chris Davies
risk committee). and Andrew Wild (Deputy Chief Executive Officers) and a certain
The Committee’s recommendations on Executive Directors’ number of Global Markets officers.
remuneration are presented to the Board after prior approval by Even if the Chief Executive Officer has the widest powers to act on
the Remuneration Committee of HSBC Holdings plc or are then the company’s behalf, he has delegated certain powers to
submitted for approval. Moreover, in carrying out these duties and employees under his immediate direct authority, who may in turn
responsibilities, the Committee may consult any adviser or expert sub-delegate some of these powers.
as it deems appropriate.
These delegated powers must be exercised within the bounds of
Remuneration Committee’s work in 2020 the person’s responsibilities and in accordance with the HSBC
The Remuneration Committee met once in 2020 (meeting on Group principles and practices. A person with delegated powers
30 January 2020), with an attendance rate of 100 per cent as in may not individually commit HSBC Continental Europe to sums
2019. Its main work concerned: above EUR 1,500,000.
• the review HSBC’s general remuneration policy in France, in There are specific delegated powers concerning credit and market
respect of 2019 year, taking into account regulations risk, for which the CEO delegates his powers.
concerning compensation, in particular risk control and the
contribution of the Risk and Compliance functions to the Presentation of the members of General
process for determining variable compensations, the review of Management
the list of employees, identified as not entirely complying with The biography of the Chief Executive Officer, Jean Beunardeau, is
the risk and compliance rules and impacts on their available on page 24.
remuneration, as well as the review of the rules and
remuneration for employees defined as risk takers; Christopher Davies
• the review of the 20 highest remunerations in respect of the Deputy Chief Executive Officer
2019 year;
Principal position: Deputy Chief Executive Officer, HSBC
• compensation proposals for the Chief Risk Officer and the Head
Continental Europe, in charge of the Network Countries perimeter
of Regulatory Compliance;
for Continental Europe. Group General Manager, HSBC Group.
• proposals to allow the Board to approve, in agreement with
Other directorships in the HSBC Group: Director, HSBC Bank
HSBC Holdings plc, the terms of the remuneration of Jean
Bermuda Limited. Director, HSBC Bank (RR) (Limited Liability
Beunardeau, Chris Davies and Andrew Wild in respect of 2019
Company). Director, HSBC Europe B.V. Director, Midcorp Limited.
and setting out the fixed and variable elements of their
Directorship expired in 2020: Director, HSBC Bank Malta p.l.c.
remuneration and the number of shares to be awarded to them
(see section ‘Executive Directors’ compensation’); Number of positions held within the meaning of L. 511-52 of the
• the Executive pension plan;
executive.
• the review of the section of the corporate governance report on
Skills and experience: Born in 1962. British nationality. Master
remuneration;
(MA) degree in French and German literature and languages from
• the review of the part relating to the Remuneration Committee the University of Oxford and graduate of the Chartered Institute of
of the report on corporate governance. Bankers. Since he joined HSBC in 1985, he has served in various
The Chairman of the Remuneration Committee reported to the senior roles across the main HSBC's major business lines,
Board on its work at the Board meeting on 6 February 2020. All of principally in the United Kingdom, the United States and China.
the Committee’s work was submitted to the Board for approval.
General Management
Since 2007, HSBC Continental Europe’s Board of Directors has
chosen to separate the functions of Chairman of the Board and
Chief Executive Officer. This choice has been maintained since
then and is furthermore in compliance with obligations for credit
institutions.
Organisation of the General Management
General Management leads the Company and acts as its
representative vis-a-vis third parties. General Management

Thus, he was Head of Commercial banking North America from

2007 to 2011 then Deputy Chief Executive Officer of HSBC Bank Executive Committee
(China) Company Limited from 2011 to 2013. from 2013 to 2020, The General Management is assisted by an Executive Committee
he has been Chief Executive Officer International Europe of HSBC whose membership was as follows as at 1 February 2021:
Bank plc. Group General Manager of the HSBC Group since 2017,
he was appointed as Deputy Chief Executive Officer of HSBC Jean Beunardeau Chief Executive Officer
Continental Europe in 2019, in charge of the Network Countries Andrew Wild Deputy Chief Executive Officer
perimeter for Continental Europe. Chris Davies Deputy Chief Executive Officer
Anne-Lise Bapst Head of Communication
2019 Directorships in the HSBC Group: Marine de Bazelaire Head of Corporate Sustainability
Deputy CEO: HSBC Continental Europe. Director: HSBC Xavier Boisseau Head of Global Banking and Markets
Bank Bermuda Limited, HSBC Bank Malta p.l.c., HSBC Myriam Couillaud Head of Human Resources
Bank (RR) (Limited Liability Company), HSBC Europe B.V, Frédéric Coutant Co-Head of Banking
Midcorp Limited. Member of the Supervisory Board: HSBC Marwan Dagher Head of Markets and Securities Services
Bank Polska S.A.
François Essertel Head of Private Banking
2018 – François Goberville Chief Operating Officer, Global Banking and
2017 – Markets
2016 – Lisa Hicks Head of Strategy and Organisation
Marc de Lapérouse Head of Legal
François Mongin Head of Internal Audit
Andrew Wild Jame Oulidi Interim Chief Operating Officer
Deputy Chief Executive Officer Matteo Pardi Head of Asset Management
Geneviève Penin Head of Corporate Governance & Secretariat
Principal position: Deputy Chief Executive Officer, Deputy to the Hubert Preschez Co-Head of Banking
CEO, HSBC Continental Europe. Head of Commercial Banking Emmanuel Rémy Chief Risk Officer
Europe, HSBC Bank plc. Simon Spilsbury Head of Compliance
Other directorships outside of the HSBC Group: Treasurer, Joseph Swithenbank Chief Financial Officer
Association Française des Banques. Chairman, Group of Banks Thomas Vandeville Head of Retail Banking and Wealth Management
under foreign control in France, Fédération Bancaire Française.
Every year, HSBC Continental Europe performs succession plans
for roles considered as key with clear rules guiding this exercise in
order to have robust succession plans, promoting gender balance
executive.
as well as internal promotion. It is required to have at least four
Skills and experience: Born in 1970. British nationality. successors per role and a female successor for each of these roles
Graduate of the Business School of the University of Nottingham. as well as a breakdown of internal recruitments vs. external
He is also qualified as a chartered accountant. He joined the HSBC recruitments of 80 to 20. The succession plans were reviewed in
Group in 2005, after having been, in particular, Senior Manager 2020 on these bases, including in respect of the members of the
Transaction Services at KPMG then, Corporate Finance Director at Executive Committee. Additional information on the diversity
KPMG Corporate Finance. In 2008, he was appointed Deputy Head policy are available in the chapter on Sustainability on page 67.
of Commercial Banking of HSBC in France. In 2011, he was
appointed Global Head of Corporate, Business Banking and Additional information
Products of Commercial Banking, HSBC Group, then he became,
in 2013, Global Head of Mid-Market and Business Banking of Agreements governed by article L. 225-38 of the
Commercial Banking, HSBC Group. French Commercial Code
He has been Deputy Chief Executive Officer, Deputy to the CEO of Article L. 225-38 of the French Commercial Code requires that any
HSBC Continental Europe since 2015 and was Head of agreement entered into directly or indirectly between a company
Commercial Banking in France from 2015 to 2018. In 2017, he was and one of its Directors or Chief Executives or Deputy Chief
appointed Head of Commercial Banking, Europe. Executives, or between a company and one of its shareholders
owning at least 10 per cent of the voting rights, or, in the case of a
corporate shareholder, the company which controls it, must first
Director and Deputy CEO: HSBC Continental Europe.
be authorised by the Board of Directors and subsequently
Directorships outside the HSBC Group:
approved at the Annual General Meeting of shareholders. It also
Treasurer: Association Française des Banques. Chairman:
prohibits certain types of agreement between those parties, such
Group of Banks under foreign control in France,
as loans or guarantees.
Fédération Bancaire Française.

During its meeting on 23 October 2020 the Board conducted its • no family relationship between Board members, including
annual review of agreements already entered into that it had Executive Directors, of HSBC Continental Europe;
authorised previously and still in force. • no arrangement or understanding with a shareholder, a
Agreements authorised in 2020 customer, a supplier or other pursuant to which one of the
Board members, including Executive Directors, was selected.
A new agreement subject to the provisions of article L. 225-38 of
the French Commercial Code was approved by the HSBC The Board policy on conflicts of interest annexed to the Board’s
Continental Europe’s Board of Directors during 2020: internal rules takes into account the corporate governance
principles for banks published by the Basel Committee on Banking
• A sale agreement relating to the transfer of Visa Inc. Preferred
Supervision in July 2015. It includes in particular a list of questions
C Shares from HSBC Continental Europe to HSBC Bank plc
to assist the Directors in identifying situations of conflict of
(meeting on 23 October 2020). This agreement was signed on
interest, examples of situations that may give rise to conflicts of
8 December 2020.
interest and situations the Board will generally determine that
Agreements entered into in prior years and still in force there are no conflicts of interest, and an application for
and effect during 2020 authorisation and for declaration of a potential conflict of interest.
In order to strengthen the conflict of interest avoidance
Agreements entered into by HSBC Continental Europe and its
mechanism, Directors must seek authorisation from the Board
direct 99.99 per cent shareholder, HSBC Bank plc Paris Branch,
before accepting a mandate or position in a company or
remained in full force and effect during 2020. These were a
organisation outside the HSBC Group and a process of
pooling of resources agreement designed to provide the parties
authorisation, review and possible withdrawal of authorisation by
with various services relating to their activities at cost, an
the Board is in place.
agreement for the provision of services covering various activities,
a group tax relief agreement, entered into in 2001, and a business Absence of convictions
and sale agreement between HSBC Bank plc Paris Branch and
To the knowledge of HSBC Continental Europe, in the last five
HSBC Continental Europe relating to the acquisition of its business
years, none of the Board members currently in office, including
relating to Equities and Equity Research as a going concern,
Executive Directors, has been the subject of a conviction for fraud,
authorised in February 2019 and entered into on January 2020.
bankruptcy, receivership, liquidation or put into administration,
The agreement renewed in 2015 between HSBC Holdings plc and official public incrimination and/or sanction pronounced by
HSBC Continental Europe, granting HSBC Continental Europe and statutory or regulatory authorities, or has been disqualified by a
its subsidiaries use at no charge of the HSBC brand, remained in court from acting as a member of an administrative, management
full force and effect during 2020. or supervisory body of an issuer or from acting in the management
The indemnity agreement entered into in 2019 between HSBC or conduct of the affairs of an issuer.
Continental Europe and HSBC Bank plc and HSBC UK Bank plc in Shareholders’ general meeting
order to cover HSBC Bank plc and HSBC UK Bank plc for any
amount that they may have to pay under obligations in which they Meetings are open to all shareholders. They are convened and
remain debtors to the beneficiaries, that is clients entered into a transact business in accordance with the provisions of the law and
relationship with HSBC Continental Europe as HSBC Bank plc and regulations in force. According to article 21 of the Articles of
HSBC UK Bank plc would no longer be authorised to provide Association, all shareholders, whatever the number of shares they
certain international trade instruments and services to companies own, are entitled to attend General Meetings and to take part in
located in the European Economic Area after the exit of United the deliberations, personally or through a representative, provided
Kingdom from the European Union. their shares are paid up in full for payments that are due and are
registered on an account in their own name no later than
Additional information about the members of midnight, Paris time, on the second business day preceding the
General Management and of the Board of General Meeting. However, the author of the notice to attend has
Directors the option at all times to reduce this period of time, as he so sees
fit.
Absence of conflicts of interest
All shareholders can also vote by correspondence using a form
To the Board’s knowledge, there is no conflict of interest between which can be sent to them in accordance with the conditions
the duties of Board members, including Executive Directors, with specified by the notice to attend the Meeting.
respect to HSBC Continental Europe and their private interests
and/or other duties. The Board of Directors can decide that shareholders will be
allowed to take part and vote in all General Meetings by video
For the record, it has to be noted that at 31 December 2020, Samir conference or by any means of telecommunications making it
Assaf is Chairman of the Board of HSBC Continental Europe and possible to identify them in accordance with the legal and
Chairman of Corporate and Investment Banking for the HSBC regulatory provisions.
Group.
To the knowledge of HSBC Continental Europe, there is:
Delegations given by the Shareholders’ meeting to increase the share capital

With pre-emptive rights
Issue of shares for cash or by capitalising reserves
Date of authority March 13, 2020
Expiry date March 13, 2022
Maximum nominal amount EUR 500 million
Used amount EUR 0 million

Supplementary pension scheme

Compensation
The Executive Directors of HSBC Continental Europe have a
Compensation and benefits of Executive Directors defined benefits supplementary pension scheme. This plan
guarantees members a pre-determined absolute supplementary
Remuneration policy
pension income based on their length of service. In the event that
The remuneration of Executive Directors is adopted each year by the beneficiary dies, 60 per cent of this pension is payable to the
the Board of Directors upon the recommendation by the surviving spouse. It is increased every year in line with the average
Remuneration Committee, and approved by the Remuneration rate applied to the French State pension scheme.
Committee of HSBC Holdings plc. It includes a fixed component
At 31 December 2020, Jean Beunardeau had accrued pension
and a variable component.
rights representing 11.6 per cent of his 2020 fixed remuneration
The fixed component is determined in accordance with, on one and 6.3 per cent of his 2020 total remuneration. The provision
hand, market practices with the help, if needed, of specialist corresponding to the present value of these HSBC Continental
consulting firms and the other hand, Group benchmarks. Europe pension commitments has been recorded in the HSBC
The variable component is determined on the basis of the overall Continental Europe accounts at 31 December 2020, for an amount
HSBC Holdings and HSBC Continental Europe performance and of EUR 5.15 million.
indicators covering ‘Financial Performance’ targets (profit before Both Deputy CEO, Andrew Wild and Chris Davies are not entitled
tax, comparative growth between revenue and costs (‘JAW’), to this pension scheme, since they take benefit of a UK pension
return on capital, etc.), ‘Strategic priorities’ targets focused on schemes linked to their employment contract.
sustainable profitability on optimised management of costs, a
successful achievement of reorganisation projects, improvement
Remuneration
of customer experience, strengthen of leadership capabilities and Samir Assaf, Chairman of the Board of HSBC Continental Europe,
‘Risk and Compliance’ targets with focus in particular in Financial does not receive any compensation or fees from HSBC Continental
crime and operational risks management and in strengthen of Europe. He is not a beneficiary of the HSBC Continental Europe
conducts aligned to our values, These indicators, embedded in a supplementary pension scheme as he has an employment
balanced-scorecard, are reviewed in comparison with the contract with another company of the HSBC Group and has
objectives set at the beginning of the year. All parameters taken access to a pension fund of the HSBC Group. The remuneration of
into account result in a performance rating. The variable Jean Beunardeau, CEO of HSBC Continental Europe, of Andrew
component also takes account of market trends and, if necessary, Wild and of Chris Davies Deputy CEO of HSBC Continental Europe
changes in regulations. In accordance with the HSBC Group’s are detailed on next page.
deferral rules, this variable component is paid partly in non- Lastly, in terms of fringe benefits, Jean Beunardeau uses a car
deferred and partly in deferred remuneration and partly in cash made available to him by the company for his professional needs
and partly in shares.Both Deputy CEO of HSBC Continental and Andrew Wild is provided with a company car. The following
Europe, namely Head of CMB Europe and Head of International information is published in accordance with the provisions of
also have specific objectives related to their Business or scope of article L. 225-102-1, paragraphs 1, 2 and 3 and article L. 225-184
responsibility. of the French Commercial Code. It concerns remuneration paid by
Award of shares HSBC Continental Europe, the companies it controls and the
companies that control it (the HSBC Group). The remuneration of
In 2020, Executive Directors benefited from the allocation of bonus
the Executive Directors below is presented in accordance with the
shares in HSBC Holdings plc in accordance with the HSBC
Autorité des marchés financiers recommendations of December
Group’s general policy.
200912. Tables 4, 5 et 9 of this recommendation are not applicable.
The HSBC Group awards various categories of bonus shares:
• Group Performance Shares are awarded, until 2015, to
Executives of the HSBC Group and which have the following
specific conditions:
– a five-year vesting period;
– a restricted period beyond the vesting period, which runs
until retirement;
– a performance condition measured using eight indicators
(four financial and four non-financial) from the performance
scorecard of the manager concerned;
• Restricted Shares, which are not subject to specific
performance criteria but which are definitively awarded to
employees still with the HSBC Group at the end either of a two-
and three-year period, which is the period in force for France,
or a five-year period for part of the ‘Material risk takers’
identified at Group level.
With respect to 2020, HSBC Continental Europe Executive
Directors received Restricted Shares, for which the only criterion is
to be with the company after a period of five years.
12
Tables numbers refer to table models provided by the Autorité des marchés financiers in its 10 December 2009, as amended lastly on 13 April
2015, recommendation 2009-16 concerning the guide for compiling registration documents.

Summary of compensation awarded to each Executive Director
Chief Executive Director1

2017 2018 2019 2020
Compensation Compensation Compensation Compensation
paid in 2017 paid in 2018 paid in 2019 paid in 2020
€ € € €
Jean Beunardeau
Fixed remuneration 545,826 545,826 545,826 545,826
Allowance ‘Material Risk Taker2,3 564,000 564,000 564,000 564,000
Variable remuneration in cash 244,033 272,000 251,697 239,112
Variable remuneration in shares4 244,033 272,000 251,697 239,112
Deferred variable remuneration in cash5 366,049 408,000 377,546 358,668
Deferred remuneration in shares without performance conditions6 366,049 408,000 377,546 358,668
Deferred remuneration in shares with performance conditions7 — — — —
Directors‘ fees8 — — — —
Benefits in kind — — — —
Total 2,329,990 2,469,826 2,368,312 2,305,386
2017 2018 2019 2020

for 2017 for 2018 for 2019 for 2020
€ € € €
Jean Beunardeau
Allowance ‘Material Risk Taker 2,3 564,000 564,000 564,000 564,000
Deferred remuneration in shares with performance conditions7 — — — —
Benefits in kind — — — —
Total 2,469,826 2,368,312 2,305,386 2,042,362
1 Deputy CEO then Chief Executive Officer since 10 January 2012.

2 Allowance awarded to ‘Material Risk Takers’ identified by Group according to the Prudential Regulatory Authority regulation.
3 This allowance is awarded monthly in form of cash.
4 Shares that vest immediately and are subject to a month's retention period for those granted until 2016 and one year for those granted from 2017.
5 Variable remuneration in cash deferred over five years (20 per cent per year will vest from year n+1).
6 Variable remuneration in shares without performance conditions deferred over five years (20 per cent per year from year n+1) and subject to a six
months‘ retention period for awards granted until 2016 and one year for those granted from 2017
7 Variable remuneration in shares with performance conditions deferred over five years (100 per cent will vest in year n+5) and subject to a
retention period up to retirement.
8 Renounced the payment of his Directors' fees by HSBC Continental Europe (see page 30).
Deputy Chief Executive Officer1

2017 2018 2019 2020
€ € € €
Andrew Wild
Allowance ‘Material Risk Taker’2,3 98,000 98,000 98,000 98,000
Benefits in kind8 4,626 4,626 4,626 4,626
Total 807,626 879,816 1,023,843 1,038,698

Deputy Chief Executive Officer1 (continued)

2017 2018 2019 2020
for 2017 for 2018 for 2019 for 2020
€ € € €
Andrew Wild
Allowance ‘Material Risk Taker’2,3 98,000 98,000 98,000 98,000
Benefits in kind8 4,626 4,626 4,626 4,626
Total 879,816 949,726 1,016,743 950,698
1 Deputy Chief Executive Officer since 1 March 2015.

3 Allowance awarded in form of cash on a monthly basis.
4 Shares that vest immediately and are subject to a twelve months‘ retention period.
6 Variable remuneration in shares without performance conditions deferred over over five years (20 per cent per year from year n+1) and subject to
a twelve months‘ retention period.
7 Renounced the payment of his Directors' fees by HSBC Continental Europe (see page 30).
8 Company car. Is also entitled to an annual accommodation allowance, a travel allowance, a medical cover and a tax assistance.
Deputy Chief Executive Officer1

2017 2018 2019 2020
€ € € €
Chris Davies
Fixed remuneration 466,864.00 519,129
Allowance ‘Material Risk Taker’2,3 77,831.00 87,017
Variable remuneration in cash 146,623
Variable remuneration in shares4 146,623
Deferred variable remuneration in cash5 97,749
Deferred remuneration in shares without performance conditions6 97,749
Benefits in kind8
Total 544,695.00 1,094,890
2017 2018 2019 2020

for 2017 for 2018 for 2019 for 2020
€ € € €
Chris Davies
Fixed remuneration 466,864.00 519,129
Allowance ‘Material Risk Taker’2,3 77,831.00 87,017
Variable remuneration in cash 146,623.00 130,500
Variable remuneration in shares4 146,623.00 130,500
Deferred variable remuneration in cash5 97,949.00 87,000
Deferred remuneration in shares without performance conditions6 97,949.00 87,000
Benefits in kind8
Total 1,033,439.00 1,041,146
1 Deputy Chief Executive Officer since 8 February 2019.

3 Allowance awarded in form of cash on a monthly basis.
4 Shares that vest immediately and are subject to a twelve months‘ retention period.
6 Variable remuneration in shares without performance conditions deferred over over five years (20 per cent per year from year n+1) and subject to
a twelve months‘ retention period.
7 As non Director he is not entitled to Directors' fees (see page 30).
8 Is entitled to an annual cost of living allowance, an accommodation allowance, a travel allowance, a medical cover and a tax assistance.

Shares awarded to each Executive Director in 2021 in respect of 2020
HSBC Holdings plc shares without performance conditions (Table 6)

Number of shares Value of the shares
Date of award awarded at grant Vesting date Date of availability
20% on each 20% on each
Jean Beunardeau March 2021 ND EUR 279,761 following dates: following dates:
March 2022 March 2023
Jean Beunardeau March 2021 ND EUR 186,507 March 2021 March 2022
Andrew Wild March 2021 ND EUR 71,400 following dates: following dates:
Andrew Wild March 2021 ND EUR 107,100 March 2021 March 2022
Chris Davies March 2021 ND EUR 87,000 following dates: following dates:
Chris Davies March 2021 ND EUR 130,500 March 2021 March 2022
Performance shares which became available for each Executive Director in 2020 (Table 7)
Number of shares
which became
available during
Date of award the year Vesting conditions
None
HSBC Holdings plc shares vested for each Executive Director in 2020 (Table 8)
Vesting conditions (in
Date of award Number of shares vested1 case of special conditions)
Jean Beunardeau 2/3/2015 18,676 Performance shares
Jean Beunardeau 27/2/2017 11,409 —
Andrew Wild 27/2/2017 1,932 —
Andrew Wild 28/3/2018 2,155 —
Andrew Wild 26/3/2019 2,933 —
Andrew Wild 24/2/2020 20,978 —
Chris Davies 27/2/2017 3,657 —
Chris Davies 26/2/2018 3,017 —
Chris Davies 26/3/2019 3,519 —
Chris Davies 24/2/2020 25,760 —
1 The shares awarded under the UK plan in 2017, 2018 , 2019 and 2020 are available six or twelve months after the vesting.
The shares awarded in 2017 were vested for 20 per cent in 2020.
The shares granted in 2019 were vested for 20 per cent in 2020.
HSBC Holdings plc free shares, without performance conditions, awarded in 2020 in respect of 2019, to the 10 employees whose
number of awarded shares is the highest (Table 10)
Number of
shares
Date of award awarded Value of the shares at grant Vesting date1 Date of availability1
Total value of the 10 highest awards of March 2022 for 66 % and 6 or 12 months after the
shares (employees or former employees) 24/2/2020 ND EUR 3,336,365 March 2023 for 34 % award
1 Part of the free shares awarded to employees considered as Material Risk Takers (cf. page 39 vests immediately and is available for sale after six
months of vesting.

HSBC Holdings plc free shares, without performance conditions, awarded in 2020 in respect of 2019, to the 10 employees whose
number of awarded shares is the highest
Number of
shares
Date of award awarded Value of the shares at grant Vesting date1 Date of availability1
March 2021 or March 2023
for 66% and March 2024 for
34% or March 2022 to 2026
Total value of the 10 highest awards of for 20% per year or March 6 or 12 months after the
shares (employees or former employees) 24/2/2021 ND EUR 2,823,199 2022, 2023, 2024 per tiers award
1 Part of the free shares awarded to employees considered as Material Risk Takers (cf. page 39) vests immediately and is available for sale six
months or a year after the vesting.
HSBC Holdings plc free shares, without performance conditions, vested in 2020, for the 10 employees whose number of awarded
shares is the highest
Number of shares
vested1 Vesting dates
Total value of the 10 highest awards of shares, vested in 2020 (employees or former employees) 612,913
– of which award 2017 80,903 12.03.2020
– of which award 2018 99,472 11.03.2020
– of which award 2019 90,634 10.03.2020
– of which award 2020 341,904 24.02.2020
1 The shares awarded in 2017 and 2018 are available for sale six months after the vesting; those granted in 2019 are available 12 months after the
vesting and those granted in 2020 under the UK plan are available for sale six or 12 months after the vesting.
Other information required by the Corporate Governance Code (Table 2)

Executive Director
Function Compensation or benefits
HSBC Continental Europe due or that may be due Compensation due under Participation in the share
First appointed supplementary pension upon termination or change terms of non-compete capital of the company and
1
Term ends Employment contract scheme in duties agreement quantity of shares held
Jean Beunardeau Suspended Yes No No No
Chief Executive Officer2
1 February 20103
Andrew Wild Not applicable No No No No
Deputy CEO
1 March 2015
Chris Davies Not applicable No No No No
Deputy CEO
8 February 2019
1 See page 39.

2 CEO since 10 January 2012.
3 Date of appointment as Deputy CEO.
Compensation policy for employees whose professional maintain an appropriate financial capacity in the Covid 19 crisis
activities have a significant impact on the risk profile of context (SSM-2020-0315 of 28 July 2020 and SSM-2020-0763 of
the business 15 December 2020).
The following information is published in accordance with article Two committees – the People Committee, in its limited perimeter,
266 of the order of 3 November 2014 on internal control of and the Remuneration Committee – play a predominant role in the
banking sector companies, based on articles L. 511-64, L. 511-71 overall process of implementing this policy.
and L. 511-72 of the French Monetary and Financial Code and In accordance with the article L 511-74 of the Code Monétaire et
article 450 of (‘UE’) regulation 575/2013. Financier, the compensation policy is submitted to an independent
Decision-making process implemented to define the audit, once a year, performed by the Internal Audit department.
company’s compensation policy The compensation policy is also approved by the local Regulatory
Compliance department.
As HSBC Continental Europe is part of an international banking
group, its compensation policy is defined at the level of the parent The People Committee, in its limited perimeter, made up of the
company. As part of a delegation by the HSBC Group’s Board of main Senior Executives of HSBC Continental Europe (the Chief
Directors, the HSBC Group’s Remuneration Committee is Executive Officer, the Deputy Chief Executive Officer in charge of
responsible for approving the compensation policy for the HSBC the Commercial Banking, the Chief Risk Officer, the Head of
Group as a whole. Human Resources ), reviews the main aspects of the
compensation policy proposed by HR function for France and
The compensation policy in place in France falls within the
framework of this global policy, while also ensuring that local
regulations, in particular those arisen from European Directive
CRD III of July 2010 repealed by the Directive CRD IV of June
2013, since 1 January 2015 from AIFM Directive, since 1 January
2016 from Solvency II Directive and since 1 January 2017 from
UCITS Directive are observed.
Especially in 2020, remuneration policy included ECB
recommendations on the need to moderate the variable pay pools,
in particular those awarded to Material Risk Takers, aiming to

approves it. It ensures that this policy fits in with the general objectives and focusing on synergy with other regions, costs
principles of the compensation policy set by the HSBC Group for control, comparison of revenue and cost trends (‘JAWS’),
all of its subsidiaries, and in the light of the specific directives set evolution in profitability through, in particular, return on risk
by the global business lines. Lastly, it gives an opinion on the weighted assets. On the other hand through non-financial metrics
policy’s compliance with local professional standards and the such as management of risks focused in particular on
recommendations of banking supervisory bodies in France such as improvement of financial crime risk culture, implementation of
the Autorité de Contrôle Prudentiel et de Résolution and the regulator or Audit recommendations, operational risks
European Central Bank since 4 November 2014, the Autorité des management, appropriate application of ‘Conduct’ principles in
Marchés Financiers and the Fédération Bancaire Française. order to act in the interest of customers, being compliant with
financial markets integrity and avoiding any conflict of interests.
In addition, as regards variable compensation, it checks that all of
Lastly the performance measure is based on more generic
the measures in place within the bank’s various business lines
indicators such as customer experience improvement,
adhere to the general principles defined in compensation policies
implementation of reorganisation and transformation projects,
edited by France Group and global business lines, and meet the
growth in women representation among Global Career Banding
requirements of supervisory committees. It reviews the variable
GCB 0-3.These indicators are included in performance scorecard
compensation budgets allocated to local staff by the global
and are analysed by comparison with objectives set at the start of
business lines on the basis both of the overall performance of each
the year.
business line and of the relative performance of local teams and
by taking into account risk and compliance aspects. It approves These budgets are then granted in a differentiating manner
the structure of these compensation pools, i.e. the breakdown according to the individual performance of each employee. The
between cash and shares, between immediate remuneration and individual performance of an employee is appraised by the
deferred remuneration in accordance with the HSBC Group’s rules manager once a year at year-end and an appraisal based on four
and local professional standards. points rating scale, which was implemented for the year-end
review in respect of 2014, is awarded:
Lastly, on an individual basis, after approval of the list, it reviews
and validates the consistency of compensation paid to • top performer;
professionals whose activities have a significant impact on the • strong performer;
company’s risk profile (excluding People Committee’s members),
before submission to HSBC Group’s decision-making bodies. It • good performer;
reviews the 20 highest compensation packages (excluding People • inconsistent performer.
Committee’s members), in collaboration with the HSBC Group’s
decision-making bodies and global business lines. It reviews any The four points performance rating scale aims to encourage
individual breaches with respect to internal rules in term of credit differentiation in performance and variable compensation levels,
risk, compliance and reputation, and for specific employees, to accordingly.
mandates provided for Volker and SRAB rules. The performance appraisal is based on achieving targets set for
On the basis of the compensation policy papers prepared by the the employee by the manager at the start of the year. These
People Committee in its limited perimeter, the Remuneration targets include both qualitative criteria (observance of compliance
Committee, chaired by an independent Director, gives his view on and internal control rules, quality of sales or quality of service, risk
the bank’s policies and practices concerning compensation, management – especially in terms of operational risks and follow-
ensuring their consistency with the HSBC Group policy and their up of audit points – customer recommendations, cross-businesses
compliance with applicable local standards, as well as that risk synergies, winning customers, etc.) and collective and/or
management and compliance issues are taken into account. individual financial criteria (income growth, cost control, growth of
the profit before tax, etc.).
Its scope of review covers all aspects of compensation policies
and practices in place within the company, although with a more The indicators, which underpin these objectives, are a function of
in-depth review concerning professionals whose activities have a the position held and the level of responsibility, and are appraised
significant impact on the risk profile of the business and Executive by comparison to the previous year and against the current year
Directors. budget.
Finally, it reviews the remuneration of any Executive Directors, of All targets are formally documented at the beginning of the year,
Head of Risk and Head of Regulatory Compliance and submit its in annual employee target sheets (performance scorecards).
proposals to the Board. In compliance with the rules under CRD III and CRD IV directives,
Main characteristics of the compensation policy some employee categories are subject to specific rules regarding
variable compensation award. These employees, considered to
At HSBC Group level, the compensation policy defined takes into have an impact on the entity’s risk profile (‘Material Risk Takers’),
account, on one hand, the sustainable financial performance and were identified on the basis of qualitative and quantitative criteria
the commercial competitiveness of the company as a whole and defined by the European Banking Authority in March 2014.
each of its businesses and, on the other hand, the overall Pursuant to these criteria, the HSBC Group, which is itself
performance regarding risk management, and finally the submitted to this regulation, identified at HSBC Continental Europe
company’s capacity to fund this policy on its own profit. level a list of 65 employees coming under this Material Risk Takers
The main performance indicator used by the HSBC Group, to set category.
variable compensation budgets, is the profit before tax before As these new criteria have to be applied both at a consolidated
variable compensation and excluding the change in value of own and an individual basis, an additional list of 67 employees who
debt due to credit spread and capital gains or losses on can have a significant impact on the company’s risk profile at a
businesses’ and subsidiaries’ disposals. local level was added to this list of Material Risk Takers identified
On the other hand, it includes model and credit risk provisions. at HSBC Group level.
Variable compensation budgets on a global basis and by This whole list of 132 employees includes mainly the executive
businesses are reviewed and approved by the Group Chief Risk directors, the heads of business lines, the heads of risk functions
Officer, the Group CEO, the Group Chief Financial Officer and the and the market operators who have an impact on the company’s
Group Remuneration Committee. Once these variable risk profile.
compensation budgets are approved, they are divided, for each
business/segment/product/function by regions and countries
depending on their respective performance. Local performances
are measured on one hand through financial metrics such as
evolution of Profit Before Tax, growth in revenue on strategic

For this population, variable remuneration are limited to twice the • Executive Directors: Chief Executive Officer and deputy Chief
fixed remuneration, according to the decision made by HSBC Executive Officer;
Continental Europe shareholders’ general meeting held on 23 May • Key functions: Heads of Risk functions, Head of Compliance,
2014. In order to maintain the competitiveness of Material Risk Head of Actuarial, Head of Audit;
Takers remuneration, Group has modified the remuneration of
several of them by allocating a monthly fixed pay allowance linked • Head of Finance: Board committee member of HSBC
to their function. In addition their variable remuneration is deferred Assurances Vie (France) and under his strategic function in the
by 40 per cent and even by 60 per cent for the highest variable. company.
Finally, variable remuneration granted in the form of shares
* except two members who have the status of external ‘non executive’
accounts for 50 per cent of variable remuneration granted; this 50
Director.
per cent applies to both the deferred component and to its
immediately paid fraction. In 2020, 17 employees have been identified as risk takers under
It should be noted that if the variable remuneration amount is Solvency II.
lower than 33 per cent of total remuneration and lower than Impact on the variable remuneration
EUR 100,000, the variable remuneration is granted in cash
immediately paid and deferred shares according to HSBC Group For this population, a part of their variable remuneration is
standard deferred rules. deferred. This deferred part comprises shares that totally vest after
a three years vesting period and that is applied under specific
For this population as a whole, 42 per cent of variable conditions described below:
remuneration is deferred, and variable remuneration represents
37 per cent of total remuneration. For French employees, the • 60 per cent of the variable remuneration is deferred when its
deferred share-based portion is not vested by the employee until total amount is equal or above GBP 500,000;
after either a period of two years for 66 per cent and after three • 40 per cent of the variable remuneration is deferred when its
years for the remaining 34 per cent or a period of two years for 40 total amount is under GBP 500,000.
per cent, three years for 20 per cent, four years for 20 per cent and
However, risk takers whose variable remuneration is lower than
five years for the remaining 20 per cent. This is furthermore
GBP 500,000 (or an equivalent amount in local currency) and
subject to a six-month or one-year retention period starting from
whose variable remuneration is under 33 per cent of their total
vesting, and there is a prohibition on hedging it.
compensation, are considered as ‘de minimis’. On this basis, they
For impatriates or employees working in European branches, are subject to Group deferral standard rules.
deferred shares vest over three years (33 per cent, 33 per cent, 34
It should be noted that beyond this Material Risk Takers
per cent).
population, the great majority of the company’s senior managers
With effect from 1 January 2017, management companies under are affected by the minimum deferred compensation rules laid
certain conditions are governed by the UCITS Directive in addition down by the HSBC Group which, for 2020, provide for deferred
to the Alternative Investment Funds Management (‘AIFM’) compensation in the form of shares of between 10 per cent and
Directive already in place since 1 January 2015. In accordance 50 per cent of variable compensation, and to which the above
with these Directives, categories of employees of HSBC Global rules on vesting apply. Nevertheless, deferred shares are no longer
Asset Management (France) and HSBC REIM (France) are subject subject to any retention period.
to specific rules in term of variable remuneration. The employees
Lastly, since disclosure of ‘Loi Pacte’, a ‘Malus’ system now
concerned, are those whose professional activity has a significant
applies to all employees receiving deferred bonuses. This allows
impact on the risk profile of the management company or its
the HSBC Group’s Remuneration Committee to cancel, reduce or
alternative investment funds. The list of these risk takers mainly
amend all or part of bonuses awarded on the basis of the
comprises Executive Directors, Heads of Risk functions, Finance
employee’s behaviour or factors justifying such action.
function and Legal function, Heads of Sales, Heads of Funds
Management and Head of Branches. In 2020, a total of 46 risk To be also noted that all vested awards are subject to the Group
takers have been identified. For this population, subject to having ‘Clawback’ policy.
a variable remuneration of more than EUR 200,000 and
representing more than 30 per cent of fixed pay, variable
remuneration is 40 per cent deferred if it is lower than GBP
500,000 and 60 per cent deferred for variable remuneration of
more or equal to GBP 500,000. For risk takers with a variable
remuneration deferred at 40 per cent, the variable remuneration is
composed as follows:
50 per cent in immediate cash,10 per cent in cash variable indexed
on the funds’ performance, 40 per cent in cash variable deferred
one-third over three years and indexed on the funds performance.
For risk takers with a variable remuneration deferred at 60 per
cent, the variable remuneration is composed as follows: 40 per
cent in immediate cash,10 per cent in deferred cash that vest in
three annual tranches, 50 per cent in cash variable deferred one-
third over three years and indexed on the fund's performance. Risk
takers who do not meet the conditions above are subject to Group
deferral standard rules.
Finally, with effect from 1 January 2016, HSBC Assurance Vie
employees identified as risk takers under Solvency II Directive are
bound by the remuneration requirements set out in this directive.
Eligible employees
In accordance with this Directive, categories of employees of
HSBC Assurances Vie (France) identified as risk takers are subject
to specific rules in term of variable remuneration. The employees
concerned are:
• Board of Directors members*;

Guaranteed bonuses are highly exceptional, limited to one year Amounts are expressed in EUR and correspond to gross salary
and only in a hiring context. (excluding employer social security contributions and before
deduction of payroll costs).
In accordance with CRD IV Directive
Consolidated quantitative information about compensation paid to
executive members and financial market professionals, whose
activities have a material impact on the company’s risk exposure.
Remunerations awarded to overall staff

Total remuneration
Full time 2020
Equivalent 20201 €
Executive members 3 4,029,581
Global Banking and Markets 607 91,588,977
Retail Banking 3,470 174,291,250
Private Banking 91 9,906,580
Commercial Banking 1,233 73,542,247
Global Functions and Other 1,834 127,129,818
Total (France perimeter) 7,238 480,488,452
HSBC Continental Europe, Athens Branch (Greece) 334 17,539,475
HSBC Continental Europe, Spanish Branch (Spain) 136 15,973,880
HSBC Continental Europe, Dublin Branch (Irland) 117 12,813,740
HSBC Continental Europe, Pobocka Praha (Czech Republic) 79 4,608,940
HSBC Continental Europe, Milan Branch (Italy) 115 14,584,867
HSBC Continental Europe, Amsterdam Branch (Netherlands) 59 6,369,835
HSBC Continental Europe, Luxembourg Branch (Luxembourg) 262 24,677,592
HSBC Continental Europe, Poland Branch (Poland) 142 7,921,560
HSBC Continental Europe, Brussels Branch (Belgium) 25 2,622,623
HSBC Continental Europe, Stockholm Branch (Sweden) 10 1,683,695
Total (international perimeter) 1,279 108,796,207
Total (France and International perimeter) 8,517 589,284,660
1 Staff as of 31 December 2020 excluding trainee, CFCS, and pre-retirements.
Remuneration awarded to Executive members and professionals whose roles have a significant impact
on risk profile of the company
Total remuneration: distribution between fixed pay and variable pay
Total remuneration
Number of people 2020 Total fixed pay Total variable pay
concerned € € €
Executive members 3 4,029,581 2,305,044 1,724,537
Global Banking and Markets 38 26,205,719 16,633,864 9,571,855
Retail Banking 14 7,158,458 4,127,302 3,031,156
Private Banking 5 1,987,202 1,133,000 854,202
Commercial Banking 10 3,119,179 2,065,000 1,054,179
Global Functions and Other 39 9,321,641 6,927,403 2,394,238
Total (France perimeter) 109 51,821,780 33,191,613 18,630,167
Total (international perimeter) 23 10,823,132 6,565,096 4,258,036
Total (France and International perimeter) 132 62,644,912 39,756,709 22,888,203
Total variable pay: distribution between payments in cash and payments in shares
Payments in Payments in Total variable
cash shares pay
€ € €
Executive members 862,269 862,269 1,724,537
Global Banking and Markets 4,818,927 4,752,927 9,571,855
Retail Banking 1,571,378 1,459,778 3,031,156
Private Banking 454,101 400,101 854,202
Commercial Banking 527,090 527,090 1,054,179
Global Functions and Other 1,636,548 757,691 2,394,238
Total (France perimeter) 9,870,312 8,759,855 18,630,167
Total (international perimeter) 2,216,176 2,041,860 4,258,036
Total (France and International perimeter) 12,086,488 10,801,715 22,888,203

Total variable pay: distribution between non deferred and deferred amount
Non-deferred
amount Deferred amount Total variable pay
€ € €
Executive members 848,215 876,322 1,724,537
Retail Banking 1,697,758 1,333,398 3,031,156
Private Banking 534,121 320,081 854,202
Commercial Banking 632,507 421,672 1,054,179
Global Functions and Other 1,781,953 612,285 2,394,238
Total (international perimeter) 2,624,548 1,633,488 4,258,036
Total deferred variable pay: distribution between payments in cash and payments in shares
Payments in Payments in Total deferred
cash shares variable pay
€ € €
Executive members 438,161 438,161 876,322
Retail Banking 320,436 1,012,962 1,333,398
Private Banking 160,040 160,040 320,081
Commercial Banking 210,836 210,836 421,672
Global Functions and Other 290,810 321,475 612,285
Total (international perimeter) 816,744 816,744 1,633,488
Amount of unvested deferred variable pay in respect of previous financial years

Amount of unvested deferred
variable pay in respect of previous financial
years
€
Executive members 2,743,431
Global Banking and Markets 14,820,728
Retail Banking 3,628,937
Private Banking 723,145
Commercial Banking 713,949
Global Functions and Other 2,418,624
Total (France perimeter) 25,048,813
Total (international perimeter) 3,401,077
Total (France and International perimeter) 28,449,890
This table shows outstanding deferred variable pay corresponding ‘malus’ mechanism or early departure. Shares and equivalent
to total unvested deferred remuneration before the 31 December instruments are valued on the share value as at 31 December
2020, i.e. variable pay that has been awarded but not yet paid 2020. Outstanding vested variable pay in respect of prior year can
(cash) or delivered (shares) and which is still subject to a future be impacted by departures from the company.
Amounts paid in respect of hiring (guaranteed variable)

Amount paid in
Number of respect of hiring
people (guaranteed variable)
concerned €
Executive members — —
Global Banking and Markets — —
Retail Banking and Private Banking — —
Commercial Banking — —
Global Functions and Other — —
Total (France perimeter) — —
Total (international perimeter) — —
Total (France and International perimeter) — —
The first column corresponds to all sums paid on termination of the employment contract (severance payment), which include
redundancy compensation and contractual indemnities.

Amount of severance payments
Number of Amount of severance

people payments
concerned €
Executive members — —
Global Banking and Markets 2 3,113,300
Retail Banking 1 710,751
Commercial Banking 1 539,240
Global Functions and Other 2 2,814,352
Total (France perimeter) 6 7,177,642
Total (international perimeter) 1 86,777
Total (France and International perimeter) 7 7,264,419
Contributions to defined benefit plan
Number of Contribution to
people defined benefit plan
concerned €
Executive members 1 549,794
Global Banking and Markets — —
Retail Banking and Private Banking — —
Commercial Banking — —
Global Functions and Other — —
Total (France perimeter) 1 549,794
Total (international perimeter) — —
Total (France and International perimeter) 1 549,794
Information on highest remunerations
Total remuneration
Number of
Material Risk
Takers
Between 1 million and 1.5 million excluded 4
Between 1.5 million and 2 million excluded 1
Between 2 million and 2.5million excluded 2
Total 7
Amounts are expressed in EUR and correspond to gross salary

In accordance with AIFM Directive (excluding employer social security contributions and before
Consolidated quantitative information about compensation paid to deduction of payroll costs).
executive members and financial market professionals, whose
activities have a material impact on the company’s risk exposure
in the entities HSBC Global Asset Management (France) and HSBC
REIM (France).
HSBC Global Asset Management and HSBC REIM (France)

Total fixed Total variable Total
pay pay Remuneration
€ € €
Total of Employees (number: 369) 27,552,919 8,831,253 36,384,172
Including employees who have a significant impact on the risk profile AIFMD (number: 46)1 7,183,035 4,356,850 11,539,885
Including Senior Managers (number: 22) 3,374,582 1,680,386 5,054,968
1 Including 4 Executive managers who are already in the CRD IV material risk takers.
Amounts are expressed in EUR and correspond to gross salary

In accordance with Solvency II Directive (excluding employer social security contributions and before
Consolidated quantitative information about compensation paid to deduction of payroll costs).
employees identified as Solvency II staff in the entities HSBC
Assurances Vie (France).
Total
Total fixed pay Total variable pay Remuneration
€ € €
Employees identifies as Solvency II staff (number: 17)1 4,066,760 2,377,717 6,444,477
1 Including 11 Executive managers who are already in the CRD IV material risk takers.

Statutory Auditor's special report on related-party agreements
PricewaterhouseCoopers Audit BDO Paris Audit & Advisory

63 rue de Villiers 43-47 avenue de la Grande Armée
92208 Neuilly-sur-Seine Cedex, France 75116 Paris, France
Statutory Auditors’ special report on related-party agreements

This is a free translation into English of the Statutory Auditors’ special report on related-party agreements issued in French and is provided
solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with,
French law and professional standards applicable in France.
(Annual General Meeting for the approval of the financial statements for the year ended 31 December 2020)
HSBC Continental Europe (formerly HSBC France)

38, avenue Kléber
75116 Paris
To the Shareholders,
In our capacity as Statutory Auditors of HSBC Continental Europe, we hereby report to you on related‑party agreements.
It is our responsibility to report to shareholders, based on the information provided to us, on the main terms and conditions of the
agreements that have been disclosed to us or that we may have identified as part of our engagement, as well as the reasons given as to
why they are beneficial for the Company, without commenting on their relevance or substance or identifying any undisclosed
agreements. Under the provisions of article R.225-31 of the French Commercial Code (Code de commerce), it is the responsibility of the
shareholders to determine whether the agreements are appropriate and should be approved.
Where applicable, it is also our responsibility to provide shareholders with the information required by article R.225-31 of the French
Commercial Code in relation to the implementation during the year of agreements already approved by the Annual General Meeting.
We performed the procedures that we deemed necessary in accordance with the professional standards applicable in France to such
engagements. These procedures consisted in verifying that the information provided to us is consistent with the underlying documents.
Agreements to be submitted for the approval of the Annual General Meeting
Agreements authorised and entered into during the year
In accordance with article L.225-40 of the French Commercial Code, we were informed of the following agreement that was entered into
during the year and authorised in advance by the Board of Directors.
With HSBC Bank plc, a company controlling a shareholder company of HSBC Continental Europe and owning more than
10 per cent of the voting rights
Nature and purpose:
At its meeting on 23 October 2020, the Board of Directors authorised an agreement between HSBC Continental Europe and HSBC Bank
plc concerning the sale of Visa Inc. class C preferred shares.
Terms and conditions:
The agreement was entered into on 8 December 2020.
The two parties agreed on the methods for determining the shares concerned by the transaction, the methods for setting the sale price
and the payment terms.
The sale price amounted to USD 38,461,712.37.
Reasons why the agreement is beneficial for the Company:
The purpose of the agreement is to allow HSBC Continental Europe to “to remove a non-core asset from its balance sheet and to
eliminate from its income statement both the volatility related to the valuation of the shares and the consumption of RWA and equity
linked to the holding thereof.”

Agreements to be submitted for the approval of the Annual General Meeting
Agreements approved in prior years
a) that were implemented during the year
In accordance with article R.225-30 of the French Commercial Code, we were informed of the following agreements, approved by the
Annual General Meeting in prior years, which were implemented during the year.
With HSBC Bank plc Paris Branch, a company controlling a shareholder company of HSBC Continental Europe and owning
more than 10 % of the voting rights
Three agreements entered into in 2001 between HSBC Continental Europe and HSBC Bank plc Paris Branch also remained in effect in
2020:
• A shared services agreement to provide its members, at cost, with various services related to the two companies’ business activities.
• An agreement by which HSBC Continental Europe provides HSBC Bank plc Paris Branch with services related to various business
activities.
With respect to these two agreements, the income recorded in 2020 amounted to EUR 1.8 million.
• A tax integration agreement between HSBC Bank plc Paris Branch and HSBC Continental Europe. With respect to this agreement, tax
income of EUR 28.5 million was recorded in 2020.
An agreement authorised on 19 February 2019 and entered into on 31 January 2020 concerning the transfer of the Equities and Equity
Research activities from HSBC Bank plc Paris Branch to HSBC Continental Europe. The sale price amounted to EUR 4,000,000 and was
offset against the amount of the liabilities transferred.
With HSBC Holdings plc, a company controlling a shareholder company of HSBC Continental Europe and owning more
than 10 % of the voting rights
The agreement renewed in 2015 provides for the free use of the HSBC brand by HSBC Continental Europe and its subsidiaries. It had no
impact on the 2020 financial statements.
b) that were not implemented during the year
In addition, we were informed of the following agreements, approved by the Annual General Meeting in previous years, which were not
implemented during the year.
With HSBC Bank plc and HSBC UK Bank plc, respectively a company controlling HSBC Continental Europe and a company
controlling a shareholder company of HSBC Continental Europe, both owning more than 10% of voting rights
The indemnification agreement entered into in 2019 between HSBC Continental Europe and HSBC Bank plc and HSBC UK Bank plc in
order to indemnify HSBC Bank plc and HSBC UK Bank plc for any costs that they may still be required to pay pursuant to their obligations
to their beneficiaries, who have become customers of HSBC Continental Europe as a result of HSBC Bank plc and HSBC UK Bank plc no
longer being authorised to supply certain instruments and international trade services to companies situated in the European Economic
Area (EEA) following the withdrawal of the United Kingdom from the European Union.

Statutory Auditor's special report on related-party agreements
Neuilly-sur-Seine and Paris, 24 February 2021

The Statutory Auditors
Agnès Hussherr Michel Léger
Partner Partner

– Economic and social risk relating to increases in vulnerable
Sustainability populations (theme 4)
• Three themes involving human capital:
Statement on extra Financial Performance – Risk of inability to ensure the employability of our
employees given the transformation of the banking sector
HSBC Continental Europe’s business model (theme 5)
Activities and strategy – Risk of failure to recruit and retain talent (theme 6)
The business model for HSBC Continental Europe, showing its – Risks related to lack of diversity among teams and
scope, main resources, main business areas and activities, its psychosocial risks (theme 7)
strategy and its prospects is set out in the Presentation of activity • Five themes involving governance risks:
and strategy part page 4.
– Risks of money laundering and financial crime (theme 8)
Sustainability Governance
– Risks of corruption* (theme 9)
Through its business activities, HSBC aims to support the long-
– Risks relating to tax evasion* (theme 10)
term success of its clients and employees and of the communities
in which it operates. HSBC Continental Europe is fully committed – Risks in the areas of cybersecurity and IT attacks (theme 11)
to the course of action adopted by the Group and presented in its – Risks in terms of non-compliance with Human Rights*
strategy report (https://www.hsbc.com/investors/results-and- (theme 12).
announcements).
At the end of 2019, rating agency Sustainalytics assessed HSBC
In 2008, in order to deploy and effectively implement this strategy Continental Europe in terms of its management of ESG risks,
in France, HSBC Continental Europe created a Sustainability putting it in the low-risk category.
Department, reporting to the Chief Executive Officer and to Global
Corporate Sustainability. The department has a seat on the bank's * required by the directive on the Extra Financial Performance
executive committee. Consisting of a team of five, it co-ordinates
the definition and implementation of action plans developed in Managing material ESG risks
collaboration with representatives of each of the relevant business
Developing a sustainable economic system is important for each
lines.
of us. All members of society have a shared duty to come up with
These sustainability representatives meet every two months in a solutions to climate change, technological transformation and
Climate Business Council, whose main purpose is to report on globalisation in order to ensure future prosperity.
progress or constraints in the deployment of this strategy.
HSBC is aware that governments, companies, the financial system
Additional governance committees have been set up in certain
and civil society are all stakeholders in fighting climate change and
business lines and functions. These committees mirror the global
addressing the challenges of sustainable development.
governance process.
It is with this in mind that HSBC manages the risk that the
This chapter supplements the extra-financial information
financial services which it provides to customers may not meet
presented in the strategy document to be published by the Group
their expectations or may have unacceptable impacts on people or
in February 2021 and made available on the Group website
the environment. Sustainability risks can also lead to commercial
(http://www.hsbc.com/our-approach/measuring-our-impact). The
risk for customers, credit risk and reputational risk for the bank.
Group’s next ESG report will be incorporated in the Group Strategy
Document. As a result, we have established policies to address these risks, as
follows:
Identifying material ESG risks for HSBC Managing the risk of customer disappointment:
Continental Europe Listening to our customers to meet their needs (theme
A responsible business culture 1)
HSBC has set itself the task of bringing together people and The HSBC Group remains committed to listening to customers,
opportunities. The goal creates for us a duty of care to our whose feedback has helped us improve our products and services.
customers, to society in the broad sense of the term and to the We also have clear policies, frameworks and governance in place
integrity of the financial system. to protect our customers. These cover the way we behave, design
products and services, train and incentivise employees, and
Non Financial risks
interact with clients.
HSBC uses a variety of tools to identify and manage its non-
The Bank will keep on working to simplify processes and optimise
financial risks, including its appetite for risk, risk mapping, a list of
the customer experience, particularly in terms of being
top and emerging risks and stress testing. It also relies on surveys
contactable, having pro-active relationship managers and
involving employees and customers, dialogue with customers and
improving the customer pathway.
investors, and the annual ESG survey carried out among investors.
To guide this work, we measure and report on customer
In 2020, HSBC Continental Europe reviewed the environmental,
satisfaction data for all of our business lines within our Strategy
social and governance risk map that it had prepared in 2019. This
Report.
analysis of the most material ESG risks over the short, medium
and long term identifies nine ESG themes that present a material
risk for HSBC Continental Europe, along with three themes
required by the 19 July 2017 order relating to the publication of
non-financial information:
• Four risks relating to banking activity:
– Risk of customer disappointment (theme 1)
– Risk relating to the non-alignment of emissions financed
with a net zero pathway (theme 2)
– Risk relating to the non-alignment of the bank’s operational
carbon footprint with a net zero pathway (theme 3)

Sustainability
Monitoring customer recommendation and satisfaction rates Monitoring of customer satisfaction in Private banking
in Private Banking and Wealth Management in France HSBC Private Banking in France pays particular attention to the
In France, HSBC aims to be the first-choice wealth manager for its opinions and suggestions of its clients so to improve its range of
customers, and strives for excellence in the service and customer products and services, in which it aims to achieve excellence.
experience it provides. HSBC's customers lie at the heart of its Every year, HSBC Private Banking in France invites its customers
approach. to take part in a survey to gain feedback on their experiences and
Customer satisfaction in retail banking in France identify areas for improvement, with two main themes:
2020 saw a change in the methodology used to measure the • level of satisfaction in the offering of products and services and
Customer Experience. Since January, in each area, customers are the advice provided;
asked to give a recommendation score for HSBC with reference to • level of confidence in HSBC Private Banking in France and its
the banking relationship with their adviser or the interaction they staff.
have had (Customer Relations Centre, On-line Banking, Branch). A
Net Promoter Score (‘NPS’) is calculated from their responses as The 2020 survey showed that customer satisfaction with HSBC
the difference between the proportion of promoters (customers Private Banking in France remained identical to its level in 2019
giving a score of 9 or 10) and detractors (customers awarding (rated 8.2/10 in 2020). Customer satisfaction with their key
between 0 and 6). contacts also scored highly this year. Customers scored their
relationship with their Private Banker at 8.7/10 and their
In 2020, more than 47,000 individual customers were surveyed, relationship with other members of the advisory teams
with positive results in a difficult public health situation that reflect (investment, credit, wealth management) and product specialists
the commitment of our teams to providing effective support to at 8.5/10.
their customers.
There was also an increase (+23 per cent) in customer satisfaction
Although the banking relationship with key contacts has suffered with the quality of advice and recommendations provided and
from these conditions (due to branch closures and remote followed up by teams from HSBC Private Banking in France (80
working), HSBC demonstrated its ability to respond effectively to per cent satisfaction in 2020).
customers across all channels. As a result, the NPS scores
measured for remote access channels were strong: +50 on 93 per cent of customers surveyed reported that they achieved
average over the year for the Customer Relations Centre, with their financial goals in 2020 thanks to a clear and effective
continuous gains over the year (more than 60 per cent of financial strategy (96 per cent of customers surveyed) with
customers gave a score of 9 or 10) and +31 for users of the secure excellent value for money (89 per cent of customers surveyed).
on-line space (nearly 55 per cent giving 9 and 10 scores). The The general level of confidence increased over the year (63 per
scores obtained in the final four months of the year for branch cent of clients said they had confidence in HSBC Private Banking
visits (this channel having been closed between April and August) in France in 2020, from 59 per cent in 2019), as did the percentage
also reflected the quality of service provided by staff (NPS of +47 of clients saying they would recommend our services (47 per cent
per cent of customers from 31 per cent in 2019). of customers from 31 per cent in 2019).
Having won a number of awards in the Trophées de la Banque in Monitoring of customer satisfaction in Commercial Banking
2019, the retail bank of HSBC Continental Europe was named best
2020’s health crisis has transformed the banking relationship and,
traditional bank for students for the second year running in 2020,
more broadly, the way companies have organised themselves.
thanks to its banking package, charges and interest rates (Prix
Commercial Banking adapted to ensure continuity of operations
Sélectra – comparing 124 offerings).
during lockdown periods by accelerating the digitalisation of our
Monitoring of retail customer complaint main processes, transactions and subscriptions to new products
In 2020, the number of customer complaints decreased by 13 per and services, making more widespread use of electronic
cent compared with 2019. It should be noted that overall, the signatures, and implementing government measures such as
Covid-19 effect has not generated a significant increase in payment deferrals and government-guaranteed loans. As part of
complaints. Over the year, that's nearly 10,000 fewer claims the annual HSBC Customer Relationship 360 satisfaction survey
entered compared to 2019. This demonstrates the adaptability that 94 per cent of customers surveyed* agreed with the following
the network and head office teams have shown to support statement: ”the continuity of my operations management has
customers and contain dissatisfaction due to pandemic-linked been ensured”. Communication campaigns via the website and
disturbances. social media, coupled with a proactive approach from commercial
teams, helped maintain close links with our business customers
The quality and speed with which complaints are handled remain (31 per cent of customers* were contacted several times per
at the heart of the priorities and continued to be closely monitored. month by their account managers).
Despite the context of the health crisis and the impacts on the
organisation, especially on complex complaints requiring back Meanwhile, within the framework of the quality plan, particular
office intervention, response times remained good: 63 per cent of attention was paid to transparency on pricing, with simplified
complaints (vs 68 per cent in 2019) were processed on the same billing for certain transactions (such as international transfers) and
day or the following day; and 77 per cent (versus 80 per cent in simpler, clearer and more regular communication on standard or
2019) were processed within five working days. specific terms applicable to transactions.
The main causes of complaints among retail customers in 2020 Commercial Banking customer satisfaction levels are monitored as
were as follows: part of an annual survey covering the entire relationship as well as
by a monthly survey, part of an HSBC Group programme, on key
• complaints about pricing: 23 per cent of complaints (mainly moments in the relationship such as opening an account or
about charges dispute/explanation); requesting credit.
• customer service and support: 13 per cent of complaints mainly In 2020, the annual HSBC Relation Clients 360° survey, conducted
linked to the lack of visibility of pending requests ; by Kantar, took place in November. A sample of 1,000 customers,
• complaints about delays with closing accounts: 13 per cent of drawn from Commercial Banking’s three segments – SME, MME
complaints mainly about delays in processing; and Large Corporate – were interviewed by telephone. On a scale
• complaints in bank and life insurance succession, 8 per cent of
complaints mostly about delays in processing.
The number of complaints involving the ombudsman fell by 24 per
cent versus 2019.

from one to ten, the overall satisfaction rating was 6.8 (average Also, Global Banking and Markets has invested in developing
across the three segments), which was stable on 2019. In addition, digital platforms that allow more efficient and responsible
monthly online surveys of customers as part of the group-wide management:
programme to review key moments in the banking relationship • Cash Flow Forecasting is an additional service on the Liquidity
help us better understand our customers’ experiences and Management Portal that was launched last year. Directly
expectations. Survey results are constantly fed back into the accessible on HSBCnet, this solution gives customers a quick
process of reviewing ways in which we can simplify our and accurate insight into their future cash needs.It enables
processes. customers to improve the management of liquidity risk by
* Annual HSBC Relation Clients 360° survey of 1,000 customers, increasing the accuracy and quality of cash flow forecasting.
conducted by Institut Kantar in November 2020. This integrated solution predicts all the cash movements that
will have an impact on their day-to-day cash position for up to
Commercial Banking customer complaints handling in France three years in the future.
In Commercial Banking in France, the number of complaints fell • The cash flow APIs are a new channel of banking
17 per cent in 2020 (1,321 in 2020 versus 1,592 in 2019). The communication, which allow clients to make payments and
Covid crisis has had an impact on the type of complaints received consult balances and account entries. This HSBC solution helps
with 19 per cent of complaints related to it. In this typology of customers optimise cash management through automated
Covid-related claims, 75 per cent concerned credit (postponement transactions, on a continuous real-time basis. For example,
of loan maturities and State Guaranteed Loans), and 15 per cent customers can track international payment orders until they are
concerned means of payment. registered on the beneficiaries’ accounts.
The top nine reasons for other complaints account for 62 per cent • Soft Token Net: HSBCnet is HSBC’s internet platform for its
of the total. Of these, 57 per cent were about account corporate customers. Secure access is protected by a one-time
management issues, 32 per cent were about payments and 11 per password generated by a physical token (keypad). As part of
cent about trade finance. the improvements to the HSBCnet customer experience, since
April 2020, HSBC Continental Europe customers have been
43 per cent of complaints were handled within five business days,
able to connect to the web platform with their smartphone.
versus 45 per cent in 2019 and 66 per cent in fewer than 15
Directly integrated within the HSBCnet mobile app, the soft
business days, versus 69 per cent in 2019. Meanwhile the
token function allows the customer to generate a one-time
processing times related to Covid claims were longer (20 days on
password from their phone, using biometric security
average) than those for other complaints (14 days on average).
(fingerprint or FaceID) with no additional system needed.
After analysing these complaints, we have prepared and are HSBCnet customers can therefore use either their physical
implementing action plans to improve procedures and to raise token (keypad) or soft token (smartphone) according to how
both service quality and customer satisfaction. they want to connect. The soft token also replaces the physical
Middle Office operational teams and project teams have optimised token for on-line signature requirements.
the process for initiating customer relationships both in France HSBC Private Banking in France has made it easier to access
and abroad, cutting processing time by a factor of three across the information and its expertise during the period of restrictions on
two processes. travel and face-to-face meetings with clients by a varied offering
Investing in digital to better support customers of digital content that is accessible to all.
Against a fast-moving economic, political and technological HSBC Private Banking in France also offers its customers regular
background, it is more important than ever to manage risks, webinars presented by internal and external experts on current
achieve operational excellence and seize growth opportunities. themes (investment, markets, philanthropy, sustainable finance,
The shift to digital technology, the challenges of the circular etc.).
economy and new value chains mean that we have to rethink and HSBC Private Banking won Best Global Private Bank for Digital
reinvent the bank–customer relationship. The HSBC Group is fully Customer Experience and Best Global Private Bank for Portfolio
aware of these issues and is investing heavily in solutions that will Management Technology by Professional Wealth Management,
make our services ever more simple, fluid, transparent and a Financial Times publication, at their 2020 Wealth Tech Awards
immediate for our customers. 2020.
More than ever, our Private Banking and Wealth Management Risk of customer disappointment performance indicators
business in France must become more efficient and get to know (theme 1)
its customers better in order to maintain and improve its value
proposition and service quality in a difficult market context. For 2020 2019 2018
individual clients, the main initiatives in 2020 were: Commercial banking customer overall
satisfaction rating (out of 10) 6.8 6.8 NA
• The deployment of tools and practices that allow staff teams to Share of commercial banking
be reached even when working from home (Jabber), provide customer complaints processed within
customers with video-conferencing facilities (Zoom), and 5 business days 43% 45% NA
improve and accelerate the response rate for emails; .
• Adjustments for Call Centre teams as a key link in contacting

branch staff (hours, team specialisation in certain topics,
expansion of range of transactions handled, etc.);
• Simplification of digital pathways (elimination of a code for
digital activation, expansion of functions available from mobile
phones, etc.);
• Improvements to the main customer pathways, with the option
of electronic signature for life assurance arbitrage, subscription
and one-off payments, simplified on-line account opening
(including for legal entities).
Commercial Banking has continued to improve its e-signature
processes, and can now integrate new documents digitally in
order to reduce the number of hard-copy documents sent through
the post.

Sustainability
Financing the low carbon economy to manage the risk The sectors identified as priorities, and for which an internal policy
relating to the non-alignment of emissions financed has been developed, are forestry and its derivative products,
with a net zero pathway (theme 2) agricultural commodities, mining and metals, chemicals, energy,
defence, world heritage sites and Ramsar wetlands.
More than ever, we need to support the transition of our
customers to a low-carbon economy, including the innovation and To improve its risk management, the HSBC Group regularly
low-carbon solutions required to ensure economic resilience. For reviews its internal sector policies. In April 2020, HSBC
HSBC, these are the key elements of sustainable growth that it strengthened its Energy Sector policy by undertaking not to
can influence. consider financing any new coal-fired power plants anywhere in
the world. In fact, the Group has not provided any project finance
The Bank's network covers the world's largest and fastest-growing for any new coal-fired power plants since the announcement of its
trade corridors and economic zones. This enables the Group to energy policy in 2018.
play a strategic role in promoting sustainable growth at the heart
of the global economy. The HSBC Group's business dealings in these sensitive sectors
always involve dialogue with the client, to help it comply with
HSBC's commitment to sustainable finance international standards as well as our policies. However, as a last
HSBC supports the Paris Agreement and, in October 2020, resort, the Group reserves the right to cease all relations with a
announced new commitments to tackling the environmental and client that does not meet its requirements or which has not made
climate crisis: significant progress.
• Reducing its emissions financed – the emissions produced by These proactive policies, which form the basis of a restrictive and
its financing portfolio – with a view to be aligned with a carbon transparent approach to financing carbon-intensive or potentially
neutral trajectory by 2050; environmentally damaging sectors, have enabled the HSBC Group
and HSBC Continental Europe more specifically to avoid financing
• Being carbon neutral for operations, including the supply chain,
new thermal coal mines and coal-fired thermal power stations
by 2030;
since the energy sector policy was revised in mid-2018. In 2020,
• Supporting customers in the transition to a sustainable model coal’s share of the energy mix financed by HSBC Continental
by providing between USD 750 billion and USD 1,000 billion in Europe represented less than 0.16 per cent of its lending to
financing and investment over the next ten years; business; that proportion resulted from the energy mix of certain
• Becoming one of the major managers of natural capital customers, not from our direct financing of coal-related activities,
globally; in line with our internal policy.
• Contributing to the transformation of sustainable infrastructure For more details, visit the Group website: http://www.hsbc.com/
into a global asset class and generating a bankable project our-approach/risk-and responsibility/sustainability-risk.
pipeline. Assessment of HSBC Continental Europe's exposure to
For more information on progress towards these commitments physical and transition risks related to climate change
please see https://www.hsbc.com/our-approach/our-climate- Under the provisions of Article 173 of act no. 2015-992 of
strategy. 17 August 2015 on energy transition and green growth, HSBC
Managing the environmental risks related to banking activity Continental Europe has assessed its risks relating to climate
change with reference to regulatory requirements.
The HSBC Group has undertaken to follow the recommendations
of the Task Force on Climate-related Financial Disclosures ('TCFD') HSBC Continental Europe aims to refine its understanding of its
since they were published in 2017, and reports its progress in its exposure to transition risks in order to maintain the alignment of
annual Strategy Report available on the Group website. Prior to its financing in the energy sector with the projections of the 2°C
this, in 2003 it became a signatory to the Equator Principles, which scenario of the IEA for Europe.
form a voluntary framework to be used by financial institutions in HSBC Continental Europe has worked with Carbone 4, a
assessing and managing the social and environmental impact of consultancy advising on energy transition and climate adaptation,
infrastructure projects. This is revised regularly; the latest updates to carry out top-down analyses of its loan book's exposure to
were published in October 2020. HSBC has voluntarily extended climate risks. We started with the most exposed sectors: Energy &
the Equator Principles to company loans, export financing and Transport in 2016 and Real Estate & Industry in 2017, representing
other project financing tools. one-third of the loan book. In 2018, Commercial Banking analysed
In addition, for over 15 years, HSBC has developed a risk its entire loan book and confirmed that real estate and transport
management framework based on an approach to working with industries, along with producers of equipment for carbon-intensive
business customers that uses formal processes and trained and industries, represent challenges for HSBC in France. In 2019,
responsible employees to understand and manage environmental HSBC Continental Europe again assessed its loan book in the
and social issues in relation to sensitive sectors and themes. energy sector to see how it had changed since 2016. The study
showed that the proportion of the loan book relating to fossil fuels
As a result, an assessment of the environmental and social impact (oil and gas) had fallen and that the proportion relating to
of financing granted to the bank's customers has been embedded electricity had risen, better aligning the energy mix financed by
in the Group's risk management procedures. To ensure global HSBC Continental Europe with the requirements arising from the
consistency in analysis and approval procedures, a system of
environmental and social risk assessment has been established to
record and monitor client companies operating in sensitive sectors
throughout the world, and to obtain more precise information on
the Group's exposure in the management of sustainability risk.
The potential environmental and social impacts caused by
customers conducting business in any of the sectors concerned by
HSBC's policies are assessed by account managers from Global
Banking and Markets and Commercial Banking and by HSBC's
designated Sustainability Risk Managers from the Credit
Department, whether for risky project finance or lending
transactions. Since 2020, regional Reputational Risk Managers
have also had responsibility for supervising management of
sustainable development risks.

IEA's 2°C Scenario for Europe. The emission factor of the (50 years) for EUR 750 million, taking the total volume of the
electricity mix financed by HSBC Continental Europe was 142g issue to EUR 1.75 billion. HSBC also co-managed a new
CO2/kWh in 2018, less than the 335g CO2/kWh proposed by the benchmark 10-year issue for SGP for EUR 3 billion;
IEA's 2°C Scenario for Europe for the same year. In October 2020, • for Unedic, HSBC co-managed three new benchmark Social
HSBC announced that it will use the PACTA (Paris Agreement Bond issues: EUR 4 billion 9 years; EUR 2 billion 15 years, and a
Capital Transition Assessment) methodology to calculate the supplementary EUR 1.5 billion in the 15-year issue.
alignment of its financing portfolios with a trajectory compatible
with the Paris Agreement. HSBC Continental Europe will align with For local authorities in France and Belgium, HSBC Continental
this methodology, in coordination with Group. Europe managed five issues:
This assessment of the HSBC Continental Europe portfolio is being • for the Ile-de-France region, HSBC co-managed a new
complemented by a company-by-company approach, designed by responsible green double-tranche 10-year and 20-year issue for
the Group for ten priority sectors (electricity and utilities; oil, gas a total of EUR 800 million;
and coal; energy; construction and materials; chemicals; • for the Wallonia region, HSBC co-managed a new double-
automotive; mines and metals; real estate; transport; tranche 10-year and 14-year sustainability issue for EUR 700
manufacturing; and agriculture). Its purpose is to evaluate the level million and a first Social Bonds 20-year issue for EUR 1 billion.
of each customer’s sensitivity to the challenges of climate change.
In 2020, more than 260 account managers, accounting for 97 per For Corporate issuers in France, HSBC Continental Europe
cent of the target, completed the training module on transition managed eight issues:
risks. It is part of the HSBC Group's strategy to engage with • for Engie, HSBC co-managed a triple-tranche 5, 8 and 12-year
customers to understand how a transition to a lower-carbon Green Bond for EUR 2.5 billion with a subordinated EUR 850
economy could affect their business and support them with that million PerpNC8 Green Bond;
transition.
• for Chanel, HSBC co-managed a double-tranche 5-year and
More information on the HSBC Group's transition risk assessment 10-year Sustainability Linked Bond for EUR 600 million;
can be found in the 2020 Group Strategy Report available on
• for Orange, HSBC co-managed a 9-year Sustainability Linked
hsbc.com.
Bond issue for EUR 500 million.
HSBC Continental Europe’s contribution to HSBC's sustainable
• for Neoen, HSBC co-managed a 5-year convertible Green Bond
finance 2025 commitments issue for EUR 170 million.
In 2017, the HSBC Group undertook to provide US$ 100 billion in Additional information on green bonds is available at https://
green financing and investment by 2025. www.hsbc.com/investors/fixed-income-investors/green- and-
HSBC Continental Europe's contribution to the Group's US$ 100 sustainability-bonds
billion target amounted to US$ 19.9 billion at 31 December 2020, a Meanwhile, despite the fall in yields reducing the potential
large part of which related to green bond issues. investment universe, HSBC Assurances Vie (France) continued to
In 2020, the HSBC Group won the Euromoney Prize for the world’s invest more in green bonds within its bond portfolio by
best bank for sustainable finance for the second year running. subscribing EUR 104 million to new issues in 2020 (including EUR
HSBC also won this award for Western Europe for the first time. 59 million in Société du Grand Paris) or around 9 per cent of its
total investment in fixed-rate bonds over the year.
Contribution from Global Banking and Markets
Green financing and financing on ESG criteria
Green bonds
HSBC Continental Europe has contributed to the development of
HSBC Continental Europe is heavily involved in developing the
this new field in transition financing and was involved in several
green, socially responsible and sustainability bond market. Across
syndicated deals completed in 2020: loans of EUR 2.5 billion to
all sectors, HSBC Continental Europe managed or co-managed a
Michelin, EUR 750 million to Edenred.
total of 25 green, socially responsible and sustainability bond
issues in 2020, for a total volume of EUR 39 billion. ESG research for asset management customers
In 2020, in the Supranational and Agency segment in France, The Equity Research and Sales team at HSBC Continental Europe
HSBC Continental Europe managed 12 deals: places considerable emphasis on SRI. In 2020, it organised several
ESG conference calls, at which it invited a company to present its
• for the European Commission and the European Union’s SURE
sustainability strategy to the bank’s SRI investment customers.
Programme, HSBC co-managed an issue of EUR 8.5 billion 15-
These meetings were attended by sustainability directors from
year Social Bonds. The SURE programme is an EU programme
several major listed companies. There were also meetings in
of temporary support to mitigate unemployment risks resulting
which financial analysts from HSBC Continental Europe presented
from the negative economic and social effects of the Covid-19
particular ESG themes (‘US elections and ESG’, ’Energy transition‘,
pandemic;
‘The European Green New Deal’)
• for the Council of Europe, HSBC co-managed a EUR 1 billion
issue of 7-year Covid-19 social bond;
• for Agence Française de Développement (‘AFD’), HSBC co-
managed a new EUR 1 billion issue of 5-year Climate Bonds;
• for Groupe Caisse des Dépôts et Consignations (‘CDC’), HSBC
co-managed a new benchmark issue under the issuer’s new
Sustainability Bonds programme for a total of EUR 500 million
over 5 years;
• for Caisse d’Amortissement de la Dette Sociale (‘CADES’), HSBC
co-managed a USD 4 billion issue of 5-year Social Bonds and a
EUR 5 billion issue of 5-year Social Bonds;
• for SNCF SA, HSBC managed a first issue of 100-year Green
Bonds for a total of EUR 50 million, and then co-managed
SNCF SA’s first public syndicated Green Bond issue – EUR 1.25
billion for 10 years;
• for Société du Grand Paris, HSBC co-managed a supplementary
issue of the issuer’s Green Bonds, maturing on 18/02/2070

Sustainability
Commercial Banking contribution This multi-partnership has the particular aim of supporting small
and medium-sized companies, which do not always have the
The whole Commercial Banking team has been mobilised in order
human and financial resources to manage their ESG risks. Partners
to direct financing and lending to companies that are on a
provide, scientific, technical, methodological and regulatory
pathway compatible with the Paris Agreement targets.
support and through this one-stop approach create unique
A Head of Sustainable Finance has been appointed for conditions for providing tailored support to HSBC customers.
Commercial Banking, responsible, alongside a dedicated team, for:
https://www.business.hsbc.fr/fr-fr/articles/finance-durable
• developing sustainable solutions and financing for Commercial
Sustainable Governance
Banking customers of HSBC in France, by ensuring good
understanding of ESG issues by all stakeholders within the In 2020, Commercial Banking introduced a Sustainable Finance
bank; Forum, a body that aims to validate sustainable financing
transactions from an ESG point of view and to tackle underlying
• working with a dedicated origination team to structure
risks such as the risk of ‘greenwashing’ or ‘ESG-washing’,
sustainable finance transactions with Commercial Banking
reputational risk, corruption risk and legal risks.
customers to direct the bank’s portfolio on a pathway
compatible with the Paris Agreement targets. Growth of responsible investment within Private bank and
Commercial Banking has thus put in place a number of strategic Wealth Management
initiatives to support managers, the risk function and customers The integration of Environmental, Social and Governance criteria
themselves, as presented below. has been a prerequisite that the bank has incorporated in its
Development of sustainable financing products management processes since 2007 as a complement to financial
criteria. Today, 100 per cent of our asset management products
Commercial Banking has put in place: factor in ESG criteria when investment decisions are made.
• a financing allocation of EUR 500 million, backed by a In a continuation of the process it has adopted since launching its
European Investment Bank resource, including at least EUR 100 first SRI equity fund in 2001, HSBC Continental Europe offers a
million dedicated to financing green projects and assets for broad range of Socially Responsible Investment (‘SRI’) products
SMEs and mid-sized companies. Through this allocation, within a French registered SICAV, the HSBC Responsible
customers benefit from a 12.5 basis point reduction in their Investment Fund (‘HSBC RIF’)*. This covers seven SRI-labelled
financing rate. funds across all asset classes and also a new range of profiled
• green lending, where funds are released only to green projects funds. These solutions – HSBC RIF- SRI Moderate, HSBC RIF-SRI
and assets, in accordance with the Green Loan Principles Balanced and HSBC RIF-SRI Dynamic by increasing level of risk -
produced by the Loan Market Association (‘LMA’); are mainly invested directly in securities in the eurozone. This
diversified SRI range combines an SRI investment process with
• impact lending, that is to say loans whose margin is linked to multi-asset investment expertise; the SRI approach is overseen by
environmental, social or governance (‘ESG’) criteria, in order to managers and analysts who use proprietary tools and a
support mid-sized customers on their sustainability pathway, in comprehensive ESG research platform ensuring the consistency of
accordance with the Sustainability-Linked Loan Principles investment decisions. This full product range allows customers to
produced by the LMA. HSBC customers are supported by a invest in the theme of sustainable finance according to their risk
dedicated team in the provision of this type of loan with appetite.
Ethifinance.
The fund also features an SRI-energy transition subfund called
Implementation of a sustainable multi-partnership HSBC RIF-Europe Equity Green Transition, which has three
This system has been developed with experts in energy transition, recognised European labels: the French government's SRI label,
and reflects the need for vigilance and ESG strategy in order to the Greenfin-France Finance Verte label, and the Belgian ‘towards
support Commercial Banking customers on their sustainability sustainability’ label created by Febelfin and awarded by the
pathway: Belgian finance industry federation in November 2019.
• Energy Economy offers small and medium-sized businesses, via Since 2017, HSBC Continental has also offered 'lower-carbon'
the Up to Green platform, a suite of four complementary energy funds aiming to achieve both capital growth and income over the
efficiency services, with support ranging from the identification long term. The fund invests at least 90 per cent of its assets in the
of priority works to their financing, via assistance in finding equity of companies of all sizes, and seeks to have a smaller
sources of support such as Energy Savings Certificates. carbon footprint than its benchmark index.
• EcoVadis offers companies an assessment of their ESG The resilience of the SRI range, combined with the collective
performance, rating of improvement processes, peer commitment of the bank and investors, have produced total new
comparison and communication on good practice to customers money of more than EUR 262 million since the beginning of the
and commercial partners. EcoVadis also offers larger year (to 31 October 2020) at a time when there was a net outflow
companies support in laws relating to oversight of the analysis from non-SRI UCITS. Money invested in the SRI range currently
of their supply chains. represents around 19 per cent of assets under management by the
bank’s teams.
• EcoAct supports mid-sized and large companies in their low-
carbon strategies, from an initial diagnosis through to the Strengthened by these factors, HSBC is seeking to position itself
implementation of a decarbonisation action plan, including the as a driver of growth and a key player in this source of support for
definition of an emissions reduction pathway compatible with sustainable development. This is why it is continuing to develop
the estimated carbon budget from GIEC with a view to limiting sustainable products and also to educate its network of advisers
global warming to between 1.5°C and 2°C, life cycle analysis through regular training and communication on subjects relating
and carbon offsetting.
• EY, a longstanding partner of HSBC Continental Europe in the
Prix de l’Entrepreneur, offers large companies a range of
services related to their ESG challenges. EY supports them in
regulatory compliance and the definition, implementation and
value proposition of their strategies.
• EthiFinance, a European ratings agency specialising in extra-
financial ratings for mid-sized companies, has expanded
HSBC’s sustainable finance offering thanks to its expertise in
impact lending.

to sustainable, socially responsible finance, in order to build Climate change commitments
awareness amongst HSBC staff who are the main sources of For HSBC Global Asset Management, engagement with the
information for customers. companies in which it invests, to better understand and support
Growth of sustainable finance within Private Banking their practices in terms of climate reporting, the management of
risks and opportunities related to climate change and our policy in
HSBC Private Banking in France has established a range of
this area, is an important step in the process. Asset Management
responsible investments for both discretionary and advisory
also adopts direct, collaborative engagement initiatives (such as
management. This range has been expanded by the launch of the
ClimateAction100+) and uses its voting decisions to highlight any
new HSBC Sustainable ETF Range and a selection of external
potential problems.
funds. More specific investment themes are also covered, from the
contributions of forestry assets and philanthropy to the The climate risk demands better communication
diversification of assets, via informational webinars. HSBC Global Asset Management has since 2014 supported the
Since January 2020, nearly 10 per cent of orders under advisory ‘Non-Disclosure Campaign’ initiated by CDP (3). This targets
mandates have been for SRI funds. companies in high-emissions sectors, which still do not contribute
to the CDP database, despite its widespread use by investors.
Asset management contribution to managing climate risk and
HSBC Global Asset Management is convinced that measurement
to responsible investment
of greenhouse gas emissions allows companies to improve
Managing climate risk in asset management management and, ultimately, reduce emissions. Over the years,
With HSBC having committed to being carbon neutral by 2050, the number of companies reporting to CDP has increased steadily.
asset management played an ever more active role in 2020, This is why HSBC Global Asset Management has chosen to
developing solutions and methodologies designed to attenuate contact a greater number of companies every year. In 2020, we
climate risk. It appears clear that the companies best prepared for wrote to 342 companies compared to 155 in 2019. Despite the
climate change, those engaged in a credible process of impact of the Covid-19 pandemic in 2020, we have seen an
transformation and perceived as such by the market, will be those increase in the rate of positive responses from companies on their
best placed to build value. HSBC Global Asset Management’s GHG emissions, in particular.
fiduciary duty to its clients logically requires it to evaluate the HSBC Global Asset Management was one of the first institutions
resilience of its investments to climate risk and to contribute to sign the recommendations of the Financial Stability Board's
actively to the transition to a low carbon economy. Task Force on Climate-related Financial Disclosures, and started to
HSBC’s offering is innovative, diversified and ambitious in helping publish the carbon footprint of its equity portfolios in 2015 after
address climate change signing the Montreal Carbon Pledge.In 2019, as well as covering
equity and bond portfolios, carbon footprint analyses also covered
In 2020, working in cooperation with IFC, a member of the World diversified and real-estate portfolios managed in five major asset
Bank Group, HSBC Global Asset Management launched REGIO, a management centres (Paris, London, Hong Kong, New York and
fund of green bonds issued by non-financial companies in Düsseldorf). Asset Management takes into account assets
emerging economies, raising US$ 474 million to support climate- invested in emerging and developed markets, whether they are
friendly investment in developing countries. In June 2020, it also managed actively or passively. To analyse portfolios’ carbon
launched a new generation of sustainable equity ETFs seeking intensity, HSBC Global Asset Management used two recognised
triple optimisation: maximisation of ESG ratings, reduction of suppliers of carbon data in 2019: S&P Trucost and MSCI.
carbon intensity and a reduction in exposure to reserves of fossil
fuels. Thus, compared to the previous year, over a larger perimeter (4),
the weighted average carbon intensity (scopes 1 and 2) expressed
Ambition Climat in tonnes of CO2 per million dollars in turnover was thus
At the end of 2019, twelve institutional investors, coordinated by established, at the end of 2018, on the S&P Trucost database:
Caisse des Dépôts and with the support of Fédération Française de • 244 teCO2/USD million revenue for equity portfolios (295 end
l’Assurance, launched the ‘Ambition Climat’ call for tenders, to 2018);
identify equity and bond strategies contributing to a steady
reduction in carbon emissions and the attenuation of global • 264 teCO2/USD million revenue for bond portfolios (228 end
warming by adopting a vigorous and dynamic alignment with the 2018).(5)
2°C scenario laid out in the Paris Agreement on climate change. In For more information about HSBC Global Asset Management's
June 2020 (1), HSBC Global Asset Management (France) was climate approach, visit www.assetmanagement.hsbc.fr
chosen to manage the bond fund thanks to its novel approach
built around the carbon budget of an individual European citizen, (3) The Carbon Disclosure Project is an organisation that publishes the
with a focus on the energy transition sectors judged to have the environmental impact of the largest companies.
(4) 46.5 per cent of HSBC Global Asset Management's total asset under
greatest impact. This ‘climate target’ is measured using a
management ie USD 517 billion as of 31 December 2019
proprietary climate score, based in part on the carbon savings
(5) The carbon intensity of bond portfolios is difficult to compare with
indicator developed by Carbon4 Finance.
those of previous years because sovereigns are treated separately. In
(1) www.afg.asso.fr/wp-content/uploads/2020/06/cp-fonds-objectifs- previous years, government bonds were consolidated with corporate
climat-version-propre-18062020.pdf bonds which led to a reduction in the total carbon intensity of the
asset class.
Carbon emissions avoided
In October 2020 (2), HSBC Global Asset Management announced a
cooperation with Carbon4 Finance, to help refine its analysis of the
companies in which it invests or wishes to invest on the basis of
their climate pathway. Although measuring the carbon footprint of
companies has become a widely used indicator, measuring the
real impact of companies’ energy transition strategies over the
medium to long term is a harder proposition. The ’greenhouse gas
emissions avoided‘ measurement developed by Carbon4 Finance
to assess companies’ climate pathways could, over time, come to
play an important role in the global process of ESG integration, as
it covers all regions and all asset classes.
(2) www.carbon4finance.com/communique-hsbc/

Sustainability
Systematic evaluation of environmental, social and governance along with themed ESG research and specific reports relating to
issues and climate risk in asset management fixed income investment on a global scale.
The HSBC Group is more convinced than ever of the need to (5) www.assetmanagement.hsbc.fr/-/media/files/attachments/common/
incorporate environmental, social and governance (’ESG‘) factors news-and-articles/impact-esg-integration-fixed-income-portfolios-
in its investment decisions to protect the value created for its performance.pdf
clients and support the transition to a sustainable economy and
society. Engagement in protecting biodiversity
As one of the first signatories to the Principles for Responsible Building on collective undertakings to tackle climate change
Investment (‘PRI’) in 2006, HSBC Global Asset Management (Climate Action 100+, IIGC, One Planet Asset Managers, etc.),
committed at that time to integrating ESG factors in its investment HSBC Global Asset Management joined the Finance for
decisions. Alongside traditional criteria such as profitability, credit Biodiversity Pledge initiative in September 2020. This seeks to
quality, valuation and financial solidity, ESG analysis gives a true protect and restore biodiversity through financing and investment.
360° view of the financial instruments in which to invest. HSBC We have undertaken to bring our expertise and global reach to
Global Asset Management does not operate an overarching bear in a collegiate approach towards identifying more sustainable
hierarchy between environmental, social and governance factors: investments in agriculture, forestry, land use and other nature-
they contribute equally to informing its investment decisions with related areas. Lastly, the Pollination partnership helps cement
a view to obtaining positive financial results for its customers and, HSBC’s ambition to become the biggest manager of ‘natural
more precisely, the best returns adjusted for long-term risk. ESG capital’ funds worldwide. The HSBC Pollination Climate Asset
integration consists of integrating environmental, social and Management joint venture intends to establish and market funds
governance factors in investment analysis. Understanding the investing in a diverse range of activities that preserve, protect and
risks and opportunities facing issuers strengthens a ’citizen‘ enhance nature over the long term and address climate change.
approach by helping understand the most urgent challenges faced Measuring biodiversity
by today’s economies. This investment approach, the products
offered and the role adopted to make the financial system more In addition, HSBC Global Asset Management (France) has, since
sustainable all contribute to this approach. September 2020, been part of the ‘B4B+’ working group set up by
CDC Biodiversité. In order to create a method suited to the needs
ESG integration process and constraints of financial companies and institutions, the B4B+
HSBC Global Asset Management is certain that ESG issues can Club intends to jointly construct and test a Global Biodiversity
have major repercussions on companies’ performance. Challenges Score in close cooperation with its members. The aim of the B4B+
such as climate change, water scarcity and availability, Club is to act as an incubator for this indicator, the Global
deforestation, health and safety and the remuneration of directors Biodiversity Score (’GBS™‘), and the associated biodiversity
create risks and opportunities for companies that financial markets footprint method.
may not have valued accurately. This is why ESG criteria are Voting and shareholder engagement
integrated into the analysis of financial securities, alongside
financial fundamentals. This analysis varies from sector to sector Engagement is an integral part of the fundamental research
in order to take account of the specific features and industrial process and long-term investment approach at HSBC Global Asset
reality of each. The associated risks and opportunities thus Management. Equity and credit analysts from the active
identified help produce better informed investment decisions. At management teams, together with portfolio managers, are in
31 December 2020, more than 16,000 issuers around the world direct contact with issuers throughout the investment process,
were covered by an ESG analysis accessible to all analysts and from before to after the investment period, and follow up ESG
fund managers at HSBC. issues as part of their research and their discussions. Engagement
initiatives are determined as a function of the size of holdings, the
Principles for Responsible Investment (’PRI‘) issues identified and overall exposure, expectations in terms of
The consistency and robustness of HSBC Global Asset change and the ability to achieve the expected results. Thanks to
Management's approach to integrating ESG factors has once this approach, at each stage of the investment cycle the main ESG
again been underlined by the latest annual PRI assessment, which issues are integrated in analysis and the decision-making process,
ranks and rates the signatories on the quality of the in order to reduce risk and optimise performance.
implementation of the six principles for responsible investment In As a first step, HSBC Global Asset Management might notify the
2020, HSBC Global Asset Management once again received an A+ Chairman and non-executives of its concerns or vote in such a
score in the main areas assessed – including strategic governance, way as to express its concerns over a company’s lack of action. If
equity management and bond management – putting it in the top these measures do not produce results, we can join forces with
decile of a group of more than 500 asset managers in each other investors or bring the problem to the notice of a broader
category, including for ABS – Asset Backed Securities, an asset audience through statements, letters to the press or participation
class that is rarely assessed from an ESG standpoint. This latest in shareholder meetings, with the submission of shareholder
annual PRI evaluation, which rates and ranks signatories by the resolutions.
quality of their implementation of the six principles for responsible
investment, underscores the quality of our approach to ESG Over the past three years, this shareholder engagement has
criteria. increased significantly in the wake of the integration and improved
understanding of the effect that ESG issues can have on the
Focus on ESG research for bond assets performance of companies. In 2020, HSBC Global Asset
In 2020, quantitative research by HSBC Global Asset Management Management addressed ESG themes with more than 2,300 issuers
confirmed that the integration of ESG factors had a positive impact in 78 markets. Its interactions with companies increased by +11
on bond management strategies during the Covid-19 crisis. per cent during the lockdown period, from 1,504 in the second
Nevertheless, because analysis carried out under unprecedented quarter of 2019 to 1,682 in the second quarter of 2020 – reflecting
conditions should not be the sole driver of long-term fixed income
allocations, these results were put in context by a detailed review
over the longer period from 2007 to June 2020, the main results of
which were published in a research paper, ‘The impact of ESG
integration in fixed income portfolios’ performance’ (5).
Within the Global Credit Research team, the appointment of a
Head of Fixed Income ESG and Green Research, in August 2020,
confirmed the desire to offer sustainable investments to increase
the resilience of client portfolios. The purpose of this new role is to
provide ESG expertise to all fixed income management teams,

the intensification of the exchanges of companies with their sustainable finance and sustainable development for customers
shareholders during this period. through innovative solutions and an agile approach.
Socially Responsible Investment ('SRI') range All in all, more than 1,600 participations were registered in the
nearly 40 training sessions organised in 2020. In addition, in 2020,
HSBC Global Asset Management has increased its range of
close to 1,700 participations were registered in the sustainable
sustainable finance products, with a full range of SRI solutions
finance modules accessible via HSBC University.
called HSBC Responsible Investment Fund (‘HSBC RIF’)*; this
French registered SICAV has seven SRI-labelled sub-funds Factoring sustainable finance criteria into remuneration
covering all asset classes and including a new diversified
The HSBC Group's management committee is responsible for
management offering. This unprecedented product allows
implementing the sustainability strategy, which results in specific
customers to invest in the theme of sustainable finance according
long-term targets for the Group's executive directors and chief
to their risk appetite, with five risk profiles from moderate to more
executives. In 2017, executive directors' long-term targets
aggressive.
included a total target of USD 30-34 billion for financing and
Despite an unprecedented context in 2020, we once again noted investing in clean energy and low-carbon technologies and
strong net inflows (+391 million EUR in 2020) – in line with 2019 projects that contribute to the attainment of the Paris Agreement
inflows (+399 million EUR in 2019) – on the HSBC Responsible and the United Nations' Sustainable Development Goals, over a
Investment funds range including socially responsible FCPEs as three-year period ending on 31 December 2020.
well as our low-carbon funds offering and our climate fund (8).
These targets are adopted by the Group's subsidiaries. For HSBC
(6) HSBC Responsible Investment Funds (HSBC RIF) is a French mutual Continental Europe, targets such as the development of
fund that acts as an umbrella for sustainable finance savings sustainable finance, the integration of the climate risk into risk
solutions accredited by the French government. This fund, which has management, the development of action both internally and
had seven sub-funds since 30 September 2019, has more than EUR externally, the reduction in CO2 emissions per employee across the
2 billion of assets under management as of End December 2020. scope of operations are criteria for variable remuneration and are
(7) Annual net inflows received by HSBC Global Asset Management included in the annual scorecard for Commercial Banking, Retail
(France) into open-end Sustainable Finance funds distributed in the Banking and Wealth Management and the Operations department.
markets listed below if those funds are registered there, or via
socially responsible employee savings funds. The markets covered by Performance indicators for risks relating to the non-alignment
HSBC Global Asset Management (France) are: France, Benelux, of emissions financed with a net zero pathway (theme 2)
Spain, Italy, Nordic countries, Greece and Malta.
2020 2019 2018
(8) Data as of December 31, 2020.
Contribution to Group's sustainable
finance 2025 objective (USDm) 13,895 6,848(1) 5,285(1)
Growing importance of environmental, social and governance
Exposure to coal 0.16% NA NA
issues and climate risk in insurance
Evolution of net new money in
In 2020, HSBC Assurances Vie (France) maintained its strong responsible investment funds year on
focus on environmental quality as part of its real-estate policy. year (2)% 164% 190%
That involves selecting properties that meet the highest
1 Indicator recalculated on HSBC Continental Europe scope.
environmental standards and carrying out works to enhance their
environmental quality as confirmed by independent accreditation Controlling the bank’s direct carbon footprint to
(HQE Excellent, Effinergie Renovation and BREEAM labels), such manage the risk relating to the non-alignment of the
as the 12M building in Levallois-Perret, which was fully renovated
bank’s operational carbon footprint with a net zero
in 2020.
pathway (theme 3)
Building employees' expertise in sustainable finance issues
As part of the Reduce strategy to reduce annual CO2 emissions per
In order to help employees develop the expertise they need to employee by one tonne between 2012 and 2020, HSBC is
meet sustainable finance challenges, the Sustainability reducing its energy consumption and increasing the proportion of
Department at Group and HSBC Continental Europe level and the energy coming from renewable sources to 100 per cent by 2030.
sustainability champions in each business line organised more
In October 2020, the Group announced its new commitment to
than 40 awareness-raising and training events in 2020, including:
becoming carbon neutral for its operations, including its supply
• themed training events for business lines and the Risk chain, by 2030.
Management function, dealing with various subjects such as:
HSBC Group publishes its annual carbon emission results in its
biodiversity, the other sustainable finance emergency; new
annual report, available on its website (http://www.hsbc.com/our-
European regulations relating to sustainable finance; metal
approach/measuring-our-impact).
recycling; additive manufacturing; European regulation;
biodiversity; and the EnRoads climate simulator;
• other training sessions dedicated to financing energy efficiency
under the Inveest programme in partnership with Ademe;
• a two-and-a-half-day training programme for directors run in
conjunction with Earthwatch, an NGO, combining theoretical
training and presentations from internal and external experts.
Earthwatch was awarded the gold medal for this programme at
the Corporate Engagement Awards 2020;
• HSBC also called on the expertise of its partners Ethifinance,
EcoAct, Economie d'Energie and Ecovadis to organise
specialised training for the sales function;
• a large number of webinars was also organised during
Sustainable Finance Month in June, a global initiative
developed by the HSBC Group; and Sustainable Finance Week
in October, which builds on existing initiatives;
• Lastly, 2020 saw the launch of the Sustainable Lab, a joint
resource for Commercial Banking and Global Banking and
Markets, which aims to support the bank’s transformation in

Sustainability
To help fulfil HSBC's strategy, HSBC Continental Europe focuses Circular economy
its attention on four objectives:
HSBC Continental Europe continues to seek to reduce waste
• improving energy efficiency; production in general and a reduction in non-recycled waste in
• reducing CO2 emissions, notably those related to business particular. Waste production fell from 849 tonnes in 2019 to 591
travel; tonnes in 2020, a fall of more than 30 per cent which is explained
by a methodological alignment with the Group which excludes site
• reducing paper consumption; waste from its scope and above all a drop in activity in buildings
• reducing production of non-recycled waste linked to lockdown. It represented on average 75 kg per employee
per year in 2020 versus 96 kg in 2019.
Reducing CO2 emissions
Electronic waste
In 2020, the main areas of action involved the on-going policy of
building renovation, actively seeking to reduce energy consumed At the start of 2020, a project to replace office telephones with
in the management of HSBC sites, and promoting remote working more up-to-date models was rapidly changed as a consequence of
and reducing business travel. the health crisis and the widespread uptake of remote working.
With the vast majority of staff working remotely and using new
Carrying on from the HQE certification it obtained for Coeur on-line communication tools (notably Jabber and Zoom), decision
Défense (46,000m² of office space) in 2011 and the ‘NFHQE™ was taken not to replace fixed-line telephones. At year end 2020,
Bâtiments Tertiaires en Exploitation’ energy efficiency certification, HSBC Continental Europe decommissioned and recycled more
under which it achieved an ‘Excellent’ rating in 2018, in 2020, than 5,800 telephones notably at the time of moving headquarters
HSBC Continental Europe maintained the ‘Exceptional’ rating from avenue des Champs Élysées. This represents a total of 9.7
achieved in 2019. tonnes of products which will be collected and recycled by Cisco.
On December 1, 2020, HSBC moved its headquarters to 38 avenue Regarding mobile phones, in February 2020, 478 mobiles were
Kleber, Paris (16). This 16,350m² building has been fully collected from HSBC Continental Europe staff and passed to
modernised and was chosen for its eco-responsible qualities, Recommerce Solutions for recycling or reconditioning, thus
having received BREEAM and BBC Effinergie certification. In contributing to sustainable development and solidarity
addition, its builder received an Exceptional HQE rating. employment in France:
Transport • 2,619kg of CO2 saved thanks to the re-use of products;
The pandemic had a significant impact on business travel in 2020: • 60,677.3MJ of primary electricity use avoided thanks to
total kilometers travelled dropped by 60 per cent compared to product recycling;
2019. Even though 2019 had already seen a sharp reduction in
international travel, due to a suspension of trips to Hong Kong • 60 hours of reintegration employment created for product
initially, due to political developments, and then to China, when processing.
the emergence of the Covid-19 virus was first reported, since Paper
March 2020 international travel has come to a virtual halt in
Having already been reduced in prior years, the reduction in paper
France and around the world. Although domestic travel was less
use gathered pace significantly in 2020, with the widespread use
tightly restricted, it was complicated in the early part of 2020 by a
of remote working favouring increased adoption of digital
strike on the SNCF rail network and major social unrest. As a
documents. The result was a fall of more than 33 per cent
result, CO2 emissions were down by 59 per cent.
between 2019 and 2020.
In 2020, HSBC also changed its relationship with its main taxi
Food issues
booking service (G7), with a default preference for ’green’ badged
taxis for all its subscriptions (apart from Club Affaires). Despite their importance on an environmental and social level,
food waste, the fight against food poverty, equitable, sustainable
In all, CO2 emissions from transport were 0.17 tonnes eq. CO2 per
member of staff per year, down 60 per cent on 2019. and responsible food and the respect for animal welfare are not
material matters within the framework of the bank's business.
In accordance with French decree no. 2011-829 of 11 July 2011 on
For more detailed information on HSBC Continental Europe’s
greenhouse gas emission footprints and the local climate energy
undertakings under its environmental policy visit hsbc.fr or
plan, HSBC Continental Europe has compiled and published its
hsbc.com
carbon report for 2019, showing a slight increase in tonnes of CO2
equivalent produced. Information on the company's 2020 Awareness-raising measures
greenhouse gas emission footprint will be available on http://
Throughout 2020, the Sustainability Department organised
www. about.hsbc.fr/fr-fr/hsbc-in-france/ community from January
awareness-building campaigns on the environmental footprint,
2021.
and more particularly the digital footprint and good practice to
Mobility plan adopt in the light of increased remote working and use of digital
The French energy transition act (act no. 2015-992 of 17 August solutions. Conference calls were organised during Sustainable
2015) requires companies with more than 100 employees on a Development weeks in September, and Waste Reduction weeks in
single site located in an 'urban travel plan' area to prepare a November, and there were also regular articles in the
mobility plan. In 2018, HSBC Continental Europe carried out an Department’s monthly Newsletter.
initial analysis for the La Défense (Courbevoie) site, which is our
largest site in terms of the number of people working there,
examining site accessibility and employee practice and
expectations regarding their commute to work. The study led to
the signature, in early 2020, of the 'Charter of reciprocal
undertakings to reduce rush hour travel' promoted by Ile-de-
France Mobilités and Paris La Défense, the aim of which is to
improve travel conditions on public transport for staff travelling at
peak times. HSBC Continental Europe, as part of its effort to
increase quality of life at work, has adopted a proactive remote
working policy, allowing an increasing proportion of employees to
work in this way. In 2020, in the face of the coronavirus health
crisis, remote working was extended to all staff. This process saw
the creation of 3,200 new access tokens within just a few days,
after the first lockdown was announced in March.

On-line training modules were also offered by HSBC University. • The second, launched in 2018, covers financial education
through 'Dilemma', a board game examining budgeting and
Performance indicator for risk relating to the non-alignment of
financial issues. In 2020, to mark Sustainable Development
the bank’s operational carbon footprint with a net zero
Week, an on-line quiz was made available for people aged 15 to
pathway (theme 3) 20, to help them discover the basics of managing a budget and
2020 2019 2018 learn about banking products and services.
CO2 emissions(2) (thousands of tonnes Since 2019, the HSBC Foundation for Education has been a
equiv CO2) per employee(3) 0.48 0.6 0.66
member of France's Institut pour l'Education Financière du Public
Evolution year on year (21)% (10)% 3% ('IEFP'): information on all of the IEFP's work can be found at
. lafinancepourtous.com. IEFP's aim is to help everyone acquire the
Managing the economic and social risks created by basic knowledge required to feel comfortable with financial
growing vulnerable populations by strengthening matters and understand the economic issues of the world we live
financial education among our customers, people and in. The partnership between the HSBC Foundation for Education
partners as a source of financial prosperity and a and the IEFP has made it possible to reach more than 59,000 of
means of tackling exclusion (theme 4) the 4,000,000 visitors to the La finance pour tous site.
Financial education is at the heart of individual and social In 2020, 184,250 people were sensitised to financial education or
progress. Improving the understanding of money management supported through our programmes and actions, this exceeding by
and economic relationships helps people progress economically, 96 per cent the 2020 target of 60,000 people.
professionally and socially.
More on financial capability actions at https://www.hsbc.com/our-
With this in mind, HSBC Continental Europe supports initiatives to approach/building-a-sustainable-future/employability-and-
enable its clients, its employees and members of the communities financial-capability.
in which the bank operates to build awareness and develop skills
Performance indicators on economic and social risk relating to
to give people confidence in managing their budgets and building
their savings. HSBC Continental Europe has set itself the objective
increases in vulnerable populations (theme 4)
of supporting 60,000 people on the subject of financial education 2020 2019 2018
by 2020. Number of beneficiaries involved in
the programmes 184,250 117,570 26,366
In 2020, HSBC Continental Europe offered its customers a series
of online conferences to address the questions they might have Progress towards 2020 objective 307% 196% 44%
about building their savings, preparing for retirement, protecting .

their wealth and how to diversify their investments. An inclusive and responsible HR strategy
In addition, to give us a better understanding of how, through our For human resources management at HSBC Continental Europe,
savings and socially responsible investments, we all can support 2020 brought very specific circumstances in several areas. Quite
companies that are helping to create a sustainable economy and apart from the consequences of the health crisis, which mobilised
preserve the planet, HSBC Continental Europe has since late 2019 the Human Resources Division, supporting the bank’s
been producing a podcast focusing on socially responsible transformation also had a central place. Against this background,
investing entitled 'Les Voies de l’économie’. Three episodes were human capital issues were the company’s first priority. The
produced in 2020 covering themed investment, carbon and waste associated risks are threefold:
management; in all, the four episodes have been listened to
• Risk of failure to recruit and retain talent ;
18,000 times.
• Risk of inability to ensure the employability of our employees
In 2020 HSBC Continental Europe continued its campaign of
given the transformation of the banking sector;
communication with customers on the topic of financial fragility,
notably through the HSBC.fr website. In particular, we send • Risks related to lack of diversity among teams and
personalised letters to customers identified as fragile, informing psychosocial risks.
them of the 'HSBC Service Initial' offering for fragile customers. In Responsible management of the health crisis to protect
2020, the number of these letters rose sharply, with a 213 per cent colleagues and customers
increase in letters sent over the year (4105 letters in 2020 vs 1283
in 2019). This increased effort to provide information to customers In all of the Continental European countries where HSBC is
identified as fragile resulted both from an expansion of the scope present, the pandemic resulted in restrictions on movement and
of customers contacted and a renewal of the information provided working on site; significant changes to the organisation of work
on a regular basis. In addition, this year the bank put in place a were made accordingly. Remote working was deployed
permanent early warning system using predictive fragility immediately and on a massive scale (in France it affected some
identifiers. 90 per cent of employees), allowing business to continue
efficiently and without interruption. Within the branch network,
Each week, HSBC Continental Europe also sends customers who which remained open as an essential service, a mixture of
have signed up for this offering an account summary by text adjustments to work teams, hours and remote working was used.
message, helping them to assess and monitor their budget. Only 2 per cent of employees were put on paid leave during the
In addition, aware that the Covid-19 health crisis could lead to an lockdown period.
increase in the number of financially fragile people and of The unprecedented circumstances forced teams to adapt very
questions about how a highly diverse group of people could be quickly to new working conditions, which created a potential
supported, HSBC strengthened its support for the work of Crésus
in order to help it expand its range of support and offer anyone in
a fragile financial position, including our customers, an individually
tailored service including attentive listening and legal, tax and
financial advice.
The HSBC Foundation for Education also supports the Crésus
charity, whose goal is to prevent financial, economic and social
exclusion through intervention, training and high-level educational
programmes. Support for the charity covers different programmes:
• The first, launched in 2013, is a support and mediation platform
for individuals, including our employees, in difficult situations;

Sustainability
source of stress. Anxiety amongst staff was further increased by members, while helping them to give their best to the Bank.
the health crisis (hospitalisations, deaths, etc.), the deterioration of In an environment where potential expresses itself in many
the economic outlook, and the personal and professional different ways, HSBC is convinced that employees' differences
difficulties created by the crisis (isolation, increased domestic and represent a source of wealth. It places a particular emphasis on
family responsibilities, health problems and so on). Lastly, with diversity, so that it may be fully expressed in all its aspects,
banks having special responsibility during the crisis and given the particularly regarding gender, age, skin colour, background,
role they have played in supporting companies and individuals, religion, disability, sexual orientation, appearance and opinions. All
employees faced periods of intense activity. employees should be able to be themselves, in an organisation
The ‘psychosocial’ risk (work-related stress, anxiety, depression) that places value on a diversity of profiles and opinions. Make this
was thus addressed by a specific action plan that was closely diversity an asset is a major stake for the bank.
monitored by the company:
Managing the risk of inability to ensure the
• Regular and targeted communication campaigns from the employability of our employees given the
Human Resources division (practical details on health matters transformation of the banking sector, by developing
and the organisation of work); talent in all its guises and strengthening employability
• Adjustments to the management of leave, to ensure that (theme 5)
adequate leave could be taken without imposing requirements; Employability is a major theme in ensuring that people can adapt
• Real time monitoring of Covid-19 cases and contact tracing, to organisational and technological changes, and more broadly
with the appointment of a contact person at the heart of the changes in the labour market, particularly in the context of
system backed by the Workplace Health Team; uncertainty and change such as was seen in 2020. To help prepare
employees, it is necessary to support them in developing the skills
• Regular dialogue with the bodies representing staff;
that the business will require in the future.
• Enhanced support for managers;
Accordingly, HSBC provides the resources each employee needs
• A virtual support programme (#Résilience) for employees and to develop and take control of their career. Support is provided
management (webinars, co-development, coaching, etc.); through an efficient training ecosystem (innovative content,
• Surveys (Snapshot Survey) and direct dialogue with employees tailored formats and individualised training) that facilitates
(‘Boost Your Bank’ workshops). A survey in June allowed us to continuous learning, internally and externally, and helps increase
establish the perceived well-being of employees (65 per cent employees’ adaptability, agility and multi-disciplinary talents.
favorable responses) and identify the main obstacles to well- In 2020, the HSBC Group rolled out an ambitious upskilling
being (family and domestic responsibilities for 30 per cent, programme, ‘Future Skills’, which was backed in France by
technological problems for 29 per cent). Overall, 87 per cent conferences, training sessions, and self-training materials, with
reported that they felt well-informed, and 81 per cent that they 1,600 employees taking part. Its aim is to develop the core skills of
were well supported by their manager. tomorrow such as curiosity, creativity, teamwork, communication
Supporting the on-going transformation of HSBC and resilience.
Continental Europe The goal is to make employees their own players of their career
and to support them to become agile in our changing
Within the framework of its strategy implementation process,
environment.
HSBC Continental Europe undertook numerous restructuring
projects in 2020 both in France and in other Continental European This aim runs alongside sustainability. More information on the
countries (Poland, Italy, Spain, Czech Republic, etc.). This followed HSBC Group's initiatives is available at https://www.hsbc.com/our-
an information and consultation process with employee approach/building-a-sustainable- future/ employability-and-
representative bodies at a European level (EWC) and in the financial-capability.
countries concerned. With this goal in mind, we believe that one of our missions is to
Within this framework, a collective redundancy plan was adopted promote our development programmes, that are open to all, and
in the autumn covering the Global Banking and Markets Division to encourage employee uptake. To this end, we have set ourselves
and resulting in the elimination of 235 positions in France. The a target of 55 per cent of employees to have taken at least one
terms of this plan received unanimous collective agreement with module of our programmes each year. In 2020, the take-up rate
representative union bodies, guaranteeing a programme of was 48 % (see table below). 2020 was the first year of our French
support to employees that was equitable and adapted to their #resilience programmes and the first year of the Future Skills
circumstances. development programmes. Having almost one employee out of
two who attended one of our session is really a good participation
A contractual termination agreement relating to employees in
level. And as all of our training sessions have been recorded, all
Commercial Banking, support functions and at the head office has
staff can have access to those contents in replay.
been negotiated with union bodies and approved on 1 February
2021 . Promoting a range of learning methods
In both France and other European countries, these plans are Because personal development is based not only on training but
based mainly on voluntary redundancies. Support measures, also on experience and feedback, HSBC Continental Europe offers
which in most cases are subject to negotiation and discussion the broadest possible range of resources to help develop new
with employee representatives in the countries concerned, will skills.
allow the departure of employees to take place, as usual, in a HSBC Continental Europe is continuing its efforts to encourage
respectful, humane and responsible manner. uptake and recognition by managers and employees of a 70/20/10
Responsible and inclusive HR policy model, which combines three complementary training
approaches:
As a leading global employer, HSBC's main aim is to develop an
HR policy that helps to develop the employability of staff • 70 per cent from experience-based learning. By seeking
solutions through their professional practice, employees

benefit from informal learning enhanced by information wants to back the individuals with profiles best-suited to current
available on the bank's intranet, websites and business and future challenges and help increase their skillsets.
applications. Talent identification involves both managers and employees
• 20 per cent of learning comes from discussions with themselves, so that the process is more coherent and consistent.
colleagues, internal and external clients and managers. This Every year, HSBC develops succession plans for positions
method is based on regular feedback regarding which aspects considered as key. There are clear guidelines for this exercise in
work well, and which could be improved. The group developed order to ensure that solid succession plans are in place and that
a feedback-gathering tool during 2020, use of which is they promote gender balance and favour internal promotion. There
encouraged both on an on-going basis and prior to end-of-year is a requirement to have at least four potential successors for each
reviews. post, with at least one female successor for each key post and an
• 10 per cent of learning comes from classroom-based training or 80/20 split of internal versus external recruitment.
virtual training (e-learning and remote training). Training HSBC develops its talent pool at the group level, but also within
provision is updated each year, with an emphasis on sharing France through a range of development programmes: AIL, AFL,
experience and experimentation to help lock in expertise. In the Explore (for the Group) and Inspire (for France).
unusual circumstances of the health crisis, the majority of
classroom learning was shifted online in 2020, with the Accelerating into Leadership (‘AIL’) and Accelerating Female
exception of regulated ‘certified’ courses. Leadership (‘AFL’) are two programmes for developing women’s
leadership. The aim is to increase women’s representation on
HSBC University: a platform available for all executive bodies by providing tailored training.
Training gives meaning to the work our employees do, helps them Explore is a group programme that has helped staff members
develop new skills and makes them more employable. For HSBC, assess their potential (talents who could become future leaders of
giving everyone access to training is a central aim, and so it has HSBC) via various stages of evaluation, based on proven methods
set up a group training platform called HSBC University, available from one of the recognised expert consultants in this area. In
to all employees through the HR portal and on smartphones. It is a 2020, more than 80 employees at HSBC Continental Europe,
vast library organised by business area themes, covering online among which 49 in France, have been invited to take part in the
training, classroom-based training, videos, articles and first-person programme and almost a quarter of them have taken part in
accounts. External training resources (such as LinkedIn Learning specific workshops.
and Degreed) covering themes like Big Data, Artificial Intelligence
and Leadership are also available. Inspire, launched in 2019, is a leadership development programme
designed and offered in France. Around 30 leading employees
These short-format training programmes help develop curiosity take part in a one-year course consisting of innovative and
and strengthen the training culture. inspiring modules. Individual development targets are combined
To support managerial staff, various leadership development with collective targets to create a shared vision of leadership at
programmes are offered to help develop management and HSBC Continental Europe.
leadership skills (inclusive management, authentic management, Emphasising promotions and internal mobility
management through trust). This training offering was renewed at
the end of 2020. For HSBC Continental Europe, internal mobility is a vital way of
developing and retaining staff members. By offering in-house
Providing support tailored to needs career development opportunities, it fosters and recognises the
For many years, HSBC Continental Europe has offered an potential of its talented employees, makes them more versatile
individually-tailored approach through individual and collective and increases their sense of trust.
coaching, to support employees with their personal development HSBC Continental Europe advertises positions for internal mobility
and individual performance, while aligning with the Bank's on its HR portal, making them accessible to all. Employees can
strategy of enhancing collective performance. enter details such as internal and external professional experience
The individual coaching programme meets a growing range of and skills (such as foreign languages) and their geographical
needs (taking on a managerial role, professional development, mobility preferences into an HR database. This information is used
developing employability, etc.) and is offered in person and, by the database to find the talent needed with corresponding
increasingly, via digital channels. skills.
In 2020, HSBC mainly concentrated on distance learning, via a In 2020, 381 employees were promoted, which was lower than in
dedicated platform, to respond to the exceptional circumstances 2019, with men and women promoted in equal proportions.
of the Covid-19 crisis (around 30 online courses and a dozen in
person).
Collective coaching supports teams or employees sharing
common development goals, particularly in areas such as change
management and team-building.
In 2020, a massive support and development programme, called
#résilience, was developed and deployed in France in response to
the health crisis, with the initiatives provided seeing more than
5,000 log-ins. These ranged from webinars on the theory of VUCA
to ways in which crises can be transformed into opportunities and
on using our individual and collective resources to prepare for the
‘new normal‘. In addition to these conferences, which are open to
all, a complementary programme was designed for managers to
address current problems such as managing remotely, managing
uncertainty and motivation.
Preparing the future: from identifying talent to identifying
talents
HSBC is mindful that managing talent is of strategic importance,
particularly in a current context of a health and economic crisis on
the one hand, and strategic decisions that have committed HSBC
CE to a far-reaching transformation on the other. HSBC therefore

Sustainability
Promotion Key recruitment figures
Key figures – HSBC in France HSBC in France

Number of Recruit- Mobility Mobility
Gender promoted FTE % ment Joiners Joiners
Perma- Recruitment from from
Women 166 53
nent Short-term different Foreign Total
Men 145 47 Gender Staff (*) contract (**) society Country Hiring %
Total 311 100 Women 157 30 5 2 194 51
Men 148 14 11 13 186 49
Number of Total 305 44 16 15 380 100
Business lines promoted FTE %
Business lines
Retail Banking and Wealth Management 160 51
Commercial Banking 35 11 Retail Banking
and Wealth
Global Banking and Markets 42 13 Management 215 34 9 1 259 68
Private Banking 15 5
Commercial
Central functions 60 19 Banking 53 3 1 1 58 15
Total 311 100
Global Banking
and Markets 16 0 0 7 23 6
Key figures – International perimeter Private Banking 0 2 0 0 2 1
Central 21 5 6 6 38 10
Number of
Gender promoted FTE % Total 305 44 16 15 380 100
Women 36 51 (*) External recruitments.
Men 34 49 (**) of which 29 additional workload contracts and 9 replacement
Total 70 100 contracts.
Number of International perimeter

Business lines promoted FTE %
Retail Banking and Wealth Management 1 1 Total hiring
Gender (FTE) %
Commercial Banking 19 27
Women 25 53
Global Banking and Markets 34 49
Men 22 47
Private Banking 0 —
Total 47 100
Central functions 16 23
Total 70 100 Business lines
Retail Banking and Wealth Management — —
Performance indicator for risk of inability to ensure the Commercial Banking 28 60
employability of our employees given the transformation of the Global Banking and Markets 15 32
banking sector (theme 5) Private Banking — —
Central functions 4 8
2020 2019 2018
Total 47 100
Take-up rates for development
programmes open to all on a voluntary
basis (annual target: 60%) 48% NA NA Internal mobility remains our preferred channel. Employees can
then grow within HSBC Continental Europe, within its subsidiaries
Managing the risk of failure to recruit and retain talent and internationally. In 2020 there were 324 internal transfers
by attracting and integrating the best people to support (change of position for existing employee, either as a change of
the bank’s growth (theme 6) job classification or location).
In a rapidly changing banking industry (digitalisation accelerated Recruitment of young people is an important challenge for
by the health crisis, economic crisis, tighter regulatory HSBC Continental Europe
requirements), HSBC aims to respond to the shift in employment In 2020, and despite the difficulties created by the health crisis,
patterns by attracting, recruiting and integrating the best talent. HSBC continued to recruit young people through its four preferred
To support its development and the creation of the Continental channels: 173 apprentices, 267 interns, nine VIE graduates and
Europe platform, HSBC recruits staff from a variety of eight graduates were recruited in France over the course of 2020.
backgrounds and outlooks to contribute to the Bank’s various Induction processes were adjusted to allow remote induction
business lines and functions in France and in the other countries where no other alternative was available. Mentors also adopted
of Continental Europe. remote contact to enable young recruits to enjoy a successful
professional experience.
Two of our programmes have proved particularly popular with
students:
• The Volontariat International en Entreprises ('VIE') or
international professional assignment programme: young
graduates undertake assignments of between six and 24
months, mainly in London, New York and Hong Kong, in areas
such as Global Market Operations, IT, Risk and Finance.
• Global Graduate: an HSBC Group programme for young
graduates with a carousel of placements at the beginning of
their contract in Global Banking and Markets and Commercial
Banking. This programme encourages graduates to discover
various roles within each division whilst acquiring cutting-edge
skills.

Events were organised to promote HSBC as an employer amongst bank continued the process by launching its new ‘Inclusive
young graduates. In 2020 HSBC Continental Europe took part in Leadership’ training programme in 2020.
more than 30 events organised by targeted schools using mostly To ensure a broader reach for its inclusive business culture, HSBC
virtual formats (virtual forum, coaching, recruitment interviews, Continental Europe has continued its awareness building
presentation of HSBC business lines, and Instagram Future Skills programme, notably through discussions on diversity and
interviews). inclusion and by drawing on its Employee Resources Group of
Performance indicator relative to risk of failure to recruit and committed employees: 50/50 Partner of Balance and Pride
retain talent (theme 6) Network France.
2020 2019 2018 Thus, many tutoring programmes – internal and external – are
Attrition of talent (annual target: 7%) 12% 3% NA offered to employees taking volunteer roles, so that they may step
out of their 'usual' settings and develop new expertise. In 2020,
In term of retention of our talented people, the 2020 results show several mentoring programmes were running within HSBC, with
a 12 per cent attrition compared to a target at 7 per cent. The around 40 mentors for Global Banking and Markets and around 30
transformation context lead our talents to question more about for Commercial Banking. In addition, 106 employees are
their future within an uncertain organisation and to be more aware supporting talented young people from disadvantaged
of external opportunities. backgrounds through structures supported by the HSBC
Foundation for Education (Convention Prioritaire de Sciences Po,
In order to improve the situation, a Talent Review will be deployed Fondation Egalité des chances, Article 1).
in Q2 2021 to better identify our talents and then to better support
them in their development. At a local level, we will deploy the HSBC Continental Europe, through the HSBC Foundation for
second wave of our local Leadership Development Programme Education, also supports:
Inspire, which aims to develop people, to create a x-business • several organisations including Article 1, Fondation Sciences Po
Network of future Leaders and to act as a retention tool since it’s a and Fondation Egalité des Chances, which encourage and
really high level development programme. support young people into further education and improve their
Managing risks related to lack of diversity among chances in the labour market;
teams and psychosocial risks, by creating a framework • digital training such as that offered by the charity Musique et
for engagement (theme 7) Culture Digitales ('MCD'), which has the Paris Code label;
Diversity and quality of life at work are crucial distinguishing • entrepreneurship programmes for the most vulnerable
features for HSBC. As well as fostering commitment, they also populations: Je Deviens Entrepreneur with L’Adie, Les
represent an investment in the future of the business: we are Entrépides with Fondation Entreprendre and the Women
confident that committed, healthy employees will help us to International Programme with Réseau Les Premières;
improve our economic performance and make the group more
Gender equality
appealing. HSBC Continental Europe has set itself the target of
continuing to promote diversity, equality and inclusion and to With women making up more than 56 per cent of executives at
improving life quality at work and developing a shared culture of HSBC France, the Bank continued its efforts to promote gender
wellbeing at work. In France, these targets resulted in the equality in 2020.
signature of an agreement on professional equality and quality of In addition the HSBC Group has set itself clear and transparent
life at work that runs to 8 March 2022. This agreement has two targets for the proportion of women in senior executive positions.
priority themes: These targets have two end dates: 30 per cent of senior executives
• diversity, equality and inclusion; to be women by 2020, rising to 35 per cent by 2025. HSBC
Continental Europe continues to invest to achieve this target, with
• quality of life at work, flexibility of working arrangements and
women making up nearly 29 per cent of Global Career Banding
issues around logging off.
GCB0-3 positions at December 2020.
The specific circumstances of the health crisis led us to step up
A monitoring dashboard for progress in increasing the proportion
efforts to protect our employees’ health and quality of life and to
of women in positions of responsibility is reviewed twice a year by
adapt provisions for remote working.
the HSBC Continental Europe Management Committee.
Diversity, equality and inclusion Inclusion of employees with disabilities
HSBC believes that its employees' differences are a source of With a reported employment rate of people with disabilities of 5.3
wealth. The challenge is to foster and make the most of those per cent (Number of people with a declared disability as a
differences with the aim of creating internal cohesion, increasing percentage of total employees), HSBC in Continental Europe
motivation and engagement, and making employees proud to continued to favour the recruitment and inclusion of employees
belong to the Group. with disabilities in 2020. The bank works in partnership with
Tackling discrimination and promoting diversity Tremplin, a charity specialising in the inclusion of young people
with disabilities in the labour market.
Diversity and inclusion have always been part of HSBC’s identity.
In 2020, HSBC Continental Europe continued to act on its business Within the context of the Covid-19 pandemic, HSBC Continental
culture, notably through awareness building campaigns. For Europe made widespread use of remote working for its
example, HSBC Continental Europe requires its recruitment service employees. Combined with the transfer of workstation adaptations
providers to provide a shortlist of candidates including at least one to their home offices, this allowed the largest possible number of
man and one woman and, where the post is a management or employees with disabilities to continue to work under good
specialist position requiring more than ten years of professional conditions.
experience, at least one ‘senior’ candidate.
Despite uncertain public health conditions, HSBC Continental
Europe continued to recruit for ‘summer jobs’, working with our
equality of opportunity charity partners: Sciences Po, Fondation
Egalité des Chances and Tremplin. This approach aims to favour
diversity of origin amongst summer job candidates. Ten young
people benefited from this opportunity in 2020.
Having run its unconscious bias training programme for three
years, training nearly 400 HR managers and professionals, the

Sustainability
The theme of mental health was a particular focus of awareness distributed via DRH Info, with Q&A packs provided to managers.
raising programmes in 2020. Dedicated manager training, a This communication helped raise awareness of approaches to help
conference and discussions all addressed this theme. structure work during lockdown, good practice to avoid overwork,
preventing isolation and strengthening team spirit.
To improve day-to-day living standards, in France more than 500
disabled employees or employees with a disabled close relative A guide to the correct use of digital tools was made available to all
received 'CESU' cheques (enabling them to pay for domestic help) HSBC staff and contains best practice for optimal use of digital
financed entirely by HSBC, while nearly 60 employees were tools that respects the work/life balance. This guide was
supported in measures to alleviate their disability and maintain incorporated into all communications available to employees on
their employment, through a range of support including the the dedicated Covid-19 intranet site.
financing of individual equipment or other adaptations. Strengthening the collective ability to manage change and
Improving quality of life at work to foster employee measuring employees' satisfaction and wellbeing
commitment Listening to employees is based on a range of approaches:
Ensuring a good quality of life at work results in a committed • The ‘Exchange’ groupware application, which for managers
workforce: accordingly, HSBC Continental Europe's senior consists of organising agenda-free consultation meetings, in
management focuses on this topic in order to increase employees' which managers take part without taking any hierarchical
sense of fairness and belonging, to foster cohesion and to protect stance. This innovative approach allows staff members to
employees' mental and physical health, which has taken on even discuss any subject freely. The resulting feedback is sent to the
greater importance in the health crisis. HSBC Group. Since the programme was launched in 2012, it
Increasing employees' commitment is a strategic aim for HSBC, has been clear that employees taking part in an Exchange
and employees' professional fulfilment is a key priority for the meeting had a more positive approach to their work and the
Bank. bank's strategy and a better understanding of the changes
affecting HSBC.
Awareness-building and training on quality of life at work
• Group engagement surveys: ‘Snapshot’ is a regular survey of
In addition to actions already in place – such as the ‘action for
employees around the world, which aims to assess
workplace well-being’ which focuses on developing high-quality
understanding of the bank's strategic priorities and measure
relationships (empathy, affirmation, caring), conflict prevention
perception of changes through various themes: strategy, Global
and resolution, the management of emotions at work, and
Standards, communication, customer experience, culture and
guidelines on managing ‘logging off’ outside work hours – HSBC
working methods.
committed to strengthening measures to support employees
during the pandemic. Frequent communication, with both • In the first half of 2020, a survey focusing on employee well-
employees and managers, and awareness building measures being in the context of the pandemic helped identify the fact
under the #résilience programme are all examples of additional that the biggest difficulty faced by staff was managing work/life
awareness building in 2020. balance. At the same time, the quality of support from HSBC
was highlighted by more than 80 per cent of respondents. This
Giving employees more flexibility
report allowed us to adjust the systems we had put in place.
HSBC Continental Europe is attentive to offering more flexible
• In the second half of 2020, a further Snapshot study showed
working arrangements to employees to help improve work-life
stable or slightly improved scores for HSBC Continental Europe
balance. By way of illustration, a group agreement on remote
relative to the first half of 2019.
working, which has been in place in France for two years,
expanded the options for working from home for salaried • Confidence in line managers, the ability to express oneself if
executive employees to allow occasional and flexible working from faced with unacceptable behavior and a feeling of professional
home. Home working on specific days is also in place. satisfaction all saw better scores compared to previous survey.
Against the background of the health crisis, HSBC Continental • The survey shows areas of improvements regarding ownership
Europe allowed more than 90 per cent of staff to work from home of the strategy by the employees.
from the early days of the crisis until the end of 2020. As existing • These Group initiatives are supplemented in France by a
measures to allow remote working had created a flexible work medical stress-monitoring system (since 2004) and a
culture, the transition to a more virtual organisation, across all framework for identifying and measuring work-related stress
Continental European countries, was a smooth process. Specific (since 2012). The most recent findings reflected employee
training programmes for managers were introduced to support concern over the difficulties facing the banking sector and the
them in more widespread remote working, and this was backed by worries about the deterioration of the economic climate. They
initiatives to encourage good use of digital tools such as ‘We also showed that the quality of working relationships with line
Innovation’. managers and between colleagues, work-life balance, the work
In addition, for some time now, considerable attention has been environment, and level of independence remained as positive
paid to maintaining social links within the company, equality of factors.
treatment of staff and respect for private life and the right to Results for 2020 are not yet known, and will reflect the highly
disconnect. In the context of the health crisis, employees were unusual context of a major health crisis. During this period, the
invited to use an existing facility to provide details of their location
(on site or at home) to allow managers to get a quick view of the
whereabouts of their teams.
Ensuring the correct use of digital tools
In a highly-connected environment, and given the massive uptake
of remote working, the correct use of professional communication
tools is a key challenge for the quality of life at work.
A charter drawn up by HSBC Continental Europe’s Executive
Committee establishes 10 major principles that aim to encourage
staff members to adopt day-to-day behaviors and rules that help to
reconcile their private and professional lives.
Throughout 2020, against the background of the health crisis and
the massive use of remote working, employees were reminded of
these guiding principles through regular communication

ability to reconcile maintaining business levels remotely and over virtually the whole of the employment grade scale, was
protecting the health of employees has been recognised by all between 98.5 per cent and 101.1 per cent of men's pay in 2020.
employees.
Ratio theoretical wage W/M
Performance indicators for risks related to lack of diversity
among teams and psychosocial risks (theme 7) Convention 2018 2019 2020
Status Level % % %
2020 2019 2018 C — — —
Share of women in senior executives D 98.2 — —
positions (2025 target : 35%) 29.3% 30% 31% Technician E 98.4 98.6 98.8
F 101.2 100.6 101.1
An interactive process: Boost Ta Banque G 100.1 100.2 100.9
Interactive workshops were held involving more than 300 H 99.1 99.6 99.1
employees from all business lines and all regions. I 98.6 98.6 98.5
Executive
J 99.6 98.6 98.6
Employees were able to work on a variety of themes such as K 99.8 100.1 100.6
recognition, independence and the complexity of the organisation.
They brought forward concrete solutions to improve operations Pay for employees working part-time, across different employment
and strengthen employee engagement. grades, was between 98.2 per cent and 106.5 per cent of that of
All these proposals were submitted to the Executive Committee, full-time employees in 2020.
which chose the actions to be implemented immediately and
projects for which a further call for volunteers was issued, Ratio theoretical wage Part Time W/M
attracting 90 employees. From the integration of new employees, Convention 2018 2019 2020
to the introduction of ‘life swap’ programmes, via pride in Status Level % % %
belonging, these projects gave employee volunteers an C — — —
opportunity to contribute to enhancing the employee experience, D — — —
whilst working with members of the Executive Committee. Technician E 102.9 104.6 106.5
F 104.5 104.9 104.3
In 2020, the second edition of Boost Ta Banque was run to allow
employees to share how they had experienced the unprecedented G 100.4 101.7 101.3
situation caused by Covid-19 and to gather collective intelligence H 100.5 101.3 100.9
in order to identify the positive aspects of the crisis and find I 98.3 99.2 99.3
Executive
means to retain these benefits when creating the ‘new normal’ at J 100.2 99.7 99.6
HSBC. K 97.2 98.8 98.2
To achieve this, 10 remote workshops were run over Zoom, The salary of disabled workers was between 97.5 per cent and
bringing together 115 volunteer employees. 112.8 per cent of that of all workers. Personal service vouchers
Having identified the five main positives from lockdown, (CESU) financed in full by the company were introduced in 2015 to
participants proposed 90 recommendations in three priority areas: assist employees with disabilities and employees with a close
remote working, caring, and processes and tools. All these relative with disabilities.
proposals were submitted to the Executive Committee for
consideration, and some are already under review or being Ratio theoretical waged disabled employees / other employees
implemented. Convention 2018 2019 2020
Status Level % % %
An attractive and fair remuneration policy
C — — —
HSBC Continental Europe’s remuneration policy is designed to D — — —
attract, motivate and retain the best employees. It is a powerful Technician E 107.7 111.2 112.8
driver of staff commitment, and one that HSBC makes full use of. F 103.8 104.9 105.9
HSBC Continental Europe addresses this strategic priority with a G 101.4 102.5 102.7
remuneration policy that is both attractive and fair, in order for H 100.5 100.8 100.9
each employee to be treated fairly. I 97.5 97.3 97.5
Executive
J 98.7 98.9 98.0
The remuneration policy recognises and rewards the efforts made, K 98.6 100.3 99.4
engagement, involvement, contribution and the collective and
.
individual performance of each of our employees through an
Table of social performance indicators of HSBC Continental
annual budget for collective and/or selective wage adjustments,
Europe
individual variable remuneration and, based on results, collective
Change
remuneration in the form of bonuses and profit sharing.
Indicators 2020 2019 2018
It helps finance employees’ day-to-day lives through the payment 1 – Workforce split by status,
of various contributions, such as for child care, the new academic gender and contract of
year, holidays through holiday voucher top-ups or in the event of employment (FTE):
mobility within the company. Lastly, it provides guarantees that Total FTE – HBCE in France 7,238 7,472 7,586
will last throughout an employee’s career at HSBC and beyond: o/w unlimited term contracts 7,183 7,437 7,555
continuation of salary and health cover in the event of illness, – o/w women managers 2,926 2,997 2,982
provident services in the event of incapacity and the – o/w men managers 2,781 2,861 2,928
supplementary pension scheme that has been in place for many – o/w women clerical staff 1,130 1,205 1,257
years to help our employees boost their income in retirement. – o/w men clerical staff 346 373 389
This policy forms part of an approach that seeks to treat all of our o/w Impatriate contracts 15 15 14
employees fairly. This approach is best illustrated by a few – o/w women 5 4 4
examples.
For more than 10 years, the collective agreements that HSBC
France has entered into have included an automatic salary review
for people returning from maternity or adoption leave. Specific
fairness budgets over the last ten years (EUR 8.8 million) have
helped establish wage fairness in several areas. Women's pay,

Sustainability
– o/w men 10 11 10 the use of a system of appropriate checks and the implementation
o/w fixed-term contracts 40 20 17 of measures to evaluate these risks.
– o/w women managers 6 10 8 Risks of money laundering and financial crime:
– o/w men managers 3 4 8 preventing the risk (theme 8)
– o/w women clerical staff 22 3 2
– o/w men clerical staff 9 3 — HSBC has a responsibility to help protect the integrity of the global
Total female FTE 4,089 4,220 4,252 financial system. In order to fulfil this responsibility, we have
% women 56.5% 56.2% 56.1% made, and continue to make, significant investments in our ability
Total male FTE 3,149 3,253 3,334 to detect, deter, and prevent financial crime. Various programmes
% men 43.5% 43.3% 43.9% have been implemented and others are under way to improve
systems and day-to-day practices for managing risks relating to
Total FTE – International network 1,279 1,385 627
money laundering, tax fraud, compliance with sanctions and
Total female FTE 652 700 360
corruption. Within HSBC Continental Europe, every month, all
% women 51.0% 50.6% 57.4%
transactions – more than 28 million across 1.7 million accounts –
are analysed to detect signs of money laundering, tax avoidance
Total male FTE 627 685 267
and failure to comply with sanctions. In addition, 1.7 million
% men 49.0% 49.4% 42.6%
names are screened on an ongoing basis using various
surveillance lists. The Bank has cut links with customers, products,
Total FTE – HBCE in France +
International network 8,517 8,857 8,213 and countries where we deemed the financial crime risk too high
to manage. The HSBC Group is also working with governments
Total female FTE 4,741 4,920 4,612
and other banks to advance its collective interests in this area.
% women 55.7% 55.5% 56.2%
These steps are enabling us to reduce the risk of financial crime
Total male FTE 3,776 3,937 3,601
much more effectively.
% men 44.3% 44.5% 43.8%
In order to ensure the effectiveness of our policies, an annual
2 – Hires and dismissals (FTE) training course has been taken by over 98 per cent of HSBC
Recruitments (FTE) HBCE in France 380 851 787 Continental Europe employees, which is in line with the bank's
% recruitments 5.2% 11.3% 10.4% Risk Appetite of having at least a 98 per cent mandatory training
Dismissals (FTE) HBCE in France 93 100 98 completion rate (the Risk Tolerance is set at 97 per cent).
% dismissals 1.3% 1.3% 1.3% Performance indicator for risk of money laundering and
financial crime (theme 8)
Recruitments (FTE) International 47 106 55
% recruitments 3.6% 7.6% 8.8% 2020 2019 2018
Dismissals (FTE) International 6 5 — Share of staff members trained on

theme 98% 98% 96%
% dismissals 0.5% 0.4% —
Recruitments (FTE) HBCE in France For more details, see Risks, Regulatory Compliance Risk
+ International network 426 957 842 Management page 147.
% recruitments 5.0% 10.8% 10.3% More information about HSBC financial crime policies at https://
Dismissals (FTE) HBCE in France + 99 105 98 www.hsbc.com/our-approach/risk-and-responsibility/financial-
International network
crime-risk/financial-crime-risk-policies
% dismissals 1.2% 1.2% 1.2%
Risks of corruption*: preventing the risk (theme 9)
3 – Equality of treatment HSBC is committed to high standards of ethical behaviour and
% of women in management HBCE operates a zero tolerance approach to bribery and corruption. We
in France (FTE) 29.0% 30.0% 30.0% consider such activity to be unethical and contrary to good
% of women in management corporate governance and require compliance with all anti-bribery
International
% of women network (FTE) HBCE
in management 30.5% 28.6% 47.6% and corruption laws in all markets and jurisdictions in which we
in France + International network operate. We have a global Anti-Bribery & Corruption Policy which
(FTE) 29.3% 29.7% 31.0%
gives practical effect to global initiatives such as the Organisation
Number of persons with disabilities of Economic Cooperation and Development (‘OECD’) Convention
(only HBCE in France) 425 439 458
on Combating Bribery of Foreign Public Officials in International
% employees with disabilities (only Business Transactions and Principle 10 of the United Nations
HBCE in France) 5.3% 5.2% 5.3%
Global Compact
% of employees less than 30 years
old HBCE in France (FTE) 10.0% 11.2% 10.8% As regards combating corruption, HSBC Continental Europe is
% of employees over 50 years old committed to complying with France's Sapin 2 act and to adopting
HBCE in France (FTE) 32.6% 31.2% 30.4% a zero- tolerance attitude to corruption.
% of employees less than 30 years In 2018, France's anti-corruption agency AFA carried out 47 audits
old International network (FTE) 7.3% 8.9% 7.7%
in France, including one at HSBC Continental Europe. Certain
% of employees over 50 years old areas of concern were highlighted and efforts to resolve them are
International network (FTE) 18.1% 15.6% 10.2%
currently underway, to enable the Bank to comply with the Sapin 2
% of employees less than 30 years
Act's eight pillars such as risk mapping and internal control.
old HBCE in France + International
network (FTE) 9.6% 10.8% 10.5%
% of employees over 50 years old
HBCE in France + International
network (FTE) 30.4% 28.8% 28.9%
Governance policies adjusting to social changes

Risks relating to laws, regulations, standards, rules, internal
policies and best practice in tackling money laundering and the
financing of terrorism, the respect of international sanctions and
tackling corruption are subject to heightened monitoring through

Performance indicator for risk of corruption (theme 9) Performance indicator for risks in cybersecurity and IT attacks
(theme 11)
2020 2019 2018
Share of employees trained on this 2020 2019 2018
theme 98% 98% 96% Number of significant security
incidents over last 12 months 0 0 0
For more details, see Risks Financial Crime Risk Management,
page 148. For more details, see Security Risks, page 152.
More information about HSBC financial crime policies at https:// Risks in terms of non-compliance with Human Rights:
www.hsbc.com/our-approach/risk-and-responsibility/financial- preventing the risks (theme 12)
crime-risk/financial-crime-risk-policies HSBC’s commitment to respecting human rights, principally as
Risks relating to tax evasion*: preventing the risk they apply to our employees, our suppliers and through our
(theme 10) lending, is set out in our 2015 Statement on Human Rights. This
statement, along with our ESG Updates and our statements under
HSBC is committed to applying both the letter and spirit of the law
the UK’s Modern Slavery Act (‘MSA’), which include further
in all territories in which it operates. We aim to have open and
information, is available on www.hsbc.com.
transparent relationships with all tax authorities, ensuring that any
areas of uncertainty or dispute are agreed and resolved in a timely HSBC also has an ethical and environmental code of conduct that
manner. As a consequence, we believe that we pay our fair share the Bank imposes on its suppliers and which takes into account
of tax in the jurisdictions in which we operate. modern slavery legislation and human rights.
Certain clients of HSBC Continental Europe could seek to use its HSBC Continental Europe is fully aligned with these Group
services for tax evasion purposes, exposing the bank to commitments and policies. Thus, since March 2017, as part of the
accusations of complicity which, if confirmed, could lead to severe new contracts process and the renewal process of the contracts,
financial, legal and reputational consequences. suppliers are systematically asked to sign the code of ethical and
environmental conduct established by the Group. At the end of
HSBC has adopted the Code of Practice on Taxation for Banks 1 December 2020, 97 per cent of the suppliers concerned had
which was introduced in 2009 and manages tax risk in accordance responded positively, thus meeting the objective of a supplier
with a formal tax risk management framework. return rate close to 100 per cent.
We apply a number of tax initiatives which were introduced after HSBC Continental Europe operates a vigilance plan to meet the
the global financial crisis with the aim of increasing transparency. requirements of France's new Duty of Care act. Given the
These initiatives address the tax positions both of companies and legislative and regulatory framework, the scope of its businesses
of their customers. These include: and the procedures in force within the HSBC Group, risks relating
• The US Foreign Account Tax Compliance Act (‘FATCA’); to a failure to respect human rights are not material for HSBC
Continental Europe.
• The OECD Standard for Automatic Exchange of Financial
Account Information (the 'Common Reporting Standard'); For more details on the ‘Duty of Care’ act, see page 77.
• The Capital Requirements Directive IV (‘CRD IV’) Country by HSBC Confidential Internal whistleblowing system
Country Reporting 2; HSBC strives to create a working environment in which employees
• The OECD Base Erosion and Profit Shifting (’BEPS‘) initiative; feel free to share their concerns. Aware that certain circumstances
require special discretion, it simplified its whistleblowing system in
• The UK legislation on the corporate criminal offence (‘CCO’) of 2015, detailed in its duty of care plan on page 78
failing to prevent the facilitation of tax evasion.
Arrangements in place within HSBC Continental Europe in France
1 See the UK Government’s code of practice on taxation for banks. and figures
2 See hsbc.com for our approach to tax transparency.
In accordance with Law N° 2016-1691 of December 9, 2016
Performance indicator for risk of tax evasion (theme 10) relating to transparency, the fight against corruption and the
modernisation of economic life, this solution allows employees to
2020 2019 2018 report, as soon as the usual channels for raising concerns are
Share of staff members trained on unavailable or inappropriate, without fear of retaliation, concerns
theme 98% 98% 96% relating to the following matters:
For more details, see Risks, page 151. • a crime or an offense (e.g. corruption, fraud, embezzlement,
More information about HSBC anti-bribery and corruption policies harassment, discrimination ...), a serious and manifest violation
at https://www.hsbc.com/our-approach/risk-and-responsibility/ of an international standard, law or settlement or serious
financial-crime-risk/financial-crime-risk-policies violation of human rights and fundamental freedoms, human
health and safety and the environment,
Risks in the areas of cybersecurity and IT attacks:
preventing the risk (theme 11)
HSBC Continental Europe, in common with other organisations, is
subject to a growing number of increasingly sophisticated cyber-
attacks that can in some instances affect its operations, including
the availability of digital facilities for customers.
The Bank’s IT security system is crucial for the proper functioning
of its banking services, the protection of its customers and of the
HSBC brand. With the aim of maintaining it at its best possible
level, HSBC Continental Europe continues to strengthen its
technical resources, its monitoring systems and its governance to
prevent and withstand the growing threat from cyber-attacks.
The cyber threat is a top priority for the management team and is
the subject of regular communication and discussion in order to
ensure the appropriate visibility, governance and support for our
cyber-security programme. HSBC Continental Europe has not
reported any significant security incidents in the last 12 months,
thus meeting its objective.

Sustainability
• events presenting a threat or serious prejudice to the general Reporting period

interest or any situation likely to generate a significant financial
or reputational risk for the bank. The annual reporting period is the calendar year (from 1 January to
31 December). For environmental indicators, the 2020 data are
HSBC Confidential in France is placed under the supervision of the based on figures covering the reporting period from 1 October
Audit Committee. Investigations are conducted, in a confidential, 2019 to 30 September 2020.
in-depth and independent manner by investigators from different
departments, mainly Compliance and Human Resources. Controls Reporting tools and processes
are in place relating to maintaining confidentiality and to protect For environmental indicators
whistleblowers from the risk of retaliation. Periodic
communication and awareness initiatives for employees are The reporting tool is Metrix, developed by Enablon, which is used
intended to encourage ‘Speak-up culture’ within HSBC. by the HSBC Group. Its main functions include the collection of
data on energy (kWh), CO2 emissions, water (m3), paper (tonnes),
30 alerts were received and accepted into the HSBC Confidential waste (tonnes), km travelled and other data: comments,
channel in France in 2020, down 44 per cent compared to 2019. operational surface areas (m²), number of sites, workforce (‘FTE’),
The main theme emerging from the admitted alerts was related to initiatives, dual validation at country level, then at regional and
human behaviour in the work environment. global levels and, finally, dashboards.
Arrangements in place in the HSBC Continental Europe branches For social indicators
and figures
The information that appears in reporting documents is the result
Alerts sent by employees in HSBC Continental Europe branches of queries from People insight.
are received and fully processed by the Group (with the exception
of the Polish branch which receives its alerts locally as France). Details on the definition of certain indicators
The Whistleblowing oversight team in France within HSBC Environmental indicators
Continental Europe Compliance monitors activities relating to the
whistleblowing arrangements in HSBC Continental Europe CO2 emissions result from the consumption of electricity, gas, fuel
branches. oil, urban heating and air conditioning. Transport-related CO2
emissions correspond to journeys made by train and plane (which
In HSBC Continental Europe branches, 6 alerts were received in are purchased through travel agencies), by taxi, and by hired cars
2020. All of these alerts related to poor human behaviour in the or the group car fleet. Energy consumption is partly estimated as
work environment (HR cases). invoicing and reporting periods do not overlap precisely.
For more details on the ‘Duty of Care’ act, see page 77.
Performance indicator for risk of non-compliance with Human Social indicators
Rights (theme 12) The total workforce includes employees under permanent
contracts (including impatriates but excluding expatriates) and
2020 2019 2018
under fixed-term contracts (replacement and additional fixed-term
Share of suppliers who signed the
contracts) depending on their activity rate (FTE). Expatriation
Code of Conduct in the renewal
process 98% 97% 39% contracts, work-study contracts, professional training contracts,
trainees, temporary workers, suspended contracts, employees on
early retirement, employees on permanent disability are excluded.
Methodological details on corporate social and Holiday auxiliary staff are excluded. Recruitment and redundancy
environmental information figures include employees under permanent and fixed-term
employment contracts. An employee whose contract changes
Scope of reporting from a fixed-term contract to a permanent contract will be
recorded as a hire.
On 1 December 2020, HSBC France became HSBC Continental
Europe.
For 2020 financial year, the scope of the Extra Financial
Performance declaration is based on a geographic scope identical
to that for 2019.
Within HSBC Continental Europe, the workforce in France
represented 85 per cent of the total workforce as at 31 December
2020, the rest of the workforce being shared between the 10 other
markets. We have chosen to carry out the verification work in
France.
The work done by PwC in relation to the fairness review therefore
looked at a scope identical to that used for 2019.
The scope of each indicator is shown in the table of sustainability
performance indicators for the HSBC Group in France. The scope
may vary depending on the availability of data or type of indicator.
Workforce-related indicators concern HSBC in France (excluding
HSBC Bank PLC Paris Branch and HSBC Global Services (UK)
LTD): HSBC Continental Europe, HSBC Assurances Vie (France),
HSBC Global Asset Management (France).
Environmental indicators concern HSBC Continental Europe in
France excluding the call Centre based in Reims.
Change in scope
For environmental indicators, entities consolidated or de-
consolidated during the year are accounted for in the data
reported on the date they enter the Group and until the date they
exit.

Table of sustainability performance indicators of HSBC Continental Europe
Risks relating to banking activities

Indicator as of 31 Dec 2020 2020 2019 2018
Risk of customer disappointment (theme 1)
Commercial banking customers overall satisfaction rating 6.8 6.8 NA
Share of commercial banking’s customers complaints handled within 5 business days 43% 45% NA
Risk relating to the non-alignment of emissions financed
with a net zero pathway (theme 2)
Contribution to Group's sustainable finance 2025 objective (USDm) (1) 13,895 6,848 5,285
Exposure to coal 0.16 % NA NA
Evolution of net new money in responsible investment funds year on year (%) (2)% 164% 190%
Risk relating to the non-alignment of the bank’s operational
carbon footprint with a net zero pathway (theme 3)
CO2 emissions (3) (thousands of tonnes equiv CO2) per employee (4) 0.48 0.60 0.66
Evolution year on year (%) (21)% (10)% 3%
Economic and social risk relating to increases in vulnerable
populations (theme 4)
Number of beneficiaries involved in the programmes supported by HSBC Continental Europe 184,250 117,570 26,366
Progress towards 2020 objective (%) 307% 196% 44%
People KPI
Risk of inability to ensure the employability of our employees given the transformation
of the banking sector (theme 5)
Take-up rates for development programmes open to all on a voluntary basis (annual target: 60%) 48% NA NA
Risk of failure to recruit and retain talent (theme 6)
Attrition of talent (annual target: 7%) 12% 3% NA
Risks related to lack of diversity among teams and psychosocial risks (theme 7)
Share of women in senior executives positions (2025 target : 35%) 29.3% 30% 31%
Governance KPI
Risks of money laundering and financial crime (theme 8)
Risks of corruption* (theme 9)
Risks relating to tax evasion* (theme 10)
Share of staff members trained on themes 8, 9 & 10 98% 98% 96%
Risks in the areas of cybersecurity and IT attacks (theme 11)
Number of significant security incidents over last 12 months 0 0 0
Risks in terms of non-compliance with Human Rights*
Share of suppliers who signed the Code of Conduct in the renewal process 98% 97% 39%
1 With the change in scope from HSBC France to HSBC Continental Europe, the indicator has been recalculated for 2019 and 2018 on the basis of
the 2020 scope.
2 CO2 emissions energy and transports.
3 Base: subject workforce.

Sustainability
Report by one of the Statutory Auditors, appointed as an independent third party, on the
consolidated non-financial statement included in the Group management report
For the year ended on the 31 of December of 2020
This is a free translation into English of the Statutory Auditor’s report issued in French and is provided solely for the convenience of English
speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards
applicable in France.
To the HSBC Continental Europe annual general meeting,
In our capacity as Statutory Auditor of your HSBC Continental Europe, appointed as an independent third party and accredited by
Cofrac(accreditation Cofrac Inspection n°3-1060 whose scope is available at www.cofrac.fr), we hereby report to you on the non-financial
information statement for the year ended... (hereinafter the “Statement”), included in the management report pursuant to the legal and
regulatory provisions of articles L. 225‑102-1, R. 225-105 and R. 225-105-1 of the French Commercial Code (Code de commerce).
The entity’s responsibility
Pursuant to legal and regulatory requirements, the Board of Directors is responsible for preparing the Statement, including a presentation
of the business model, a description of the principal non‑financial risks, a presentation of the policies implemented considering those
risks and the outcomes of said policies, including key performance indicators.
The Statement has been prepared in accordance with the entity’s procedures (hereinafter the “Guidelines”), the main elements of which
are available on request from the Sustainable Finance Direction.
Independence and quality control
Our independence is defined by the provisions of article L. 822-11-3 of the French Commercial Code and the French Code of Ethics (Code
de déontologie) of our profession. In addition, we have implemented a system of quality control including documented policies and
procedures regarding compliance with the ethical requirements, French professional guidance and applicable legal and regulatory
requirements.
Responsibility of the Statutory Auditor, appointed as an independent third party
On the basis of our work, our responsibility is to provide a report expressing a limited assurance conclusion on:
• the compliance of the Statement with the provisions of article R. 225-105 of the French Commercial Code;
• the fairness of the information provided in accordance with article R. 225‑105 I, 3 and II of the French Commercial Code, i.e., the
outcomes, including key performance indicators, and the measures implemented considering the principal risks (hereinafter the
“Information”).
However, it is not our responsibility to comment on:
• The entity’s compliance with other applicable legal and regulatory provisions, in particular the French duty of care law and anti-
corruption and tax evasion legislation;
• The compliance of products and services with the applicable regulations.
Nature and scope of our work
The work described below was performed in accordance with the provisions of articles A. 225-1 et seq. of the French Commercial Code
determining the conditions in which the independent third party performs its engagement and with the professional
guidance of the French Institute of Statutory Auditors (“CNCC”) applicable to such engagements, as well as with ISAE 3000 – Assurance
engagements other than audits or reviews of historical financial information
Our procedures allowed us to assess the compliance of the Statement with regulatory provisions and the fairness of the Information:
• we obtained an understanding of all the consolidated entities’ activities, the description of the social and environmental risks
associated with their activities, as well as the resulting policies and their outcomes;
• we assessed the suitability of the Guidelines with respect to their relevance, completeness, reliability, objectivity and
understandability, with due consideration of industry best practices, where appropriate;
• we verified that the Statement includes each category of social and environmental information set out in article L. 225‑102‑1 III;
• we verified that the Statement includes an explanation for the absence of the information required under article L. 225-102-1 III, 2;
• we verified that the Statement presents the business model and the principal risks associated with all the consolidated entities’
activities, including where relevant and proportionate, the risks associated with their business relationships and products or services,
as well as its their policies, measures and the outcomes thereof, including key performance indicators;
• we verified, where relevant with respect to the principal risks or the policies presented, that the Statement provides the information
required under article R. 225-105 II;
• we assessed the process used to identify and confirm the principal risks;
• we asked what internal control and risk management procedures the entity has put in place;
• we assessed the consistency of the outcomes and the key performance indicators used with respect to the principal risks and the
policies presented;
• we verified that the Statement covers the scope of consolidation, i.e., all the companies included in the scope of consolidation in
accordance with article L. 233-16 within the limitations set out in the Statement;
• we assessed the data collection process implemented by the entity to ensure the completeness and fairness of the Information;

• for the key performance indicators and other quantitative outcomes that we considered to be the most important, we implemented:
– analytical procedures to verify the proper consolidation of the data collected and the consistency of any changes in those data,
– tests of details, using sampling techniques, in order to verify the proper application of the definitions and procedures and reconcile
the data with the supporting documents. This work was carried out on the contributing entity ‘La Défense site’ and covers between
90 percent and 100 percent of the consolidated data relating to the key performance indicators and outcomes selected for these
tests;
• we referred to documentary sources and conducted interviews to corroborate the qualitative information (measures and outcomes)
that we considered to be the most important (see the list provided in the appendix);
• we assessed the overall consistency of the Statement based on our knowledge of all the consolidated entities.
We believe that the work carried out, based on our professional judgement, is sufficient to provide a basis for our limited assurance
conclusion; a higher level of assurance would have required us to carry out more extensive procedures.
Means and resources
Our work was carried out by a team of 5 people October 2020 and mid-February 2021 and took a total of 6 weeks.
We were assisted in our work by our specialists in sustainable development and corporate social responsibility. We conducted about
twenty interviews with 21 people responsible for preparing the Statement, representing strategic management, sustainable development,
human resources, marketing, supply chain and purchasing departments.
Conclusion
Based on our work, nothing has come to our attention that causes us to believe that the non-financial information statement is not in
accordance with the applicable regulatory provisions and that the Information, taken as a whole, is not presented fairly in accordance
with the Guidelines.
Neuilly-sur-Seine, the 24th of February of 2021
One of the Statutory Auditors
PricewaterhouseCoopers Audit
Agnès Hussherr Pascal Baranger
Partner Sustainable Development Director

Sustainability
Appendix: List of the information we considered most important

Key performance indicators and other quantitative results:
• Overall satisfaction rating of business customers;
• Complaints from business customers processed in less than 5 working days;
• Contribution to the Group’s sustainable finance 2025 objective (USDm);
• Share of coal in total assets;
• Change in SRI inflows;
• CO2 emissions (tonnes of CO2 eq.) per employee;
• Beneficiaries of the financial education program;
• Participation in development programmes open to all on a voluntary basis;
• Talent attrition;
• Women in senior executives positions;
• Staff trained in financial crime, money laundering, corruption and tax evasion;
• Significant security incidents over the last 12 months;
• Suppliers who signed the Code of Conduct when renewing their contracts;
• Change in the number of customer complaints compared with 2019;
• Level of NPS on remote channels;
• Complaints from retail customers;
• Results of customer surveys for Private Banking and Commercial Banking;
• Transactions led by HSBC Continental Europe;
• Amount of green bond issues for the Ile-de-France region;
• Amount of green bond subscriptions in the bond portfolio;
• Loans linked to ESG criteria for Michelin and Edenred;
• Net new money in responsible investment funds (EURm);
• Waste production;
• Paper consumption;
• Employees involved in tutoring programmes;
• Personalised mailings to customers identified as being in fragile situations;
• Women recruited on permanent contracts;
• Employees invited to the Explore programme;
• Employees with disabilities;
• Monthly transactions analysed to detect signs of money laundering, tax evasion and non‑compliance with sanctions;
• Alerts received.
Qualitative information (measures and outcomes):
• Overall satisfaction rating of CMB customers;
• Deployment of a platform where customers can rate HSBC;
• Organisation of several “ESG” conference calls;
• Signing of a charter aimed at improving travel conditions on Paris public transport by reducing rush hour travel, “Charte
d’engagements réciproques pour le lissage des heures de pointe”;
• The HSBC Foundation for Education becoming a member of the IEFP, a French financial education organisation;
• Annual completion of succession plans for roles considered as key;
• Implementation by tutors of remote tutoring for young people;
• New Group agreement on remote working;
• Update of the annual training on financial crime, money laundering, corruption and tax evasion;
• Strengthening of technical resources for cybersecurity;
• Updates to ESG and the UK Modern Slavery Act (“MSA”) statements.

of raw materials. It pays particular attention to risks relating to
France ‘Duty of Care’ act climate change, which is defined as an urgent and potentially
Implementation of HSBC Continental Europe's irreversible threat in HSBC’s Statement on Climate Change*.
Duty of Care Plan * These statements and policies can be viewed on the ‘Our Approach /
ESG reporting and policies’ page of the Group website.
HSBC Continental Europe has implemented a Duty of Care Plan in
https://www.hsbc.com/our-approach/esg-information/esg-reporting-
accordance with France’s act no. 2017-399 of 27 March 2017 on
and-policies
the duty of care of parent companies and ordering companies.
HSBC Continental Europe's Duty of Care Plan follows the Risk mapping and assessment procedures
framework defined by HSBC. Commitments have been made and Risks specific to the Duty of Care are mapped on the basis of the
rules and procedures adopted at the HSBC Group level* to mitigate library of risks and controls used within HSBC. The risks related to
risks and prevent serious infringements of human rights and the Duty of Care are contained in the map of risks assessed by
fundamental freedoms, to safeguard the health and safety of business lines and functions, which state all the risks to which
individuals and to protect the environment. The framework applies they are exposed and key controls to mitigate them.
to all HSBC Group companies worldwide, including HSBC
Continental Europe and its consolidated subsidiaries. The risk map and permanent control system are updated on an
ongoing basis, based on the results of controls carried out by
The Duty of Care Plan is implemented and monitored by a operational staff, lines of business and functions risk management
committee that meets twice yearly and consists of members of teams (‘BRCM/CCO’), Insurance teams, the conclusions of reports
HSBC Continental Europe's Legal Affairs Department, Regulatory prepared by periodic control or by third parties (including
Compliance Department, Human Resources Department, regulators), internal or external incidents and whenever a material
Purchasing Department, Operational Risks Department and change takes place (requiring a review of the current risk
Sustainability Department and is headed by HSBC Continental assessment and the related control).
Europe's Chief Risk Officer.
In 2020, the control system used within business lines and
* These statements and policies can be viewed on the ‘Our Approach / functions did not identify any critical failures connected with the
ESG reporting and policies’ page of the Group website. Duty of Care.
https://www.hsbc.com/our-approach/esg-information/esg-reporting-
and-policies Plan to prevent risks related to suppliers and
subcontractors
Identification of risks relating to the Duty of Care
As regards monitoring suppliers and subcontractors, HSBC
Scope of application regularly updates its Ethical and Environmental Code of Conduct
The Duty of Care Plan’s geographical scope of application consists for Suppliers of Goods and Services in line with new
of HSBC Continental Europe including its international branches. developments. Since March 2017, when forming new contracts or
renewing existing ones, HSBC Continental Europe’s suppliers are
Within that geographical scope, the Duty of Care Plan covers risks required to accept these principles by signing the code of conduct.
relating to HSBC Continental Europe’s employees and banking By signing the document, the supplier confirms that it respects
activities, as well as suppliers and subcontractors. fundamental laws on human rights, health and safety and
Identification and definition of risks relating to the Duty environmental protection. As of 31 December 2020, 98 per cent of
of Care HSBC's Continental Europe's suppliers had signed the Code of
Conduct.
Occupational health and safety
HSBC Continental Europe is particularly careful regarding its
As stated in its Health & Safety Policy* document, HSBC, as an strategic suppliers that represent an annual commitment of over
employer, must provide a healthy, respectful working USD 500 million. HSBC works with Sedex to assess ethical and
environment, as well as protecting and ensuring the physical environmental risks. Sedex considers the risks associated with
safety of its employees at their workplace or when travelling for each supplier as a function of its location, its regions of
business purposes. production, its business sectors and the responses to a self-
Respect for human rights assessment questionnaire designed to identify the risks associated
with workers’ rights, health and safety, the environment and
HSBC defines its approach to human rights in its ‘Statement on business ethics. This process produces a risk rating. If a supplier
Human Rights’, which is based on various international texts has a ‘high-risk’ rating, the information is passed to the relevant
including the UN’s International Bill of Human Rights and the purchasing staff member so that he/she can decide whether to
International Labour Organisation’s Declaration on Fundamental continue or discontinue the business relationship between HSBC
Principles and Rights at Work. Continental Europe and that supplier. HSBC Continental Europe
As part of its approach to human rights, HSBC ensures that its has not identified any supplier exposed to high risk to date.
employees, along with the employees of its suppliers and clients,
are treated without discrimination or harassment because of their
religion, social background, ethnicity, gender, age, disability,
sexual orientation, marital status, pregnancy or involvement in
charitable or union activities where authorised by national law, in
both its professional relationships and employment practices.
HSBC is also committed to combating all forms of slavery, forced
and compulsory labour, human trafficking and child labour, as
stated in its Modern Slavery Act*. As regards labour standards,
HSBC takes care to comply with local regulations and industry
practices in terms of wages, working hours, freedom of
association and the right to organise, disciplinary practices and
conflict resolution procedures.
Environmental protection
HSBC prevents, mitigates and controls its material impacts on the
environment and health in accordance with its Environmental
Policy*. This includes complying with regulations concerning
waste management, handling of hazardous materials and sourcing

Sustainability
Plan to prevent risks relating to the Bank’s communication and awareness initiatives for employees are
activities intended to encourage ‘Speak-up culture’ within HSBC.
Regarding the impact of bank financing on potential breaches of 32 alerts were received and accepted into the HSBC Confidential
human rights and environmental protection, the sustainability risk channel in France in 2020, down 41 per cent compared to 2019.
management policy adopted by HSBC for more than 15 years The main theme emerging from the admitted alerts was related to
provides a solid risk management framework. An annual review is human behaviour in the work environment.
carried out regarding Global Banking and Markets and Commercial Arrangements in place in the HSBC Continental Europe
Banking clients operating in sectors covered by the Group’s sector branches and figures
policies, and all transactions in these sectors are also reviewed.
Alerts sent by employees in HSBC Continental Europe branches
HSBC’s sector policies cover agricultural commodities, chemicals,
are received and fully processed by the Group (with the exception
defence, energy, forestry, mining and metals, World Heritage Sites
of the Polish branch which receives its alerts locally as France).
and Ramsar wetlands*. HSBC regularly reviews and refines these
The Whistleblowing oversight team in France within HSBC
policies, including through constructive dialogue with NGOs and
Continental Europe Compliance monitors activities relating to the
action groups, alongside which it regularly addresses matters of
whistleblowing arrangements in the HSBC Continental Europe
common interest. HSBC has applied the Equator Principles since
branches.
they were first developed in 2003, including the latest version
(‘EP3’) since 2014. In addition, regarding six particularly carbon- In HSBC Continental Europe branches, 6 alerts were received in
intensive sectors (oil and gas, energy, construction, chemicals, 2020. All of these alerts related to poor human behaviour in the
automotive, mining and metals), HSBC has developed a method to work environment (HR cases).
assess the climate strategies put in place by its business clients in
order to oversee the impact of its financing more effectively. * These statements and policies can be viewed on the ‘Our Approach/
ESG reporting and policies’ page of the Group website.
For more details, see the ‘Managing the environmental risks https://www.hsbc.com/our-approach/esg-information/esg-reporting-
related to banking activity’ section on page 56. and-policies
Internal Whistleblowing system
HSBC strives to create a working environment in which employees
feel free to share their concerns. Aware that certain circumstances
require special discretion, it simplified its whistleblowing system in
2015 by creating "HSBC Confidential". The arrangements are open
to all employees of HSBC and other stakeholders. The
arrangements can be used anonymously by the whistleblower and
are accessible, at any time. Enhancements to the channel in
December 2020 mean the majority of concerns are now raised
through an independent third party offering 24/7 hotlines and a
web portal in multiple languages, including French and English.
The arrangements are supervised by an independent team within
the Compliance function. It can be used to report, in particular,
facts or behaviour constituting a serious violation of human rights
and fundamental freedoms, the health and safety of persons as
well as the environment resulting from the activities of HSBC
Continental Europe as well as those of their subcontractors or
suppliers, in accordance with Law N° 2017-399 of 27 March 2017
relating to the duty of care of parent companies and ordering
companies. Investigations are conducted confidentially, in depth
and independently by investigators who are trained and made
aware of the legislation / regulations applicable to whistleblowing
arrangements.
Alerts received in France are fully managed in France (i.) while
alerts sent by employees in HSBC Continental Europe branches (ii.)
are received and fully processed by Group in accordance with the
processes put in place by Group (with the exception of the Polish
branch which receives its alerts locally, as France). As the French
alerts and the alerts from HSBC Continental Europe branches do
not follow the same process, the figures are therefore reported
separately in this report.
Arrangements in place within HSBC Continental Europe
in France and figures
In accordance with Law N° 2017-399 of March 27, 2017 on the
duty of care of parent companies and ordering companies, the
whistleblowing arrangements can be used to report facts or
behaviour constituting a serious violation towards human rights
and fundamental freedoms, human health and safety and the
environment resulting from the activities of HSBC Continental
Europe as well as those of their subcontractors or suppliers.
HSBC Confidential in France is placed under the supervision of the
Audit Committee. Investigations are conducted, in a confidential,
in-depth and independent manner by investigators from different
departments, mainly Compliance and Human Resources. Controls
are in place relating to maintaining confidentiality and to protect
whistleblowers from the risk of retaliation. Periodic

System for monitoring measures taken
HSBC Continental Europe has adopted a process for managing
inappropriate individual breaches. The process aims to identify all
situations in which rules and procedures are not complied with,
and to ensure that cases are treated consistently.
The breaches that HSBC Continental Europe seeks to identify
include cases of money laundering – which may involve activities
such as terrorist financing, human trafficking or slavery – as well
as cases where the physical safety of staff members is jeopardised
and cases of harassment.
To deal with such situations, each of HSBC Continental Europe’s
business lines and main functions hold breach committee
meetings. For smaller functions and branches, ad-hoc committee
meetings are held if a breach occurs. The aim of these meetings is
to assess the risk level, the circumstances in which the breach
occurred and the level of the breach. If appropriate, sanctions are
applied; remedial action may also be taken to prevent the situation
from recurring. Monitoring indicators have also been adopted.
In 2020, five breaches were dealt with in relation to the Duty of
Care Act.
We investigate credible allegations of human rights violations as
they are reported to us via engagement with stakeholders. They
are then raised directly with the client company by the
Relationship Manager and, if necessary, escalated to Senior
Management both within HSBC and at the client company, up to
the senior executive level. Where required, individual customer
relationships are referred to and reviewed by Reputational Risk
and Client Selection Committees on a case-by-case basis. These
reviews may decide to restrict or end a customer relationship
where it is unwilling or unable to meet HSBC’s standards,
including those relating to modern slavery and human trafficking.

Risk
Risk Key Highlights

Page
Key Highlights 80 Principal Regulatory Ratios
Our risk appetite 81 At
Areas of special interest 81 31 Dec 2020 31 Dec 2019
Top and emerging risks 85 % %
Risk factors 92 Capital Ratios
Key developments and risk profile 100 Common equity tier 1 12.6 13.5
Key developments in 2020 100 Total tier 1 14.2 15.0
Risk management 100 Total capital 17.3 16.9
Credit Risk 106 Leverage Ratio 4.2 3.7
Counterparty Credit Risk 126 Liquidity Ratios
Treasury risk 129 Liquidity Coverage Ratio 143 152
Capital 129 Net Stable Funding Ratio1 136 127
Liquidity and funding risk management 132
1 Computed in respect of CRR II guidelines.
Market risk 135
Interest-rate risk of the banking book 140
Structural foreign exchange risk 141 Risk-Weighted Assets – by Risk Type
Non Financial (or Operational) risks 141 RWAs Capital required
Compliance 147 2020 2019 2020 2019
Legal risks and litigation management 149 €m €m €m €m
Tax risk 151 Credit Risk 36,431 36,426 2,914 2,914
Accounting risk 151 Counterparty Credit Risk 3,736 3,982 298 319
Resilience risk 152 Market Risk 2,663 4,494 213 359
Information and cyber security risk 152 Operational Risk 3,283 3,149 263 252
Third party risk 153 Total Risk-Weighted
Security of People and Physical Assets 153 Assets 46,113 48,051 3,688 3,844
Contingency risk 154
IT Systems risk 155
Model risk 155
Periodic control 156
Human Resources 157
Insurable Risk Coverage 159
Sustainability and climate change risk 159
Risk management of Insurance operations 159
Reputational risk management 163
All Pillar 3 and regulatory documentation is available on the

Internet websites www.hsbc.com and www.hsbc.fr.
Loan Impairment Charges / Impaired Loans

At
31 Dec 2020 31 Dec 2019
(in million of euros / %) €m €m
Total Gross loans 63,827 64,436
Total Impaired loans (B)1 1,392 1,239
Impaired loans % 2.18% 1.92%
Total loan impairment charge at 31 December (289) (128)
Impairment allowances (A)1 (673) (589)
Impairment ratio: A/B 48.35% 47.54%
1 Including only stage 3.

have fallen outside of the appetite/tolerance are provided, along
Our risk appetite with remediating actions.
We have maintained a consistent risk profile throughout our
history. This is central to our business and strategy. We recognise Areas of special interest
the importance of a strong culture, which refers to our shared
The United Kingdom’s withdrawal from the
attitudes, values and standards that shape behaviours related to
risk awareness, risk taking and risk management. All our people European Union
are responsible for the management of risk, with the ultimate The United Kingdom left the European Union on 31 January 2020
accountability residing with the Board. We seek to build our at midnight following the withdrawal agreement ratification, and
business for the long term by balancing social, environmental and entered a transition period until 31 December 2020. A Trade and
economic considerations in the decisions we make. Our strategic Cooperation Agreement between the European Union and the
priorities are underpinned by our endeavour to operate in a United Kingdom was agreed on 24 December 2020, and ratified by
sustainable way. This helps us to carry out our social responsibility the British Parliament on 30 December 2020. Prior to European
and manage the risk profile of the business. We are committed to Parliament ratification (expected in early 2021), the Trade and
managing and mitigating climate related risks, both physical and Cooperation Agreement provisionally comes into effect from
transition, and continue to incorporate consideration of these into 1 January 2021 onwards. The deal mainly focused on goods and
how we manage and oversee risks internally and with our services but also covered a wide range of other areas. However, it
customers. included limited elements on financial services. This creates
market volatility and economic risk, particularly in the United
Financial position
Kingdom. HSBC Group’s global presence and diversified client
• Strong capital position, defined by regulatory and internal base should help to mitigate the impact of the United Kingdom’s
ratios. withdrawal from the European Union. HSBC Group’s existing
• Liquidity and funding management for each Group entity on a footprint in the European Union, and in particular its subsidiary in
stand-alone basis. France, provides a strong foundation for us to build upon.
Operating model Mitigating actions

HSBC Group has put in place a robust contingency plan. HSBC
• Returns generated in line with risk taken.
Group’s programme has now been largely completed (see also
• Sustainable and diversified earnings mix, delivering consistent page 9 – Impact of United Kingdom’s withdrawal from the
return for shareholders. European Union on HSBC Continental Europe), but there remain
Business practice execution risks, many of them linked to the uncertain outcome of
negotiations and potentially tight timelines to implement further
• Zero tolerance for knowingly engaging in any business, activity changes to our United Kingdom and European operating models.
or association where foreseeable reputational risk or damage to Risks are monitored continuously, with vulnerable industry sectors
the Group has not been considered and/or mitigated. reviewed by management to determine if adjustments to HSBC
• No appetite for deliberately or knowingly causing detriment to Group and HSBC Continental Europe’s risk policy or appetite are
consumers arising from our products and services or incurring required. The impacts of Covid-19 outbreak from a planning
a breach of the letter or spirit of regulatory requirements. perspective have been mostly mitigated.
• No appetite for inappropriate market conduct by a member of As part of HSBC Group’s stress testing programme, a number of
staff or by any group business. internal macroeconomic and event-driven scenarios were
considered to assess HSBC Group’s planning with respect to the
Enterprise-wide application impact of the United Kingdom’s withdrawal from the European
HSBC Continental Europe’s risk appetite is set out in the Risk Union. The results confirmed that HSBC Group is well positioned
Appetite Statement, which describes the types and levels of risk in the event of potential shocks.
that HSBC Continental Europe is prepared to accept in executing This risk has diminished since 31 December 2019.
its strategy. The HSBC Continental Europe’s Risk Appetite
Statement covers the following key areas of risk, with detailed IBOR transition
measures for each category: Financial Crime Compliance, The Financial Stability Board has observed that the decline in
Regulatory Compliance, Operational Risk, Reputational Risk, interbank short-term unsecured funding poses structural risks for
Resilience Risk, Asset Management, Insurance, People Risk, Cost interest rate benchmarks that reference these markets.
of Risk, Risk Diversification, Market Risk, RWAs, Capital (including
In response, regulators and central banks in various jurisdictions
leverage ratio), Liquidity and Funding, Interest Rate Risk on the
have convened national working groups (‘NWGs’) to identify
banking book portfolio, Earnings and Costs. Quantitative
replacement rates for these interbank offer rates ('IBORs') and,
statements and qualitative metrics are assigned to the above risk
where appropriate, to facilitate an orderly transition to these rates.
categories. Measurement against the metrics:
• guides underlying business activity, ensuring it is aligned to risk
appetite statements;
• informs risk-adjusted return;
• enables the key underlying assumptions to be monitored and,
where necessary, adjusted through subsequent business
planning cycles; and
• promptly identifies business decisions needed to mitigate risk.
The Risk Appetite Statement is approved by the HSBC Continental
Europe Board following advice from the Risk Committee, and is a
key component of the risk management framework. It is central to
the annual planning process and seeks to be aligned with the
strategy.
The business performance against these risk appetite metrics is
reviewed on a monthly basis in the Risk Management Meeting and
quarterly in the Risk Committee and Board. Details of metrics that

Risk
Following the announcement by the UK’s Financial Conduct and industry initiatives such as the ISDA protocol are necessary to
Authority in July 2017 that it will no longer persuade or require enable a more ordered transition coupled with legislative
banks to submit rates for LIBOR after 2021, the NWGs for the approaches for the products which are structurally difficult to
affected currencies were tasked with facilitating an orderly transition (‘tough legacy’). Repapering and operational booking
transition of the relevant LIBORs to their chosen replacement will be coordinated and driven by the client’s willingness, with a
rates. The EUR NWG was also responsible for facilitating an defined commercial strategy in place for each global business.
orderly transition of the Euro Overnight Index Average (‘EONIA’) to Dedicated teams are in place to support the client engagement
the Euro Short-Term Rate (‘€STR’) as a result of the determination and facilitate the transition, and specific training helps to further
that EONIA could not, as it was computed before 2nd October mitigate the conduct risk potentially generated by the legacy book
2019, be made to comply with the European Benchmark transition.
Regulation (‘BMR’) and could therefore no longer be used beyond
2021.
Financial instruments impacted by IBOR reforms
HSBC established the IBOR transition programme with the Amendments to IFRSs issued in August 2020 (Interest Rate
objective of facilitating an orderly transition from LIBOR and Benchmark Reform Phase 2) represents the second phase of the
EONIA for HSBC and its clients. This global programme oversees IASB’s project on the effects of interest rate benchmark reform,
the transition effected by each of the global businesses and is led addressing issues affecting financial statements when changes are
by the Group Chief Risk Officer. made to contractual cash flows and hedging relationships as a
result of reform. Under these amendments, changes made to an
In HSBC Continental Europe, the programme is led by the HSBC amortised cost financial instrument that are economically
Continental Europe Chief Risk Officer. Substantial change has equivalent and required by interest rate benchmark reform do not
been undertaken to develop products that reference the result in the derecognition or a change in the carrying amount of
replacement rates and enable the transition of legacy EONIA/ the financial instrument, but instead require the effective interest
LIBOR contracts, which exposes HSBC to material financial and rate to be updated to reflect the change in the interest rate
non-financial risks. benchmark. In addition, hedge accounting will not be discontinued
Throughout 2020 the programme has continued to develop solely because of the replacement of the interest rate benchmark if
products that reference the replacement near Risk Free Rates the hedge meets other hedge accounting criteria.
(‘nRFR'), including the supporting processes and systems, and to These amendments apply from 1 January 2021 with early adoption
make them available to customers. This included meeting permitted. HSBC has adopted the amendments from 1 January
regulatory deadlines for loan product readiness and the transition 2020.
to nRFR discounting by clearing houses. A structured development
plan had to be designed given the widespread use of LIBOR and Financial instruments yet to transition to alternative benchmarks,
EONIA in a wide range of products, systems and processes across by main benchmark
each of the four global businesses. The associated operational risk Total gross
is closely monitored by the programme. Moreover, the material carrying value/
change in the interest computation methodology for loans when USD GBP notional
Eonia Libor Libor Others1 amount
moving from LIBORs to nRFRs and the interpretation of nRFR loan
€m €m €m €m €m
market conventions are a source of conduct risk, that HSBC
addresses through specific client communication processes. At 31 Dec 2020
Non-derivative
EONIA is now off sale for almost all products in HSBC Continental financial assets2 1 2,098 272 1 2,372
Europe and has also been removed from our internal funding Non-derivative
processes; only new EONIA swaps are still being traded, as the financial liabilities2 2 229 — — 231
liquidity of the €STR swaps market has not taken off yet. LIBOR Derivative notional
sales continue as long as the equivalent products in nRFR are not contract amount 192,127 332,644 45,180 45,827 615,778
available and/or the liquidity is not present in the market. Selling
such products referring indices that will be discontinued is also a 1 Comprises financial instruments referencing other significant
source of conduct risk that HSBC mitigates notably through benchmark rates yet to transition to alternative benchmarks (EUR
Libor, JPY Libor and CHF Libor).
specific client information processes and following the industry
2 Gross carrying amount excluding allowances for expected credit
groups’ guidance on the enhancement of the legal documentation.
losses.
It extends to the EURIBOR contracts; indeed, even if the EURIBOR
is not planned, for now, to be discontinued, the industry is The amounts in the above table relate to HSBC Continental
working on developing robust fallback clauses for this index as Europe's main operating entities1 and provide an indication of the
required by the European Benchmark Regulation, which will have extent of the group's exposure to the Ibor benchmarks which are
to be incorporated in EURIBOR new contracts and potentially also due to be replaced. Amounts are in respect of financial
in some legacy contracts. instruments that:
In addition to offering new alternative rate based products, the • contractually reference an interest rate benchmark that is
new product capabilities will also help enable the transition of planned to transition to an alternative benchmark;
outstanding LIBOR and EONIA products. HSBC has begun to
engage clients to determine their ability to transition in line with • have a contractual maturity date after 31 December 2021, the
the readiness of the alternative rate product availability. date by which Libor is expected to cease;
Covid-19 may have affected the ability of clients to transition early • are recognised on HSBC's consolidated balance sheet.
and could result in compressed timelines for IBOR transition. 1 Entities where we have material exposures impacted by Ibor reform
Therefore, development and use of appropriate migration tools, in countries including France, the Netherlands, Spain and Ireland.
The administrator of Libor, IBA, has announced a proposal to

extend the publication date of most US dollar Libor tenors until

30 June 2023. Publication of one-week and two-month tenors will contact the bank in the usual manner and obviously to go to
cease after 31 December 2021. This proposal, if endorsed, would branches. In that context, HSBC Continental Europe has adapted
reduce the amounts presented in the above table as some its processes and controls as necessary to ensure seamless
financial instruments included will reach their contractual maturity continuity in service where necessary.
date prior to 30 June 2023. In addition, a Global Covid-19 Working Group was in place in the
Covid-19 first months of the crisis to coordinate, report and provide
guidance on issues requiring global coverage or consistency in
The Covid-19 outbreak has had, and continues to have, a material responding to the observed or potential impacts of the pandemic.
impact on businesses and on the economic environments in which This fed into the Major Incident Group meetings, which were held
HSBC Continental Europe operates. There are a number of factors at high frequency during that period.
associated with the outbreak and its impact on economies that
have, or could have, a material adverse effect on (among other Since the end of the first lockdown, these exceptional crisis
things) the profitability, capital and liquidity of financial institutions management measures have been gradually unwound or relaxed
such as HSBC Continental Europe. The Covid-19 outbreak has (e.g. less frequent meetings and reports). However, the Covid-19
caused disruption to HSBC Continental Europe’s customers, pandemic and its consequences on the bank’s operations and
suppliers and staff. performance remain under priority monitoring.
In many of the jurisdictions in which HSBC Continental Europe The situation has been closely monitored at executive and Board
operates, notably in France, schemes have been initiated by level since the Covid-19 crisis burst in Europe, initially through
national governments to provide financial support to parts of the daily or weekly meetings covering all risk areas (liquidity, capital,
economy most impacted by the Covid-19 outbreak. credit, operational).
The Covid-19 pandemic led this year, notably in Europe, to sudden As of today, no material operational losses have been recorded
episodes of recessions, which have been unprecedented in due to Covid-19.
magnitude since World War II. During the second quarter of 2020, Credit Risk
lockdowns of populations in many countries and the suspension of
productive activities meant a historical trough for the concerned The review of counterparties under potential stress has been
economies. From second quarter 2020, national fiscal authorities reinforced since the beginning of the Covid-19 crisis, with a focus
and the ECB have taken strong measures to support firms and on the early identification of cases that showed signs of credit
employment, but also to ensure that the financing of the real worthiness deterioration.
economy did not face any issue. Extremely substantial public Credit Risk RWAs have increased as a result of the deferral of
spending has been engaged, pushing fiscal deficit and the public repayments, approval of waiver requests, additional financing
debt ratio to record levels in some cases, while the ECB enhanced requests, precautionary drawdown by companies of their revolving
banks’ liquidity and funding conditions (‘TLTRO III’) and credit facilities and the downgrading of clients’ risk rating.
strengthened its quantitative easing policy through the creation of
Expected Credit Losses have increased significantly over the
a Pandemic Emergency Purchase Programme (‘PEPP’).
period, reflecting the deterioration of the overall credit worthiness
After an improvement in the health situation at the beginning of of the portfolio, which consequently increases the ECL for Stage 1
the summer in 2020, contributing to a very large rebound in the & 2. Stage 3 impairments have also materially increased as some
economic activity over the third quarter, the pandemic spread companies entered into default either through bankruptcy or as
accelerated during the autumn across Europe, where growing they engaged into financial restructuring.
restrictions limited people’s mobility. New lockdowns have been
implemented from October 2020, weighing on the domestic
Expected Credit Losses
economic activity, in spite of fiscal supports sometimes increased In all of our markets, the Covid-19 outbreak has led to a
compared to the packages decided during the spring. weakening in GDP, a key input used for calculating expected
All in all, although the economic outlook in Asia but also in the US credit losses (‘ECL’), and there remains the risk of more adverse
finally looks less deteriorated than initially expected, 2021 may economic scenarios given its ongoing impact. Furthermore, ECL
prove for Europe a year beginning with a lower than anticipated may also increase from parts of our business impacted by the
growth and with rising uncertainties about the recession-induced disruption to supply chains. The impact will vary by sectors of the
permanent scarring on medium term potential growth and on economy, with retail, tourism and the related sectors such as
public finances, which have been durably affected in several hospitality, as well as transportation, among those facing distress.
countries. Indeed, despite a progressive recovery in global trade The impact of the outbreak on the long-term prospects of
and in spite of bond yields having touched historically low levels businesses in these sectors is uncertain and may lead to
for some sovereign borrowers, the reported increase in the significant ECL charges on specific exposures, which may not be
household saving ratio and a deteriorated labour market in Europe fully captured in ECL estimates. In addition, in times of crisis,
have fueled fears that the level of activity reached at the end of fraudulent activity is often more prevalent, leading to potentially
2019 may not be recorded again before 2022 on average. significant ECL charges or operational losses. The significant
Admittedly, any success to manage the pandemic better than changes in economic and market drivers, customer behaviours
forecast thanks to vaccines would represent an upside risk to and government actions caused by Covid-19 have materially
economic growth in the near term. impacted the performance of financial models. In particular, IFRS9
model performance has been dramatically impacted over the
Given the impact of the Covid-19 and the confinement period, course of 2020 which has increased reliance on management
customers and Lines of Businesses faced new issues for which judgment in determining the appropriate level of ECL estimates.
some current processes were not fit for purpose, taking into
account that customers were sometimes facing difficulties to

Risk
As a matter of fact, these models are driven by forecasts of People risk

economic factors such as GDP and unemployment, such that
The exceptional Covid-19 pandemic crisis, has increased the
many of these models were not able to deliver reliable outputs
people risk during lockdown periods imposed by authorities. These
given the dramatic volatility in these forecasts, many of which
periods have generated more uncertainty, interrogations, anxiety,
significantly exceeded observed historic extremes. There has also
stress, and make difficult the work life balance with some
been an unprecedented response from governments to provide a
employees feeling isolated, some others feeling overworked
variety of economic stimulus packages to support livelihoods and
especially for those taking care of children while schools were
the highest hit business sectors which could not be predicted by
closed.
models.
The end of lockdown raised new concerns mainly linked with
HSBC Continental Europe operational resilience over security in public transportation and with workplace conditions on
the crisis, and coming challenges site.
The Covid-19 event has been effectively managed at HSBC All elements which lead to an increase of psycho social risks
Continental Europe. At the peak, around 95 per cent of the main overall.
offices employees were successfully working from home, with
only exceptional roles continuing onsite. There have been no In order to mitigate those risks over this difficult year, several
material operational issues experienced and we have successfully actions focused on employee/clients health and safety, were
supported government furlough schemes. taken:
The key support provided by the IT infrastructure for home • Regular written communications, including authorities’
working has enabled teams to successfully adapt and maintain messages and guidelines, sharing best practices and
key deliverables during this challenging period. Working from encouraging employees to keep in touch with their colleagues
home has arguably become the ‘new normal’. Our overall Video and the company overall sent to employees through different
technology has performed well. channels,
The main risks identified during the crisis have been • Specific tool kit trainings on resilience, remotely management
actively monitored: to support managers and employees in the current difficult
context,
Operational Risk: The dependency on offshore locations, and our
IT infrastructure is clear. The response from our offshore locations • Awareness of HR teams and Contact center to answer
has been at the expected standards. In Q4-2020 we experienced a employees’ queries,
second wave of Covid-19 where no major issues had to be to be • Detailed daily reporting on Covid-19 cases in order to be
reported. Remote working is becoming more and more accepted informed on the situation evolution within the company.
by employees. As long as the Covid-19 situation remains we will
More specifically, at the end of lockdown, additional actions were
keep the IT infrastructure and our protocols in place to be able to
taken to support employee’s reluctance to return back to the
return to full home working if necessary.
office:
Control Environment: Covid-19 has led to some exceptions to
• Progressive return to workplace with a maximum employee
standard practices which have been validated by the relevant Risk
occupancy on site for each three phases associated with
stewards and recorded in a central register.
remote working maintained as much as possible and flexibility
Coming challenges: on arrival/departure hours,
Define and implement new ways of working following the new • Sanitary measures such as hydro-alcoholic gel available at
norm post Covid-19. This will involve a mix of main office working, entrance building/floor, enhanced daily desk cleaning, and
contingency site, and Working from Home (WFH). Return to masks provided to employees,
workplace plans keep being adapted to follow the latest • Social distancing organised through floor markings, lifts with
development of the pandemic and the government responses. limited occupancy, serving packed lunch in company
The HSBC Operations, Services and Technology teams have restaurant,
continued to work with all Global Businesses to ensure resiliency • Development workshops to get employees feedbacks on the
under a range of operating scenarios and are continuing to crisis and support from in-house Health Centre.
actively monitor other risk levels across the business, particularly
increased operational risk (staff capacity, largely mitigated by the Model Risk
rapid move to remote working), reputational risk, and fraud. The unprecedented character of the economic and financial
Further to our operational response to the pandemic, specific disruptions created by the Covid-19 crisis is a challenge to
attention is given to the impact of Covid-19 across our key modelling. Models, in the sense of quantitative methods that apply
regulatory change programmes. The wider implications of mathematical techniques and assumptions to process input data
potential material impacts are monitored, in order to ensure our into quantitative estimates, are used by the bank for a wide range
Regulatory Compliance Risk profile remains reflective and of purposes, including calculation of risk-weighted assets, loan
accurate. impairment charges, fair valuation of some financial instruments,
financial crime and fraud risk management, stress testing, and
All of our businesses and functions have focused on
credit approvals.
understanding what processes needed to change to accommodate
a working from home model and also to operate effectively in the All models are based on a fundamental assumption that there exist
‘new normal,’ which we anticipate will involve a mix of main office some stable relationships between various aspects of the
working, contingency site, and working from home. A Covid-19 modelled situation, or in other terms that the future will look like
Inventory is now in place to document all known exceptions to the past. Hence they cannot be trusted to provide wholly reliable
how teams are operating versus what had previously occurred in predictions in an unprecedented state of affairs such as the deep
business as usual. Such exceptional handling has been agreed recession caused by the current health crisis.
through formal governance arrangements. Amongst the main impacted models are the Credit Risk models
used for capital requirements and accounting provisions: they are
based on lagged data and on past patterns which may not reflect

the actual economic situation of borrowers or the prospects they The recovery of the market offered a good opportunity to adjust
face for the future. In particular, they may not properly take into the hedging strategy of the company. After this adjustment the
account the benefit brought by extremely substantial government portfolio of the company is efficiently protected against a new
interventions in the economy. Likewise, in Market Risk, value-at- drop in the market.
risk (‘VaR’) models are based on an assumption of stable market The second major impact of the crisis, for the medium term, is the
conditions and therefore failed to immediately adjust to the very likelihood of several rating downgrades among the bond issuers in
high price volatility observed since March 2020, resulting in the portfolio of assets held by the insurance company. This will
particular in an abnormal concentration of daily losses higher than both impact the bond market valuations and the spread risk
VaR in March. capital demand as its calculation method is directly proportional to
The bank is dealing with this situation by a strong focus on the the bond ranking. The default risk has also increased.
performance of the models, and by instructing model users to Nonetheless, the strong monitoring of the bond portfolio and
apply professional judgement when considering model output, restrictive choice among the bonds universe (through issuers
using overlays when there is a suspicion that the model is relying selection, strong average rating of the bond portfolio (A/A-), and
too much on outdated assumptions or data. Some tactical model low average duration) are expected to mitigate this risk effectively.
redevelopments are being considered, in particular in the Credit
Risk space, but on the longer term, models are expected to The pandemic had also an impact on the mortality rate of the
progressively recover their predictive power as the pace of persons insured by the company. This impact was very limited on
changes slows down, and many models are already incorporating the holders of the protection products (term life insurance or
recent crisis-related data in their calibrations. creditor insurance) in relation with their average age of c. 47. This
average is higher for the wealth clients of the company (c. 67
Market risk years) and as a consequence the pandemic entailed some rise in
Dedicated Covid-19 stress tests did not exhibit significant potential the mortality rate for these clients.
market risk losses on Trading portfolios. They showed a Capital and Liquidity
significant increase in the bank's Counterparty Credit Risk
exposure but this was concentrated on collateralised or The Covid-19 crisis resulted in HSBC Continental Europe facing
investment grade counterparties. material draw down from customers on committed facilities. The
situation has normalised since then and outlook on liquidity and
The announcement around vaccination readiness and efficiency funding improved which was in particular driven by the
led to a new rally on markets at year end. participation to LTRO and TLTRO III. Customers deposits have
However, the sanitary situation was still concerning with the grown during the crisis in CMB and WPB. Several measures were
winter period in western countries and the lockdown measures implemented (see section on regulatory developments on pages 3
still impacting many economies despite being less strict in general and 4 in the HSBC Continental Europe Pillar 3 document) by
than in spring. national authorities and regulators to allow banks to support the
European economies from a capital and leverage perspective.
The market turmoil caused by the Covid-19 outbreak saw asset
price dispersion and bid-offer spreads significantly increase, Conclusion
leading notably to a material increase of bid-offers charge in 1Q20
It remains unclear how the Covid-19 situation will evolve through
when compared with 4Q19. Since the end of the second quarter of
2021 and we continue to monitor the situation closely. Given the
2020 the charge has materially reduced due to bid offer spreads
prolonged nature of the current crisis, additional mitigating actions
and price dispersion reductions.
may be required.
We also noticed an increase in our Credit Valuation Adjustment
(‘CVA’) charge because of the widening of our counterparties Top and emerging risks
credit spread.
We use a top and emerging risks process to provide a forward
Both Credit Valuation adjustment charges and bid offer reserve
looking view of issues with the potential to threaten the execution
has continued to decrease of the course of second semester of
of our strategy or operations over the medium to long term.
2020.
We proactively assess the internal and external risk environment
Despite the higher volatility experienced by the markets in this
updating our top and emerging risks as necessary.
period, we did not observe any major weakness in HSBC
Continental Europe’s fair valuation models and concluded that We define a ‘top risk’ as a thematic issue that may form and
they operated satisfactorily. crystallise in between six months and one year, and that has the
potential to materially affect the Group’s financial results,
Insurance reputation or business model. It may arise across any combination
The Covid-19 crisis has entailed one of the worst drops on of risk types or global businesses. The impact may be well
financial markets ever seen. The major impact of this adverse understood by senior management and some mitigating actions
evolution was on the company’s solvency ratio, which dropped may already be in place.
dramatically in March. An ‘emerging risk’ is a thematic issue with large unknown
This drop was due to the combination of the degradation of the components that may form and crystallise beyond a one-year time
equity markets, the increasing volatility of the markets and the horizon.
strong decrease in rates. It resulted in a significant increase of
equity risk capital demand and a reduction in economic own
funds. However, it should be noted that a prudent hedging
strategy had been set up before the crisis, which contained the
impact of the drop.
Thanks to the recovery of the markets and to the measures
implemented to improve the solvency ratio, this ratio increased
since then up to levels in line with the company’s objective.

Risk
If it were to materialise, it could have a material effect on the circumstances, and these will become permanent. Beside, the
Group’s long-term strategy, profitability and/or reputation. Existing bank has supported its customers through this difficult period, in
mitigation plans are likely to be minimal, reflecting the uncertain particular by granting loan repayment holidays depending on their
nature of these risks at this stage. individual situation and, for those eligible, by participating in the
support schemes organised by the French state. So far, the
During 2020, we made certain changes in the list of our top and
consequences of the crisis on the bank’s retail loan portfolio have
emerging risks, reflecting the evolution of the issues facing HSBC
been rather moderate. In parallel, the bank has carried on with its
Continental Europe. Our current top and emerging risks, as
assessment of the various strategic options available to it
assessed by us, are as follows:
regarding this business.
Externally Driven Regarding its Global Banking and Markets business, HSBC
Continental Europe has continued to on-board European
Macroeconomic risks companies, in particular those that were banking with its UK
The Covid-19 pandemic led this year, notably in Europe, to sudden parent, HSBC Bank plc, so that service continuity was ensured for
episodes of recessions, which have been unprecedented in all of them ahead of the end of the transition period. At the same
magnitude since World War II. During the second quarter of 2020, time, the bank is now focusing its organic growth on clients and
lockdowns of populations in many countries and the suspension of products that are meeting in full the strategic orientations of the
productive activities meant a historical trough for the concerned HSBC Group, which is to reinforce its position as a dominant
economies. However, from March, national fiscal authorities and international bank in Europe while reducing capital consumption
the ECB have taken strong measures to support firms and and costs there for redeployment within higher growth
employment, but also to ensure that the financing of the real geographies. Besides, in consideration of persistent imbalances in
economy did not face any issue. Extremely substantial public economic situations across countries in the EU and of the
spending has been engaged, pushing fiscal deficit and the public uncertainties generated by United Kingdom’s withdrawal from the
debt ratio to record levels in some cases, while the ECB enhanced European Union, HSBC Continental Europe continues to maintain
banks’ liquidity and funding conditions (‘TLTRO III’) and limited market risk positions in its trading book portfolio. These are
strengthened its quantitative easing policy through the creation of subject to frequent stress tests based on a number of different
a Pandemic Emergency Purchase Programme (‘PEPP’). scenarios which the bank modifies according to the observed
trends and possible evolutions of the economic environment. Also,
After an improvement in the health situation at the beginning of risk calculations and the limits set to the ‘front office’ teams take
the summer in 2020, contributing to a very large rebound in the into account the relative illiquidity of certain markets.
economic activity over the third quarter, the pandemic spread
accelerated during the autumn across Europe, where growing The Commercial Banking network has mobilised itself to support
restrictions limited people’s mobility. New lockdowns have been its clients exposed to the impacts of the crisis, both under
implemented from October 2020, weighing on the domestic government-driven schemes (State-Guaranteed loans in France or
economic activity, in spite of fiscal supports sometimes increased their equivalent in other European countries) and under loan
compared to the packages decided during the spring. moratoria agreed across the French banking industry (quasi-
systematic six month loan repayment deferrals granted to SMEs in
All in all, although the economic outlook in Asia but also in the US the second quarter), and also by granting new financing and/or
finally looks less deteriorated than initially expected, 2021 may additional flexibilitiy on a case by case basis. While doing so, it has
prove for Europe a year beginning with a lower than anticipated also adapted its organization and its resources to reinforce the
growth and with rising uncertainties about the recession-induced monitoring of its corporate clients’ situation and address problems
permanent scarring on medium term potential growth and on at an early stage.
public finances, which have been durably affected in several
countries. Indeed, despite a progressive recovery in global trade As concerns industry sector risks, HSBC Continental Europe has
and in spite of bond yields having touched historically low levels long established procedures and a control framework which
for some sovereign borrowers, the reported increase in the includes the review, in detail, of all significant exposures to
household saving ratio and a deteriorated labour market in Europe customers operating in a higher risk sector, the establishment of
have fueled fears that the level of activity reached at the end of sector ‘Caps’ and a programme of stress tests designed to
2019 may not be recorded again before 2022 on average. regularly evaluate the effect of an exceptional deterioration
Admittedly, any success to manage the pandemic better than occurring in certain sectors which the bank is particularly exposed
forecast thanks to vaccines would represent an upside risk to to. The lending guidelines are updated as necessary in the event of
economic growth in the near term. any material change observed in particular sectors as well as in
consideration of any conclusions that could be drawn from these
Mitigating actions ‘stress tests’. Bank wide stress tests are undertaken annually to
Faced with these challenges, HSBC Continental Europe has measure the impact of a major economic downturn on the bank’s
maintained its efforts to adapt itself to this new environment in results and its balance sheet.
order to offset its impact on its profitability and reinforce the In terms of life insurance activities, HSBC Continental Europe
sustainability of its economic model. continues to apply a long term management strategy of its assets
This adaptation requires maintaining a very strict cost control, and hedging which have the effect of mitigating the impact of the
while carrying-on with necessary modernisation efforts. decline in yields. It is worth noting in this respect that HSBC
Assurances Vie (France) is the only insurance company in France
In Retail banking, the transformation of the distribution model in that integrates in its profit and loss account the variations in
2018, with the specialisation of the salesforce, combined with an Present Value In Force (‘PVIF’), which is the net present value of
accelerating modernisation of internet banking services, turned the profits expected to be generated by its current portfolio of
out to be particularly relevant : lockdowns and travel restrictions investment assets. In order to preserve its solvency ratio, HSBC
have led an increasing proportion of customers to use them and to Assurances Vie (France) has also made various adjustments,
have recourse to the central teams in charge of client relationship including on the sharing of distribution fees with its distribution
under the remote banking model. channel, namely the HSBC Continental Europe branch network.
New processes for the secure exchange of documents have been
made available to help clients to cope with these exceptional

This risk has increased since 31 December 2019. The enhanced pressure on fundraising and cash management
could also limit their capacity to expand and/or demonstrate
Competition risk material and sustainable progress on their path to sustainability.
HSBC Continental Europe operates in a highly competitive industry
The European banking sector is disrupted by regulation
that continues to undergo significant change as a result of
financial regulatory reforms as well as increased public scrutiny Payments
stemming from the financial crisis and continued challenging The adoption and the extension of the legal perimeter of the
economic conditions, further enhanced by the Covid-19 sanitary European payment services ‘PSD2’ regulation has opened up
crisis. access to the bank’s electronic payment platforms to two new
The European banking sector is under strain types of entrants such as Account Information Service Providers
(‘AISP’) and Payment Initiation Service Providers (‘PISP’). AISP's
European banks are encountering higher credit losses in both
are aggregators of data, who can process and centralise
corporate and retail portfolios given the current external
information relating to accounts held by the same account holder
environment, in addition to a slowing of new business and
across different banks, whereas PISP's, receive and process
compressed margins. Most European banks are expected to
payment requests for clients once authorised by them to do so.
record lower revenues as net interest margins and fee income go
Alongside PSD2, Strong Consumer Authentication (‘SCA’)
into reverse at the same time in retail and commercial banking.
standards will be enforced by most of the European Union’s
Other product areas such as payments, trade finance, and
country members by 1 January 2021, and in France by 1 April
consumer credit, are trending downward as economic activity
2021. In addition, banks have had – or will have – to quickly adapt
stalls. While corporate and investment banking divisions could
their processes and their IT infrastructure to be able to propose
experience countercyclical revenues driven by market volatility
instant payment to their clients. Lastly, the payments landscape is
and immediate financing demand from corporates, these benefits
also evolving with the increasing use of blockchain representing a
could be short-lived. The combination of credit losses and weaker
strong risk of disintermediation despite being in its early stages.
revenues will impact earnings and balance sheets, which,
combined, with risk-weighted asset inflation, will drive capital Data Management
ratios and average returns on equity down. Given that industry GDPR, Open Banking and Artificial Intelligence will materially
growth is expected to be low, improved returns will need to come change the way banks will use customer data. Potential new
from reducing cost or capital intensity, while meeting regulatory entrants with strong technology expertise are able to better use
and market requirements in the payment (European Payment data through Application Programming Interfaces (‘APIs’): GAFAs
Services Directive ‘PSD2’, Instant Payment, Near Field (Google, Apple, Facebook and Amazon), payment services, and
Communication payment, blockchain) and data management tech start-ups are already offering real personal services by Big
landscape (General Data Protection Regulation ‘GDPR’, Open Data analysis.
Banking, Artificial Intelligence).
One of the major risks for traditional banks, who can be less
The European banking sector is disrupted by new flexible than the new entrants, is to progressively lose part of their
entrants business as customers increasingly expect exemplary services
The banking industry is facing continued competition on its from their bank.
traditional banking products and services following the arrival of Mitigating actions
new entrants such as mobile banks, tech companies and new non-
banking entrants (‘Fintechs’, ‘Insurtech’, ‘Supply Chain HSBC Group is fully aware of the technology innovations
Specialists’). These potential competitors are capable of capturing mentioned above and maintains high level contacts with the
part of the banking sector’s value chain’ by offering to their ‘Fintech ecosystem’. The PSD2 project is well structured in France
customers relatively more flexible and reactive services, leveraging and Europe to ensure that the bank complies with its obligations
new technologies (e.g. automated customer risk assessment using and is also looking at key business opportunities. GDPR is now
algorithms), attractive pricing, or more responsive online banking applied in a structured manner within HSBC Continental Europe.
services via smartphones or tablets. The Covid-19 lockdowns have HSBC Continental Europe has implemented Instant Payment and
further triggered the shift to digital and mobile banking in all enhanced multichannel and digital features for its retail customers.
European countries. Neobanks have also demonstrated that This risk is stable versus 31 December 2019.
simple products built on new technology platforms with a digital-
first approach can operate at a fraction of the marginal and unit Cyber threats and unauthorised access to
cost of the incumbent banks. Traditional players may be systems
constrained by outdated platforms in an environment where The threat from cyber-attacks remains a concern for our
customers expect exemplary service and are trying to respond organisation, and failure to protect our operations from internet
through disciplined investments as well as partnerships, crime or cyber attacks may result in financial loss, business
acquisitions, or the development of incubators and Labs. It is to be disruption and/or loss of customer services and data or other
noted that, while the profitability of the whole banking sector will sensitive information that could undermine our reputation and our
be impacted by the Covid-19 crisis, smaller players such as ability to attract and keep customers. Ransomware and
neobanks or new non-banking entrants could be further weakened Distributed Denial of Service ('DDOS') attacks are an increasingly
as they have not weathered economic distress or been subject to dominant threat across the industry.
the same level of regulatory oversight and preparedness
measures. Although the bank was not subjected directly to ransomware
attacks in 2020, attacks on third parties and customers increased.
The phishing technique remains the most effective way to spread
malware and other viruses.

Risk
Mitigating actions all Lines of Business have taken full ownership of Conduct risk,
like the other risks.
The security of our information and technology infrastructure is
crucial for maintaining our banking applications, processes, Regulatory Compliance oversees and provides advice to the lines
protecting our customers and the HSBC brand. We continue to of Business in their action plans, with a focus on employee
strengthen and significantly invest in our ability to prevent, detect training, to address any concern or possible delay in the
and respond to the ever-increasing and sophisticated threat of application of the regulatory requirements. It engages with internal
cyber attacks. More specifically, many tests are conducted and external stakeholders, including Regulators, as part of its role
internally to raise the awareness of the HSBC employees of the as Risk Stewards in achieving HSBC’s strategic priorities.
risk of phishing. This risk has remained stable versus 31 December 2019.
Cyber risk is a top priority of the Board and is regularly reported to
Financial crime risks
ensure appropriate visibility, governance and executive support for
our ongoing cyber security programme. HSBC has no appetite to see its products being used to transform
the profits of crime and corruption into legitimate assets, to
This risk is stable versus 31 December 2019.
finance terrorism, transfer money to sanctioned countries or
Tax transparency risks individuals or facilitate tax evasion. The risk of financial crime
remains a top risk for HSBC which continuously reinforces its
In common with all companies, HSBC Continental Europe is
framework to detect and deter suspicious activities.
potentially exposed to the risk that tax rules could be
misinterpreted or incorrect application of the increasingly complex Mitigating actions
tax rules that apply. In particular, the tax authorities are The framework is built to observe the letter and spirit of all
increasingly attentive to the transfer pricing that apply between relevant laws, codes, rules, regulations and standards of good
member companies of large international groups such as HSBC. market practice. These include those relating to financial crime
HSBC Continental Europe runs the risk of a tax adjustment or compliance such as Anti-Money Laundering (‘AML’), Counter
penalties in the event that the bank does not respect these rules Terrorist and Proliferation Financing, Sanctions, Anti-Bribery and
and in particular the requirement to transact with its parent Corruption (‘AB&C’), Fraud Prevention and Tax Transparency with
company at normal commercial conditions. the following top priorities:
Moreover, certain clients of HSBC Continental Europe could use • A suitable Customer Due Diligence (‘CDD’) framework, which
some of its services with the objective of tax evasion which could incorporates Customer Identification and Verification (‘ID&V’)
expose the bank to charges of collusion and which, if confirmed, and Know Your Customer (‘KYC’) principles, as well as
could also lead to severe financial, legal and reputational risks. Enhanced Due Diligence (‘EDD’) on customers assessed as
higher risk, such as Politically Exposed Persons (‘PEPs’) in
Mitigating actions
senior positions, their relatives and close associates;
HSBC Continental Europe Tax department works closely with
• A good Financial Crime Risk culture, from top management to
other central Functions and the various Global Businesses as well
each staff member, with regular training of employees and
as with other Group entities to verify that the transactions
contractors;
undertaken for the bank’s own account or by our clients are
consistent with the spirit and letter of the tax laws (tax • A suitable Transaction Monitoring framework, designed to
transparency principles). Furthermore, it also monitors that the monitor customer transactions for the purpose of identifying
transfer pricing conditions applied by other Group entities is suspicious activity to be reported to Tracfin;
properly justified and documented. • The suitable screening of customers, third parties and
This risk has remained stable versus 31 December 2019. transactions globally against the sanctions lists, with the
associated investigations being conducted in a reasonable
Regulatory Compliance including Conduct timeframe;
The Industry continues to operate under an increasing focus of • Ensure prohibition of business activity that HSBC believes may
regulators on Conduct matters, such as the fair treatment of violate applicable sanctions laws or HSBC’s Global Sanctions
customers with specific attention paid on the protection of fragile Policy;
customers and compliance with conduct rules in financial markets
(including the market abuse framework). • A suitable ‘AB&C’ framework compliant with the HBSC Group
policy and the requirements of Sapin 2 and the Agence
The ACPR also mentioned it was paying particular attention to Francaise Anticorruption (‘AFA’);
digital initiatives, artificial intelligence, FinTech developments and
e-activities, reminding banks that these changes should aim at the • Appropriate Fraud prevention systems to deter and detect all
clients' interest and allow enhanced traceability and control. internal and external fraud attempts;
The green finance and crypto-currencies have also been • Robust policies designed to meet the obligations related to tax
mentioned as emerging issues. The French law on energy fraud and tax evasion in line with art L561-15-11 of the Code
transition and green finance will have to be reviewed following Monétaire et Financier as well as FATCA, CRS and DAC6
European initiatives, and preventing green-washing and pushing reporting requirements.
for a better harmonization of methodologies to define what green This risk is stable versus 31 December 2019.
really is have been a big stake for the AMF. Regarding crypto-
currencies, the French regulators are calling for a European Environmental risks
initiative. HSBC has recently set out its ambitions to be the leading bank
Mitigating actions within the Net Zero Economy. The Net Zero Economy will require
banks to think of return on investment not just in financial terms,
In line with Group initiatives and the Global Conduct Policy, HSBC but in terms of impact on the climate, society, and the natural
Continental Europe has implemented the Conduct framework: ecosystems upon which we depend.
HSBC is aware that those environmental threats including climate
change and transition to a low carbon economy will generate risks
in the short, medium and long term. HSBC Continental Europe

also meets French regulatory and non-regulatory requirements by pesticide use, waste generation; (3) markets – loss of investment
assessing its exposure to those risks. value due to customers’ boycotts of entities producing goods that
are seen to have negative environmental impacts or loss of clients
Climate change
due to a poor environmental performance of a fund; (4)
Climate-related risks are divided into two major categories: reputational – damaged reputation as a consequence of negative
(1) risks related to the transition to a lower-carbon economy and press coverage related to financing of projects with negative
(2) risks related to the physical impacts of climate change, and will impact on natural capital or loss of clients as a result of their
materialise over different time horizons depending on the country perception that the bank does not adequately account for natural
and the sector considered. Transition risk, in the context of climate capital in its decision making;
change, is the risk that the ability of a customer/counterparty to
meet its financial obligations deteriorates as a consequence of the
Mitigating actions
transition from a high-carbon to a low-carbon economy. This HSBC is updating risk policies to strengthen its framework relative
transition could be driven by policies and regulations, adoption of to environmental and biodiversity risks that may arise from the
energy efficient technologies and market changes. financial products and services it delivers.
Transition risk could manifest itself as lost revenues, declining HSBC Global Asset Management is also testing how to set up a
asset values, increased costs (including higher inputs cost, biodiversity impact score in their portfolio assessment tools.
investment in new technology, CO2 tax, regulatory related costs/ Trainings on ‘why biodiversity matters’ have been conducted over
fines, legal claims) and by reputational risk. HSBC may assume the past years among CMB teams.
exposure to material climate-related risks through lending or This risk has increased versus 31 December 2019 and is now listed
market dealing activities with companies which have direct in the top and emerging risks.
exposure to climate-related risks (e.g., fossil fuel producers,
intensive fossil fuel users, real estate owners, or agricultural/food IBOR Transition risk
companies). The bank could also become subject to reputational
Throughout 2020, the IBOR (‘interbank offered rate’) transition
risk and litigation related to its financing activities to CO2 intensive
programme has continued to implement the required IT and
businesses. At the same time, as the markets for low-carbon and
operational changes necessary for an orderly transition from
energy-efficient alternatives grow, HSBC may pursue opportunities
demising EONIA and LIBOR to the replacement near Risk Free
with firms making investments in ‘green assets’.
Rates (‘nRFRs’). These included meeting regulatory deadlines for
Mitigating actions loan product readiness and the transition to nRFR discounting by
clearing houses. The programme also covers EURIBOR contracts;
HSBC is developing risk policies and procedures consistent with
indeed, even if the EURIBOR is not planned, for now, to be
Group Risk Appetite to (1) protect the Group from climate change
discontinued, the industry is working on developing robust
risk and (2) enable business supporting a transition to a low
fallback clauses for this index as required by the European
carbon economy.
Benchmark Regulation, that will have to be incorporated in new
It is developing processes to measure and report exposure and potentially legacy contracts.
(defined as Cat A limits/outstanding) to (1) carbon intensive and
(2) low carbon business activities. Transition risk is measured and
Mitigating actions
monitored by the client facing teams and the credit teams, and The programme has identified financial and non-financial risks by
exposure to Transition Risk is reported to the RMM including line of business, and entity where appropriate, including key
regular review of sensitive sectors/clients. This process will help to mitigation required. The risk associated with continuation of sale
align the Group’s portfolio to net zero by 2050. of products referencing IBOR has been most prevalent in 2020,
This risk has remained stable versus 31 December 2019. with a control framework implemented to reduce potential
conduct implications. Given the impact of Covid-19 and the
Biodiversity progression of the programme into execution phase, the
Biodiversity loss is one of the greatest systemic risks to the global operational risks associated with rollout of new products,
economy and the health of people and the planet. The global migration of legacy contracts, and new product sales are
economy and ecosystems on which we rely depend heavily on increasing, as a result of compressed timelines for client
functioning ecosystems for food, fuel, fibre, climate regulation, engagement. The legal risks associated with enforceability of
water resources, air quality and many other essential products and fallback provisions in IBOR contracts, and the regulatory
services. There is an increasing regulatory and legal pressure, as compliance risk due to interpretation of near RFR loan market
well as calls from investors and other stakeholders to put a conventions are also emerging.
spotlight on corporates ‘management of natural capital, leading For further details on our approach to IBOR transition, see ‘Areas
companies to incur higher costs of capital when engaging in of special interest’ on page 81.
nature-degrading practices.
The risk has increased versus 31 December 2019.
Nature capital-related risks which might have a direct impact on
the bank are (1) operational – i.e. increased risk of default as a Business Model risk
result of customer/counterparty facing higher business costs due The banking industry in Europe is still impacted by low
to a reduction of resources/revenues directly linked to natural profitability, with some banks generating a return on Equity (‘RoE’)
capital loss/degradation or reduced valuation due to increased which is below their estimated cost of equity.
costs for ecosystemic services which are not delivered anymore;
HSBC Continental Europe, has been impacted by the prolonged
(2) legal and regulatory – downward revaluation of assets due to
period of low interest rates and intense competition impacting the
high risk of litigation relating to activities that damage the natural
ability to generate income. Furthermore, investments in IT and to
environment or compromise livelihoods or risks of stranded assets
support the fight against Financial Crime have weighed on our
as a consequence of land-use change limitations, constraints on

Risk
cost base. The current uncertain macroeconomic outlook adds relations and political leadership are now an increasing driving
pressure on revenues, loan impairment charges, and impacts force behind financial market volatility.
credit, capital, liquidity and people risks. The Group strategy US: The US elections were the main focus this year.
presented on 18 February 2020 aims to improve returns and
efficiency in Continental Europe by 2022, and to reduce Risk Middle East: Broadly the region was calm in 2020. The
Weighted Assets (‘RWAs’). Given these guidelines, Global agreements signed by Israel in 2020 establishing diplomatic
Businesses have reviewed their operating models, to build more relations with four Arab League countries, Bahrain, the United
streamlined and effective operations across Europe. HSBC Arab Emirates, Sudan and Morocco were positive for the region.
Continental Europe’s focus in 2021 is to continue to manage US tensions with Iran remained high however. It remains to be
Covid-19 impacts whilst moving forward with the transformation seen whether the new US administration will change existing US
of our activities: (i) the strategic review of the retail operations policy or not.
which is ongoing and no decision has been made; (ii) the Europe: The United Kingdom left the European Union on
repositioning of our Global Banking and Markets (‘GBM’) activities 31 January 2020 and entered a transition period until
for which a social plan has been approved by the French Ministry 31 December 2020, during which negotiations took place on the
of Labour – associated employee exits will take place in 2021; future relationship between the UK and the EU. The risk of a no
(iii) the reshaping of our Commercial Banking (‘CMB’) activities deal remained high throughout 2020.
and support functions through a voluntary redundancy plan; and
(iv) the transformation of the HSBC Continental Europe Mitigating actions
International/European Economic Area (‘EEA’) branches, which We continue to closely monitor the evolving political and
increases focus on client-related activities whilst better leveraging economic environments and portfolio quality to the sectors most
our Paris hub and the Group’s Centres of Excellence. The affected. In particular, exposure is reviewed regularly for ‘at risk’
adaptation of our operational model will enable a significant sectors or companies.
reduction of our cost base across Continental Europe. HSBC
The risk has remained stable versus 31 December 2019
France has changed its name to become HSBC Continental
notwithstanding the threat of a no deal throughout much of this
Europe. The new name better reflects the purpose and nature of
year.
its activities, namely an integrated Continental European bank
connecting our customers to HSBC’s global network, and
providing access to Continental Europe for HSBC’s customers Internally driven
around the world. IT risks & Operational resilience risks
Mitigating actions Apart from malicious activities, the bank’s IT systems are also
HSBC Continental Europe has identified a number of initiatives to exposed to malfunction or breakdown risk, which would affect
adapt its businesses and its cost structure to the current HSBC Continental Europe’s clients, operations or its ability to
environment. These are being tracked both at the country, comply with regulatory obligations.
European and Group level. Key projects such as the repositioning
Mitigating actions
of our Global Banking and Markets (‘GBM’), and Commercial
Banking (‘CMB’) activities, the adaptation of our operational model HSBC Continental Europe is implementing a regular data and
as well as for the preparedness of the United Kingdom’s departure software migration programme onto new servers. In some
from the European Union are being implemented to support instances, the Bank decided to outsource some IT services to third
market developments. The strategic review of our Retail party companies whenever it is safer and more efficient. The use
operations is still ongoing. No decision has been taken. of Cloud services allows us to increase our resilience while
maintaining control over our data, applications and architecture.
This risk has increased since 31 December 2019 given the
macroeconomic environment which has worsened due to the An evergreening plan is in place to updates the software being
sanitary crisis. used with the recent versions to ensure that vendor support will be
obtained if an incident occurs.
Reputational Risk
This risk is stable versus 31 December 2019.
The need to adapt HSBC Continental Europe’s business model to
the current operating environment has significantly increased the People risks
number of transformational projects. The intensity and the pace of A more challenging external environment, made worse by the
transformation is an area of concern for HSBC Continental Covid-19 crisis as well as the implementation of several
Europe’s reputation overall as well as for employees. restructuring projects in accordance with our ongoing strategic
Mitigating actions orientation at HSBC Continental Europe impact the bank’s staff
and create an environment that many employees feel as complex
These risks are closely monitored and mitigation actions have and more uncertain.
been implemented, including an enhanced communication plan.
Due to the low interest rates environment, an increasingly
The risk has increased since December 2019. competitive situation in market activities and the Covid-19
Geo-political Risk pandemic crisis, HSBC Continental Europe's financial results are
deteriorating compared to previous years and this situation could
Financial markets around the world remained impacted by therefore potentially lead to a decrease in staff engagement and
geopolitical dynamics. High levels of geopolitical risk has become increased sick leave. In addition, the current transformation and
the new normal, with uncertainty surrounding policy, international increasing complexity in the banking industry modify the skills and
expertise required in all Businesses and Functions. Staff have to

adapt themselves and develop new competencies, which could and, beyond, this makes the usage of internal models uncertain
create a feeling of unsuitability for some of them. over the longer term for some client segments. On the longer
term, several changes are planned, are ongoing or being
Mitigating actions
considered by supervisors: enhanced definition of default,
In order to mitigate the above risks, HSBC Continental Europe is reassessment of models used for Probability of Default and Loss
making regular and clear communications to all staff concerning Given Default, CRR2 and 3, Fundamental Review of the Trading
the reorganisations, projects in progress and future skills. The Book. This leads to uncertainty on the long-term regulatory
bank also monitors with attention the workload and stress levels framework for regulatory capital models, which might need
of its employees via bi-annual surveys. Line managers are equally significant redevelopments, entailing risks of regulatory approval
made aware of this risk regularly and are encouraged to take issues, and of capital impacts in case of defects in the new
appropriate action when necessary. HSBC Continental Europe in models’ performances. Given its unprecedented nature, the
France has developed a series of collaborative workshops to Covid-19 crisis is a major challenge for models, as they mostly rely
collect feedback and concrete action plans and has created a on the assumption of stable relations between some economic
programme called #Resilience to help managers and employees and financial features. In particular, Probability of Default models
cope with the current context of high uncertainty. In addition, used for regulatory capital and provisioning perform less well and
HSBC Continental Europe in France has deployed specific learning have to be adjusted on the basis of recent observations or expert
classes ‘Future Skills’ for staff to develop new competencies and judgement.
adapt themselves.
The deep changes in rate benchmarks (‘IBOR‘) that are due to
The risk has increased versus 31 December 2019. happen over the next few years, can cause model-related
challenges in areas such as Traded Risk and Markets Valuation, in
Execution risks
particular due to uncertainties related to the timing and exact
In order to deliver our strategic objectives and meet mandatory nature of the transition period. Lack of awareness of the impact on
regulatory requirements, it is important for HSBC to maintain a the model landscape and model risk, could result in ineffective
strong focus on execution risk. The increase of different projects prioritisation of coordinated activities, and partial inability to cope
and reorganisation in progress at HSBC Continental Europe could with some aspects of the transition.
generate conflicting priorities and conflicts vis-à-vis the allocation
On the development side, models are used by businesses on a
of resources. This could impact on the management of each
wider and wider scope, with more sophisticated modelling
project, its correct and timely completion and on the running of
approaches linked to technical developments in machine learning.
the bank with possible consequences such as financial losses,
While this is expected to result in increased efficiency, there is a
reputational damage or also regulatory sanctions.
risk that model controls might not follow the pace of
Mitigating actions developments, leading to lower visibility on actual model risks.
HSBC Continental Europe provides the necessary means to Besides, the growing focus on environment risk is not translated
manage its various projects be they technical, financial or human, yet into the bank’s models, which might ultimately lead to an
particularly in an environment where these resources are shared incorrect assessment of this risk and to inadequate business
with the other parts of the HSBC Group at European and global decisions.
level. These are subject to regular monitoring as part of the Mitigating actions
governance framework adapted to the nature and complexity of
HSBC Continental Europe is actively improving its model risk
the projects. The most important projects are followed at the
management framework, and the implementation of the new
highest possible global, regional and local governance forums. The
model risk policy is closely monitored by committees gathering
local governance, which is ensured by a dedicated monthly
key stakeholders. For regulatory capital models specifically, HSBC
Oversight Project committee was launched on 1 January 2018.
Continental Europe is actively engaging with supervisory bodies to
The risk has increased since 31 December 2019. ensure their concerns are addressed and expectations are being
met. Development of enhanced models for the main areas of
Model risks
concern is ongoing, with some models submitted to supervisors in
Model risk arises when business decision making includes some 2020 and some planned to be in 2021.
reliance on models, which are increasingly used across many
The consequences of future regulation changes on models are
areas of the bank in both financial and non-financial contexts.
reviewed in formal project planning and working groups
While sound controls are already in place, in particular the
established, as required, to address regulatory change, including
maintenance of a model inventory and its extensive coverage by
the Fundamental Review of the Trading Book and Basel III
regular independent model validations, a new and more ambitious
reforms. Review of broader regulatory guidance for model
Model Risk Policy is being implemented to improve them further
implications will continue, and be addressed in conjunction with
and effectively manage model risk. Failure to do so could expose
established HSBC working groups and governance. Active
the bank to reliance on ill-controlled models, impact strategic
engagement with regulatory bodies will continue.
objectives especially in terms of efficient use of capital, and bring
reputational risk to HSBC Continental Europe. The performance of the bank’s models in the crisis context is
being actively monitored, in particular with a particular category
For regulatory capital models specifically, HSBC Continental
created for credit override when model output is inadequate.
Europe’s supervisors continue to hold their expectations high
Adjustments are in place on scenarios used for provisioning.
regarding model quality and control. Supervisory Authorities have
Concerning rate benchmarks, a model risk working group has
expressed reservations on the quality of some current models, but
been set up at the level of HSBC Group to conduct gap
also of new developments submitted for approval, which
assessment and give a consolidated view of the transition from
generates a risk that unfavourable conditions may be imposed for
the model risk perspective. Global businesses, model owners and
the calculation of Risk Weighted Assets based on internal models;
Model Risk Management are devising plans to implement model
changes and assess model risk during the transition period.
Model Risk Management in HSBC Group is working in conjunction
with the global businesses and functions to master the advanced

Risk
analytic developments and technologies, actively reaching out to • HSBC have also initiated efforts to modernise data architecture
new Artificial Intelligence-Machine Learning (‘AI-ML’) programs and infrastructure through adoption of big data, cloud, machine
which are in the process of being developed. The embedding of learning, advanced analytics and visualisation technologies. To
environment risks in modelling is still an emerging topic; the help our employees keep abreast of Data Management and
second line of defence is encouraging businesses to consider it in Data Privacy Laws and Regulations and continue to hold annual
their upcoming model developments. data symposiums and data privacy awareness training
highlighting our commitment to protect personal data for our
The risk has increased versus 31 December 2019.
customers, employees and stakeholders.
Data management risks The risk is stable versus 31 December 2019.
HSBC Continental Europe uses a large number of systems and
applications to support key business processes and operations. As
Third Party Risk
a result, we often need to reconcile multiple data sources, HSBC Continental Europe utilises third parties for the provision of
including customer data sources, to reduce the risk of error, and to a range of services, in common with other financial service
ensure an accurate, complete and up to date data in our systems. providers. Risks arising from the use of third-party service
HSBC, along with other organisations, also needs to meet providers may be less transparent and therefore more challenging
external/regulatory obligations such as the General Data Protection to manage or influence. It is critical that we ensure we have
Regulation (‘GDPR’), the Basel committee for Banking Supervision appropriate risk management policies, processes and practices.
(‘BCBS’ 239) principles and Basel III. These should include adequate control over the selection,
Mitigating actions governance and oversight of third parties, including Cloud,
particularly for key processes and controls that could affect
• We continue to improve data quality across the large number
operational resilience. Any deficiency in our management of risks
of systems that we use. Data management, aggregation and
arising from the use of third parties could affect our ability to meet
oversight continues to strengthen and enhance the
strategic, regulatory or client expectations.
effectiveness of internal systems and processes. We have
continuously enhanced our data controls in order to comply the Mitigating actions
increased regulatory requirements and to better meet customer We continued to embed our delivery model in the first line of
expectations. defence through several dedicated teams. Processes, controls and
• We have achieved our objectives in support of the Basel technology to asses third party service providers against key
Committee for Banking Supervision (‘BCBS’ 239) principles. criteria and associated control monitoring and assurance have
been developed.
• We continue to enhance and advance our data insights, data
aggregation, reporting and decisions. We carry out ongoing Oversight capabilities in the second line of defence has been
improvement and investments in data Governance, data enhanced to monitor and embed policy requirements and
Quality, data Architecture and data Privacy. performance against risk appetite. Within the second line of
defence, the Resilience Risk is in charge of defining the strategy
• Through the implementation of the Global Data Management
and the policy for an effective management of the Third Party
Framework, HSBC has made progress in increasing coverage of
Risk.
key business processes and associated critical data to monitor
which again HSBC Continental Europe is benefiting from. A Governance: Any outsourcing of a material service is formally
proactive monitoring and reporting on the quality of customer, approved by the Bank Risk Management Meeting prior to the
product, reference and transaction data is designed for identify, contract commencement date.
track remediation and resolve the associated data issues in a A dedicated Cloud Committee is implemented to review each
timely manner. project to outsource on a Cloud to ensure adherence to the Group
• Additional control monitoring developed Key Performance, Cloud strategy and to review data privacy, regulatory compliance,
Control and Risk Indicators that will be integrated in 2021 with Legal and IT aspects.
the current controls and reported to the appropriate data A quarterly Third Party Risk Forum is in place to ensure that third
governance forums. parties are managed in line with Group standards and regulatory
• HSBC is continuously improving the global Data Privacy expectations.
Framework that establishes data privacy practices, design The risk has increased versus 31 December 2019.
principles and guidelines that demonstrate compliance with
Data Privacy Laws and Regulations in the jurisdictions which
Risk factors
HSBC Continental Europe operates such as the GDPR in EU.
Streamlining on the implementation of data privacy processes We have identified a comprehensive list of risk factors that cover
with new tools to enhance compliance with data privacy the broad range of risks our businesses are exposed to. A number
regulation on Data Transfers and Privacy Impact Assessments. of the risk factors have the potential to have a material adverse
effect on our business, prospects, financial condition, capital
position, reputation, results of operations and/or our customers.
They may not necessarily be deemed as top or emerging risks;
however, they inform the ongoing assessment of our top and
emerging risks that may result in our risk appetite being revised.
For the risks linked to Covid-19 see ‘Areas of Special Interest’ on
pages 83 to 85.

Probability Impact (Low/
(Very Unlikely/ Medium/
Unlikely/Likely/ High/ Very
Category Risks Very Likely) High)
Macroeconomic risk Current economic and market conditions may adversely affect HSBC Continental Europe’s results. Likely Very High
Geopolitical risk The UK’s withdrawal from the European Union may pose operating challenges to HSBC Continental
Europe in its adaptation to the new economic and regulatory environment. Likely Medium
Macro-prudential, HSBC Continental Europe is exposed to the risks associated with the replacement of benchmark
regulatory and legal indices.
risks Likely High
Risks concerning borrower credit quality are inherent in our businesses. Likely Very High
The delivery of our strategic actions is subject to execution risk. Likely High
HSBC Continental Europe is exposed to a risk of attrition along with a skills retention risk. Likely High
We have significant exposure to counterparty risk. Likely High
We may not achieve any of the expected benefits of our strategic initiatives. Unlikely High
HSBC Continental Europe remain susceptible to a wide range of cyber-risks that impact and/or are
facilitated by technology. Unlikely High
HSBC Continental Europe’s operations are highly dependent on our information technology systems. Unlikely High
Risks related to our
business, business HSBC Continental Europe could incur losses or be required to hold additional capital as a result of
operations, model limitations or weaknesses. Unlikely High
governance and HSBC Continental Europe’s operations utilise third-party and intra group suppliers and service
internal control providers. Likely Medium
systems
HSBC Continental Europe’s data management policies and processes may not be sufficiently robust. Likely Medium
HSBC Continental Europe's reputational risk is highly linked to its current organisational evolution. Likely Medium
Market fluctuations may reduce our income or the value of our portfolios. Likely Medium
HSBC Continental Europe’s operations are subject to the threat of fraudulent activity. Likely Medium
HSBC Continental Europe’s financial statements are based in part on judgements, estimates and
assumptions that are subject to uncertainty. Unlikely Medium
Liquidity, or ready access to funds, is essential to our businesses. Unlikely Medium
Third parties may use us as a conduit for illegal activities without our knowledge. Unlikely Medium
Macroeconomic risks carrying on with the transformation of its businesses. The HSBC
Group has launched a restructuring of its businesses and central
Current economic and market conditions may adversely functions. The Group strategy presented in February 2020 aims to
affect HSBC Continental Europe’s results. Probability: Likely / improve returns and efficiency in Continental Europe by 2022, and
Impact: Very High. to reduce Risk Weighted Assets (‘RWAs’). Following these
The Covid-19 outbreak has had, and continues to have, a material announcements, the global business lines and the central
impact on businesses and on the economic environment in which functions have been working on designing new business and
HSBC Continental Europe operates. It has caused disruption to operating models in order to make the bank simpler and more
HSBC Continental Europe’s customers, suppliers and staff. In most agile across Europe. This has been undertaken alongside the
countries in which HSBC Continental Europe operates, notably in strategic review of the Retail operations which is ongoing and for
France, schemes have been initiated by national governments to which, at this point, no decision has been made.
provide financial and social support to the economic sectors most Loss before tax was EUR 945 million in 2020, sharply down from a
impacted by the Covid-19 outbreak. EUR 22 million loss in 2019, and included impairments of tangible
As the Covid-19 outbreak continued to disrupt the economic and intangible assets, restructuring costs, an adverse PVIF
activity in most countries in the word, including in Europe movement and incremental ECL charges.
throughout 2020, there could be adverse impacts on HSBC
Continental Europe’s income due to lower lending and transaction
Geopolitical risks
volumes and lower wealth and insurance manufacturing revenue, The United Kingdom’s withdrawal from the European
including the present value of in-force long-term insurance Union may pose operating challenges to HSBC Continental
business (‘PVIF’), due to bond and equity markets volatility and Europe in its adaptation to the new economic and
weakness. In addition, lower interest rates will negatively impact regulatory environment Probability: Likely / Impact: Medium
net interest income and extreme market movements could have a The United Kingdom left the European Union on 31 January 2020
negative impact on HSBC Continental Europe’s markets activities. at midnight following the withdrawal agreement ratification, and
The current uncertain macroeconomic outlook will add pressure entered a transition period until 31 December 2020. A Trade and
on revenues, weigh on loan impairment charges, and impact Cooperation Agreement between the European Union and the
credit risk, capital risk, liquidity risk and people risk. United Kingdom was agreed on 24 December 2020, and ratified by
HSBC Continental Europe’s priority in 2021 is to continue to the British Parliament on 30 December 2020. Prior to European
manage the consequences of the Covid-19 health crisis while Parliament ratification (expected in 2021), the Trade and

Risk
Cooperation Agreement provisionally comes into effect from • Pricing risks, such as changes to benchmark indexes could
1 January 2021 onwards. The European Union and United impact pricing mechanisms on some instruments.
Kingdom agreed through a joint declaration to establish structured See also section ‘IBOR transition’ in the Areas of Special Interest
regulatory cooperation on financial services, with the aim of on pages 81- 83.
establishing a durable and stable relationship between
autonomous jurisdictions. However, there remain risks, many of Risks related to our business, business
them linked to the absence of tangible agreement between the operations, governance and internal control
United Kingdom and the European Union on financial services. systems
While the United Kingdom and the European Union have made a
number of equivalence decisions before the end of the transition Risks concerning borrower credit quality are inherent in
period, both parties are expected to establish the framework of our businesses. Probability: Likely / Impact: Very High.
their future cooperation with the Memorandum of Understanding Risks arising from changes in credit quality and the recoverability
to be signed by 31 March 2021. The United Kingdom’s future of loans and amounts due from borrowers and counterparties in
relationship with the European Union will have implications for the derivative transactions are inherent in the businesses of HSBC
future business model for HSBC Group’s London-based European Continental Europe. Adverse changes in the credit quality of our
cross-border banking operations, which relies on unrestricted borrowers and counterparties arising from a general deterioration
access to the European financial services market (discontinuation in economic conditions or systemic risks in the financial systems
of the free movement of services and significant changes to the could reduce the recoverability and value of our assets, and
United Kingdom’s immigration policy). require an increase in our loan impairment charges. The risk is that
Similarly, HSBC Continental Europe may be restricted in accessing we fail to estimate accurately the effect of factors that we identify
UK based financial infrastructure. or fail to identify relevant factors. Further, the information; HSBC
Continental Europe use to assess the creditworthiness of our
As a result, meeting HSBC clients' needs after the United counterparties may be inaccurate or incorrect. Any failure by
Kingdom’s departure from the European Union required HSBC Continental Europe to accurately estimate the ability of our
adjustments to HSBC European cross-border banking operations, counterparties to meet their obligations may have a material
including the transfer to HSBC Continental Europe of several EEA- adverse effect on HSBC Continental Europe its prospects, financial
based HSBC entities to HSBC Continental Europe and the condition and results of operations. The level of any material
migration of impacted businesses and clients from the United adverse effect will depend of the number of borrowers involved,
Kingdom to its EEA subsidiaries, in particular HSBC Continental the size of the exposures and the level of any inaccuracy of our
Europe. The programme is now largely completed. HSBC estimations.
Continental Europe has addressed many challenges (legal,
regulatory, organisational, operational, IT-related, HR-related, In 2020, HSBC Continental Europe has been taking exceptional
financial) as part of its adaptation programme. These adaptations measures to protect itself and its clients and participate in the
are now largely implemented and HSBC Continental Europe is prevention of an economic collapse, in particular through a quasi-
now providing continuity of service to EEA customers previously systematic six month deferral of loan repayments for its smaller
banking with HSBC Bank Plc. CMB clients and its personal, professional and entrepreneur client
base within WPB, with limited exclusions or restrictions. For the
See also page 9 (Purpose and strategy – Impact of United corporate segments, deferral of repayments has been considered
Kingdom’s withdrawal from the European Union on HSBC on a case-by case basis. At the beginning of the crisis, new money
Continental Europe) and page 81 (Areas of Special Interest – The financing has been granted to our customers, either state-
United Kingdom’s withdrawal agreement from the European guaranteed or not (depending on the individual situation). New
Union) for further information. money financing have been approved for large corporates to
Macro-prudential, regulatory and legal risks to the strengthen their short to mid-term liquidity at the beginning of the
business model of HSBC Continental Europe crisis, usually to support their rating or as a simple bridge to a
refinancing in the debt market.
HSBC Continental Europe is exposed to the risks
associated with the replacement of IBORs (interbank The review of counterparties under potential stress has been
offered rates). Probability: Likely / Impact: High reinforced since the beginning of the Covid-19 crisis, with a focus
on the early identification of cases that showed signs of credit
The planned replacement of key IBOR rates (LIBOR / EONIA) with worthiness deterioration.
alternative benchmark rates introduces a number of risks for
HSBC Continental Europe, its clients, and the financial services Credit Risk RWAs have increased as a result of the deferral of
industry more widely. This includes, but is not limited to: repayments, approval of waiver requests, additional financing
requests, precautionary drawdown by companies of their revolving
• Execution/operational risks, due to the requirement to adapt IT credit facilities and the downgrading of clients’ risk rating. For
systems, infrastructure and operational processes, notably for details concerning Credit Risk RWAs as at 31 December 2020 see
the legacy book transition; table 9: ‘Credit risk exposure – summary’ on page 16 in the 2020
• Conduct risks, relating to potential negative outcomes for the HSBC Continental Europe Pillar 3 document. The geographic
clients resulting from the sales of new product, the continued breakdown of exposures of HSBC Continental Europe and the
sales of IBOR products and the transition of the legacy book; credit risk exposures by industry sectors can be found in tables 14
and 15 on pages 22, 23 and 24 respectively in the 2020 HSBC
• Legal risks, as changes required to documentation for new and Continental Europe Pillar 3 document.
existing transactions may be required;
Expected Credit Losses have increased significantly over the
• Financial risks, arising from any changes in the valuation of period, reflecting the deterioration of the overall credit worthiness
financial instruments linked to benchmark rates; of the portfolio, which consequently increases the ECL for Stage 1
& 2. Stage 3 impairments have also materially increased as some
companies entered into default either through bankruptcy or as
they engaged into financial restructuring. Change in expected
credit losses and other credit impairment charges ('ECL') was

EUR 289 millions in 2020 versus 128 million in 2019. The increase We have significant exposure to counterparty risk.
mainly reflected the deterioration of current economic conditions Probability: Likely / Impact: High .
and forward economic outlook that came out as significant HSBC Continental Europe are exposed to counterparties that are
provisions on GBM and CMB businesses. involved in virtually all major industries, and we routinely execute
The delivery of our strategic actions is subject to execution transactions with counterparties in financial services, including
risk. Probability: Likely / Impact: High . central clearing counterparties, commercial banks, investment
banks, mutual funds, and other institutional clients. Many of these
Robust management of critical time-sensitive and resource
transactions expose HSBC Continental Europe to credit risk in the
intensive projects is required to effectively deliver HSBC
event of default by our counterparty or client. Our ability to engage
Continental Europe’s strategic priorities. HSBC Continental Europe
in routine transactions to fund our operations and manage our
continues to implement a number of programmes (Continental
risks could be materially adversely affected by the actions and
European hub in Paris, transformation and repositioning of our
commercial soundness of other financial services institutions.
underperforming businesses, completion of the strategic review of
Financial institutions are necessarily interdependent because of
retail banking activities, adaptation of our operational model, and
trading, clearing, counterparty or other relationships. As a
regulatory programmes) in addition to the already mentioned
consequence, a default by, or decline in market confidence in,
project related to the UK's departure from the European Union.
individual institutions, or anxiety about the financial services
The magnitude and complexity of the transformation underway industry generally, can lead to further individual and/or system
does present heightened execution risk. The cumulative impact of difficulties, defaults and losses. Mandatory central clearing of OTC
the collective change initiatives within HSBC Continental Europe is derivatives, including under the EU’s European Market
significant and has direct implications on HSBC Continental Infrastructure Regulation, poses risks to HSBC. As a clearing
Europe’s resourcing and people. In addition, these strategic member, we will be required to underwrite losses incurred at a
actions are being undertaken in an uncertain economic, market Central Counterparty (‘CCP’) by the default of other clearing
and regulatory context, which may result in volatility in financial members and their clients. Hence, increased moves towards
results and necessary adaptation of strategy execution to take new central clearing brings with it a further element of
environment into account. interconnectedness between clearing members and clients that
The failure to successfully deliver key strategic actions or other we believe may increase rather than reduce our exposure to
regulatory programmes could have a significant impact on HSBC systemic risk. At the same time, our ability to manage such risk
Continental Europe’s financial condition, profitability and ourselves will be reduced because control has been largely
prospects, as well as wider reputational and regulatory outsourced to CCPs.
implications. Execution Risk linked to the ongoing number of Where bilateral counterparty risk has been mitigated by taking
projects is being managed and mitigated through a Project collateral, credit risk for HSBC Continental Europe may remain
Oversight Committee. high if the collateral we hold cannot be realised or has to be
HSBC Continental Europe is exposed to a risk of attrition liquidated at prices that are insufficient to recover the full amount
along with a skills retention risk. Probability: Likely / Impact: of our loan or derivative exposure. There is a risk that collateral
High. cannot be realised, including situations where this arises by
change of law that may influence our ability to foreclose on
The demands being placed on the human resources of the bank collateral or otherwise enforce contractual rights. Any such
remain at a very high level. The workload arising from evolving adjustments or fair value changes may have a material adverse
regulatory reform programmes places increasingly complex and effect on our financial condition and results of operations.
sometime conflicting demands on the workforce. At the same
time, the human resources operate in an employment market As at 31 December 2020, Counterparty Risk RWAs were EUR 3.7
where expertise in key markets is often in short supply and mobile. billion of which EUR 769 million were on IRB advanced approach
The continued success of HSBC Continental Europe depends in (100 per cent institutions), EUR 1.7 billion on IRB foundation
part on the retention of key members of its management team and approach (100 per cent corporates), EUR 712 million standardised
wider employee base. The ability to continue to attract, train, (90 per cent institutions), EUR 307 million CVA advanced, EUR 86
motivate and retain highly qualified professionals and talented million CVA standardised and EUR 132 million CCP standardised.
people who embrace HSBC core values is a key element of our 81 per cent of Counterparty Risk RWAs are derivatives (OTC and
strategy. The successful implementation of our strategy which exchange-traded derivatives) related. See table: Counterparty
aims to become the leading bank for international corporates in credit risk – RWAs by exposure class and product on page 129.
Europe leading to reorganisation plans implementation highly Details concerning IRB and Standardised exposure – credit risk
depends on our capacity to retain key skilled people in each of our mitigation can be found in tables 21 and 22 on pages 31 and Page
businesses and functions. If businesses or functions fail to staff 32 respectively in the HSBC Continental Europe Pillar 3 document.
their operations appropriately, to attract international profiles, or See also Counterparty Credit Section on pages 126-129.
lose one or more of their key senior executives/talent and fail to
We may not achieve any of the expected benefits of our
successfully replace them in a satisfactory and timely manner, or
strategic initiatives. Probability: Unlikely / Impact: High
fail to implement successfully the organisational changes required
to support the strategy, or do not succeed to develop shared core HSBC Group’s strategy is built around two fundamental trends:
values, the sustainable improvement of the results of our activities the continued growth of international trade and capital flows, and
and more globally of our financial results, alongside with control wealth creation. With regards to the current operating
and operational risks, could be materially adversely affected. environment in Europe, the HSBC Group has reviewed its strategy
Nevertheless the current pandemic crisis has had an impact on
headcounts with a reduction in the trend of resignations and
hence a reduction in our external recruitments requirements. On
the contrary, people risks linked to higher uncertainty, anxiety and
stress, has undoubtedly increased during this prolonged period of
‘working from home’.

Risk
and operations in order to implement a sustainable and profitable Universal registration document concerning Operational risk
operating model that would be able to best serve its clients in the losses: quantitative data starting from 2012 for full details.
future. Within this framework, our strategy in Europe is to become HSBC Continental Europe’s operations are highly
the leading international wholesale bank, complemented by a dependent on our information technology systems.
targeted wealth management business. The HSBC Group’s Probability: Unlikely / Impact: High.
international network and expertise along with HSBC Continental
Europe’s coverage and capabilities provide us with a strategic The reliability and security of our information and technology
advantage to help clients achieve their goals, whether it is growing infrastructure, and our customer databases are crucial to
heir businesses in the single market or breaking into international maintaining the service availability of banking applications and
markets. The development and implementation of HSBC processes and to protecting the HSBC brand. The proper
Continental Europe’s strategy requires difficult, subjective and functioning of our payment systems, financial control, risk
complex judgements, including forecasts of economic conditions management, credit analysis and reporting, accounting, customer
in Continental Europe but also in other parts of the world. HSBC service and other information technology systems, as well as the
Continental Europe may fail to correctly identify the trends it seeks communication networks between our branches and main data
to exploit and the relevant factors in making decisions as to capital processing centres, are critical to our operations. Critical system
deployment and cost reduction.Key to achieving HSBC Continental failure, any prolonged loss of service or data availability or any
Europe’s strategy is to increase the cross-business and cross- material breach of data integrity, could cause serious damage to
border synergies between HSBC Group’s different entities across our ability to service our clients, could breach regulations under
the globe, while ensuring an efficient operating model across our which we operate and cause long-term damage to our business
Continental European operations. and brand that could have a material adverse effect on our
business, prospects, financial condition and results of operations.
HSBC Continental Europe’s transformation is articulated around No noticeable incidents or disruptions were reported for HSBC
four pillars: (i) the strategic review of the retail operations which is Continental Europe in 2019 and 2020. In addition HSBC
ongoing and no decision has been made; (ii) the repositioning of Continental Europe management considered the financial control
our Global Banking and Markets (‘GBM’) activities for which a environment and reviewed action taken to enhance controls over
social plan has been approved by the French Ministry of Labour – IT access management.
associated employee exits will take place in 2021; (iii) the
reshaping of our Commercial Banking (‘CMB’) activities and Operational losses for combined Information, technology and
support functions through a voluntary redundancy plan; and (iv) cyber security risks were EUR 0.22 million in 2020 (of which zero
the transformation of the HSBC Continental Europe International/ related to cyber risks). See table on page 146 of the HSBC
European Economic Area (‘EEA’) branches, which increases focus Continental Europe Universal registration document concerning
on client-related activities whilst better leveraging our Paris hub Operational risk losses: quantitative data starting from 2012 for full
and the Group’s Centres of Excellence. The adaptation of our details.
operational model will enable a significant reduction of our cost HSBC Continental Europe could incur losses or be required
base across Continental Europe. HSBC Continental Europe’s ability to hold additional capital as a result of model limitations or
to execute its strategy may be limited by its operational capacity weaknesses. Probability: Unlikely / Impact: High .
and the increasing complexity of the regulatory environment in
which HSBC Continental Europe operates. HSBC Continental Europe uses models for a range of purposes in
managing its business, including calculation of risk-weighted
HSBC Continental Europe remains susceptible to a wide assets, loan impairment charges, fair valuation of some financial
range of cyber-risks that impact and/or are facilitated by instruments, financial crime and fraud risk management, stress
technology. Probability: Unlikely / Impact: High. testing, and credit approvals.
The threat from cyber-attacks remains a concern for our HSBC Continental Europe could in some cases face adverse
organisation, and failure to protect our operations from internet consequences as a result of decisions by management based on
crime or cyber-attacks may result in financial loss, business the use of models. This can happen when models have been
disruption and/or loss of customer services and data or other inadequately designed or implemented, when their outcome is
sensitive information that could undermine our reputation and our misunderstood or used beyond the model’s intended use case, or
ability to attract and keep customers. Ransomware and as a result of random events whose probability was neglected in
Distributed Denial of Service (‘DDOS’) attacks are an increasingly the model design. Such events are made more probable by the
dominant threat across the industry. In 2020, the bank was subject uncertain and unprecedented environment created by the
to a small number of DDOS attacks on our external facing Covid-19 crisis. Risks arising from the use of models could have a
websites across the Group. In 2020, the bank was not subject to material adverse effect on our business, prospects, financial
ransomware attacks although there were several attacks on condition, results of operations, minimum capital requirements
Third Parties & Customers. Although cyberattacks had a negligible and reputation. Regulatory scrutiny and supervisory concerns over
effect on our customers or services due to the increasing banks’ use of models is considerable, particularly the internal
sophistication of cyber-attacks potential future attacks could have models and assumptions used by banks in the calculation of risk
a material adverse effect on our business, prospects, our capital, weighted assets. In case of significant model deficiencies,
reputation and our profit. regulators may require model re-developments or impose capital
add-ons.
HSBC Continental Europe did not report any operational losses
related to Cyber risks in either 2018, 2019 or 2020. Operational For details concerning RWAs as at 31 December 2020 – see table:
losses for combined Information, technology and cyber security RWAs by risk types on page 132.
risks were EUR 0.22 million in 2020 (of which zero related to cyber Likewise, models are used to infer the fair value of some financial
risks). See table on page 146 of the HSBC Continental Europe instruments, such as over-the-counter derivatives, whose price
cannot be directly observed on trading platforms: models then
compute a fair value by leveraging the prices of similar observable

financial instruments. They may be based on observable inputs Regulators expect HSBC to do more by increasing their
only (‘Level 2’ fair value accounting) or, in some cases, on some capabilities and scope for compliance on Data Management, Data
unobservable inputs that have to be prudently estimated (‘Level 3’ Architecture and Data Privacy requirements.
fair value accounting). HSBC Continental Europe's reputational risk is highly
For information purposes, as of 31 December 2020, assets valued linked to its current organisational evolution. Probability:
under Level 2 techniques amounted to EUR 50 billion, and Likely / Impact: Medium.
liabilities to EUR 54 billion; assets valued under Level 3 techniques Reputational risk has significantly increased in the context of
amounted to EUR 3.232 billion, and liabilities to EUR 791 million HSBC Continental Europe business model reshaping: The path of
(cf. 2020 HSBC Continental Europe Universal Registration transformation and the intense activity linked to an important
Document, Note 11 of the consolidated financial statements, page number of strategic projects concurrently managed have attracted
193). media pick up, most notably the Group’s strategic review of retail
HSBC Continental Europe’s operations utilise third-party operations in France, and the reorganisation in Market services
and intra group suppliers and service providers. Probability: and Investment banking, could affect directly HSBC Continental
Likely / Impact: Medium . Europe, financially or not, along with partners and clients’ trust.
Simultaneously the level of uncertainty has increased for both
HSBC relies on external and intra-group third parties to supply
customers and employees and our ability to hire or retain may be
goods and services. Regulators have increased their scrutiny
impacted by a long lasting period of lack of visibility on businesses
regarding the use of third-party providers by financial institutions,
and operations moving forward. Negative public opinion may
including the ones related to how outsourcing decisions are
adversely affect our ability to retain and attract customers, in
managed. Risks arising from the use of third parties may be more
particular, corporate and retail depositors, and retain and motivate
challenging to manage.
staff, and could have a material adverse effect on our business,
The inadequate management of third-party risk could impact our prospects, financial condition, reputation and results of operations.
ability to meet strategic, regulatory and client expectations. This
Market fluctuations may reduce our income or the value of
may lead to consequences, including regulatory or civil penalties
our portfolios. Probability: Likely / Impact: Medium. .
or damage both to shareholder value and to our reputation, which
could have a negative impact on our business, clients, capital and Our businesses are inherently subject to risks in financial markets
profit. To answer regulatory evolutions related to the and in the wider economy, including changes in, and increased
implementation of new European Banking Authority guidelines on volatility of, interest rates, inflation rates, credit spreads, foreign
outsourcing, HSBC Continental Europe has continued to enhance exchange rates, commodity, equity, bond and property prices, and
in 2020 its third party risk management framework in order to deal the risk that our customers act in a manner inconsistent with our
with those risks in a consistent and efficient way within its business, pricing and hedging assumptions.
perimeter. This new framework, applicable within the whole Market movements will continue to significantly affect us in a
perimeter of HSBC Continental Europe, is currently being rolled number of key areas. For example, banking and trading activities
out and still needs support from the businesses. Furthermore, are subject to interest rate risk, foreign exchange risk, inflation risk
remediation works related to pre-existing third-parties are under and credit spread risk. Changes in interest rate levels, interbank
way. Any outsourcing of a material service needs to be formally spreads over official rates, yield curves and spreads affect the
approved by the Bank Risk Management Committee / Meeting. interest rate spread realised between lending and borrowing costs.
In the context of the Covid-19, a strong follow up has been Competitive pressures on fixed rates or product terms in existing
implemented on our main third party and intra Group suppliers, loans and deposits sometimes restrict our ability to change
notably through dashboards. No material incidents linked to Third interest rates applying to customers in response to changes in
party occurred. official and wholesale market rates. Our insurance businesses are
also exposed to the risk that market fluctuations will cause
HSBC Continental Europe’s data management policies and
mismatches to occur between product liabilities and the
processes may not be sufficiently robust. Probability: Likely /
investment assets that back them. It is difficult to predict with any
Impact: Medium.
degree of accuracy changes in market conditions, and such
Prioritised business processes rely on large volumes of data from a changes may have a material adverse effect on our business,
number of different systems and sources. If data governance prospects, financial condition and results of operations.
including retention and deletion, data quality and data architecture
The world has been dramatically hit by the Covid-19 sanitary crisis.
policies and procedures are not sufficiently robust, manual
The lockdown measures stopped the economic activity abruptly
interventions, adjustments and reconciliations may be required to
and forced governments and central banks to react vigorously to
reduce the risk of error in reporting to senior management or to
avoid a severe and lasting economic depression.
Regulators. Inadequate policies and processes may also affect our
ability to use data within HSBC Continental Europe to service The European Central Bank (‘ECB’) launched a pandemic
customers more effectively and/or improve our product offering. emergency purchase programme of EUR 1,850 billion until 2022.
This could have a material adverse effect on our business, The criteria of eligibility – in terms of size by issuer and ratings –
prospects, financial results and firm reputation. have been relaxed compared to the previous plans to allow the
institution to purchase Greece and Italian debts more easily. The
Moreover, financial institutions that fail to comply with the
scope has been extended to non-financial papers.
principles for effective risk data aggregation and risk reporting as
set out by the Basel Committee by the required deadline may face In the US, The Federal Reserve announced an unlimited
supervisory measures. quantitative easing program and central government undertook
extremely substantial fiscal and credit backed programs.
In addition, failure to comply with the EU General Data Protection
Regulation (‘GDPR’) and Data Privacy requirements may result in
regulatory sanctions and fines. We observed the last years that the

Risk
Despite the support to the economy, the financial markets have misrepresenting financial statements to secure additional lines of
been severally impacted by the crisis in the first half of the year. credit. There is significant fraud risk associated with the bail-out
schemes, with associated media coverage globally. To date, we
Stocks market dropped by 20-30 per cent across the globe in
are not aware of significant losses from Covid-19 related fraud in
March but rallied significantly in June backed by a renewal of
Europe.
optimism on the end of sanitary crisis and the amount of liquidity
brought by central banks. In response to Covid-19 lockdown measures, organisations
(including HSBC) have had to invoke business continuity
The announcement around vaccination readiness and efficiency
arrangements resulting in reduced face to face contact and
lead to a new rally on markets at year end.
increased adoption of digital methods to support the processing of
However, sanitary situation was still concerning with the winter client requests. Processes and controls have had to be adapted to
period on western countries and the lockdown measures still support these new working arrangements. Increased levels of staff
impacting economy despite less thought than in spring. Dedicated working remotely, reduced management supervision and visibility
coronavirus stress tests did not exhibit significant potential market of staff activity all contribute to the heightened risk of internal
risk losses on Trading portfolios. They show significant increase of fraud. To date, no evidence of increased internal fraud has been
the Counterparty Credit Risk exposure but concentrated on identified in Europe.
collateralised or investment grade counterparties.
HSBC Continental Europe’s financial statements are based
As at 31 December 2020, Market Risk RWAs were EUR 2.7 billion in part on judgements, estimates and assumptions that are
of which EUR 339 million were under standardised approach and subject to uncertainty. Probability: Unlikely / Impact: Medium.
EUR 2.3 billion under IMA. The standardised RWAs include EUR
The preparation of financial statements requires management to
146 million of Interest rate risk, EUR 100 million of Foreign
make judgements, estimates and assumptions that affect the
exchange risk and EUR 93 million of options. RWAs under IMA
reported amounts of assets, liabilities, income and expenses. Due
include EUR 444 million VaR RWAs, EUR 964 million Stressed VaR
to the inherent uncertainty in making estimates, particularly those
RWAs, EUR 350 million of Incremental risk charge RWAs and EUR
involving the use of complex models, actual results reported in
566 million re Others.
future periods may be based upon amounts which differ from
See tables: ‘Market risk under standardised approach’ and ‘Market those estimates. Estimates, judgements, assumptions and models
risk under IMA’ on page 140. are continually evaluated, and are based on historical experience
HSBC Continental Europe’s operations are subject to the and other factors, including expectations of future events that are
threat of fraudulent activity. Probability: Likely / Impact: believed to be reasonable under the circumstances. Revisions to
Medium. accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected. The
The risk of fraud has increased and been made more complex by accounting policies deemed critical to our results and financial
the digital transformations operated within HSBC, fraudsters may position, based upon materiality and significant judgements and
target any of our products, services and delivery channels estimates, include impairment of loans and advances, goodwill,
(especially the online on-boarding), including lending, internet intangible and tangible asset impairment, valuation of financial
banking, payments, bank accounts and cards, and cyber-attacks instruments, deferred tax assets, provisions and interests in
against the bank’s infrastructure are increasing in frequency and associates. The valuation of financial instruments measured at fair
force. This may result in financial loss to HSBC Continental value can be subjective, in particular where models are used that
Europe, an adverse customer experience, reputational damage include unobservable inputs. Given the uncertainty and
and potential regulatory action depending on the circumstances of subjectivity associated with valuing such instruments, future
the event, any of which could have a material adverse effect on outcomes may differ materially from those assumed using
our business, prospects, financial condition and results of information available at the reporting date. The effect of these
operations. There is consumer association pressure to make banks differences on the future results of operations and the future
liable for substantially more of consumer fraud losses in absence financial position of HSBC Continental Europe may be material. If
of comprehensive fraud prevention solutions and controls. In the judgement, estimates and assumptions HSBC Continental
addition, fraud related litigation against the bank is increasing, be Europe use in preparing its consolidated financial statements are
it where HSBC is banking the client or the fraudster. subsequently found to be materially different from those assumed
In 2020, Operational Risk losses totalled EUR 81.7 million of which using information available at the reporting date, this could affect
EUR 2.3 million were for external fraud compared to EUR 15.1 our business, prospects, financial condition and results of
million in total in 2019 of which EUR 2.5 million for external fraud. operations.
Internal fraud was negligible in 2019 and 2020. See table on page Liquidity, or ready access to funds, is essential to our
146 of the 2020 HSBC Continental Europe Universal Registration businesses. Probability: Unlikely / Impact: Medium.
Document concerning Operational risk losses: quantitative data
starting from 2012 for full details. Our ability to borrow on a secured or unsecured basis, and the
cost of doing so, can be affected by increases in interest rates or
The risk of external fraud remains high as the Covid-19 pandemic credit spreads, the availability of credit, regulatory requirements
continues to disrupt the lives of individuals and organisations, relating to liquidity or the market perceptions of risk relating to the
fraudsters continue to exploit the current state of uncertainty
through the use of scams designed to steal money by deception
(3rd party fraud), organisations have had to change business
models to survive and/or take advantage of government bail-out
schemes, and there is increased risk of 1st party fraud from clients

wider HSBC Group, HSBC Continental Europe specifically or the corrective action is taken. Several different stress testing scenarios
banking sector. Current accounts and savings deposits payable on are run that test the quality of liquidity resources under stresses of
demand or at short notice form a significant part of our funding, varying durations and nature. The Asset, liability and capital
and we place considerable importance on maintaining their management committees (‘ALCO’) approves the underlying
stability. For deposits, stability depends upon preserving investor assumptions and reviews results. These results are also presented
confidence in our capital strength and liquidity, and on through the Internal Liquidity Adequacy Assessment Process
comparable and transparent pricing. Although deposits have (‘ILAAP’) to the Board. In addition, since 2020 HSBC Continental
always been a stable source of funding historically, even in times Europe runs, on a daily basis, an internal liquidity stressed
of economic crisis, under an extreme scenario this may not indicator: The Internal Liquidity Metric. This indicator adds in,
continue. We also access wholesale markets in order to provide complementing the LCR and internal stress-tests, a new stress
funding to align asset and liability balances, maturities and scenario defined internally and relied on the operational day-to-day
currencies, and to contribute to the financing of our lending and management of the Bank’s liquidity position.
market activities. Non-favourable macroeconomic developments, Third parties may use us as a conduit for illegal activities
market disruptions or regulatory developments may increase our without our knowledge. Probability: Unlikely / Impact:
funding costs or challenge the ability of HSBC Continental Europe Medium. .
to raise funds to support or expand its businesses.
We are required to comply with applicable AML laws, Sanctions,
If we were unable to raise funds through deposits and/or in the AB&C, Fraud Prevention and Tax Transparency regulations, and
capital markets, our liquidity position could be adversely affected, have adopted HSBC Group policies and procedures, as well as
and we could be unable to meet deposit withdrawals on demand additional local legislative regulatory requirements, and regulators
or at their contractual maturity, to repay borrowings as they and FIU’s expectations and recommendations including Customer
mature, to meet our obligations under committed financing Due Diligence procedures and internal control framework and
facilities and insurance contracts or to fund new loans, governance, aimed at preventing use of HSBC products and
investments and businesses. We could need to liquidate services for the purpose of committing or concealing financial
unencumbered assets to meet our liabilities. In such an extreme crime and at mitigating HSBC exposition to Financial Crime risks.
scenario and in a time of reduced liquidity, we may be unable to A major focus of US and UK government policy relating to
sell some of our assets, or we may need to sell assets at reduced financial institutions in recent years has been preventing, detecting
prices, which in either case could materially adversely affect our and deterring money laundering and enforcing compliance with
business, prospects, financial condition and results of operations. US and EU economic sanctions at Group level. This focus is
It is difficult to predict with any degree of accuracy changes in reflected in part by our agreements with US and UK authorities
access to funds, and such changes may have a material adverse relating to various investigations regarding past inadequate
effect on our business, prospects, financial condition and results compliance with AML, and sanctions. These consent orders do not
of operations. Nevertheless, number of contingent actions and preclude additional enforcement actions by bank regulatory,
procedures – including business actions, and accessing the central governmental or law enforcement agencies or private litigation.
bank refinancing operations which have materially enhanced over Our local French regulators remain strongly focused on AML-CTF
the second quarter of 2020 – are in place in HSBC Continental and, more recently, AB&C and Tax Fraud/Tax Evasion matters
Europe’s Contingency Funding Plan in order to tackle such a within the French Banking industry. Furthermore, French
situation should it happen, which materially reduces the impact of anticorruption requirements have been issued through the loi n
this risk should it materialise. °2016-1691 du 9 décembre 2016 said ‘Sapin II’. In addition to this,
The short-term ratio (Liquidity coverage ratio – LCR), calculated the Agence Française Anticorruption (‘AFA’) have been established
according to the European Commission Delegated regulation (EU to supervise French companies. A number of the remedial actions
2015/61), was 143 per cent as at end December 2020 compared to have been taken as a result of the matters to which the US
the regulatory minimum figure of 100 per cent. Deferred Prosecution Agreement (‘DPA’) related, which are
intended to ensure that the Group’s businesses are better
HSBC Continental Europe calculates the long-term ratio (Net
protected in respect of these risks. As HSBC have met their
stable funding ratio – ‘NSFR’) under its interpretation of the CRR II
obligations under the DPA, the agreement has expired at the end
(EU 2019/876) to enter into force in June 2021, but also calculates
of 2017. The Monitor is overseeing HSBC progress under the UK
the NSFR, like the HSBC Group, in line with Basel Committee on
Financial Conduct Authority instructions and will continue its
Banking Supervision’s publication number 295 (‘BCBS295’). These
monitoring. In recent years, we have experienced a substantial rise
calculations require various interpretations of the texts, and
in the volume of new regulation impacting our operational
therefore HSBC Continental Europe’s NSFR according to both
processes, along with increasing levels of compliance risk as
rules may not be directly comparable with the ratios of other
regulators and other authorities pursued reviews and
institutions.
investigations into the bank’s activities. It is important to note that
As at the end of December 2020, the NSFR, calculated on the France on-site visit and plenary discussions for a mutual
basis of the CRR II was 136 per cent and based on the BCBS 295 evaluation is scheduled by FATF in 2021. In line with the Group's
ruleset, was at 130 per cent. heightened standards and organisation, HSBC Continental Europe
HSBC Continental Europe undertakes liquidity stress testing to test has continued to improve the Financial Crime Compliance and
that its risk appetite is adequate, to validate that it can continue to Regulatory Compliance framework. However, there can be no
operate under various stress scenarios that involve an analysis on assurance that these will be completely effective.
the relevant probable or severe area of risk to HSBC Continental Moreover, in relevant situations, and where permitted by
Europe, and to confirm that the stress assumptions within the LCR regulation, we may rely upon certain third parties to carry out
scenario are appropriate and conservative enough for the group's
business. HSBC Continental Europe also conducts reverse stress
testing with the specific aim of reviewing the remoteness of the
scenarios that would lead the bank to exhaust its liquidity
resources. If the scenarios are not deemed remote enough,

Risk
certain ID&V and KYC activities in accordance with our AML, • We continue to promote Risk Culture through dedicated
Sanctions, AB&C, Fraud Prevention and Tax Transparency sessions for First Line of Defence, Risk stewards and Senior
procedures. While permitted by regulation, such reliance may not management related to Non-financial risk framework and
be effective in preventing third parties from using us (and our through specific elearning for each stakeholders within the
relevant counterparties) as a conduit for money laundering, Three lines of Defence.
including illegal cash operations, without our knowledge (and that • We continued to promote and encourage good conduct
of our relevant counterparties) or for financing terrorism, sanctions through our people's behaviour and decision making to deliver
violation, corruption, fraud or tax fraud and tax evasion. Becoming fair outcomes for customers and preserve market integrity;
a party to money laundering, association with, or even accusations
of being associated with, money laundering, sanctions violation, • We continued to focus on simplifying and enhancing our
corruption fraud or tax fraud/evasion will damage our reputation approach to non-financial risk management. We drove more
and could make us subject to fines, sanctions and/or legal effective oversight and better end-to-end identification and
enforcement. Any one of these outcomes could have a material management of non-financial risks;
adverse effect on our business, prospects, financial condition and • A new risk management structure and governance redesign
results of operations. has been implemented since 1 December 2020 with the
Within HSBC Continental Europe, every month, all transactions – implementation of HSBC Continental Europe, comprising
more than 30 million across 1.7 million accounts – are analysed to France, its European branches (Spain, Italy, Luxembourg,
detect signs of money laundering, terrorism financing tax Netherlands, Belgium, Czech-Republic, Poland, Greece, Ireland
avoidance, bribery and corruption, fraud and failure to comply and Sweden).
with sanctions. In addition, 1.7 million names are screened on an
ongoing basis using various surveillance lists. In order to ensure Risk Management
the effectiveness of our policies, an annual training course has
We recognise that the primary role of risk management is to
been taken by over 98 per cent of HSBC Continental Europe
protect our customers, business, colleagues, shareholders and the
employees, which is in line with the bank's Risk Appetite of having
communities that we serve, while ensuring we are able to support
at least a 98 per cent mandatory training completion rate (the Risk
our strategy and provide sustainable growth. This is supported
Tolerance is set at 97 per cent).
through our three lines of defence model described on page 101.
ESG Risks – Environmental, Social and We are focused upon implementation of our business strategy, as
Governance part of which we are carrying out a major change programme, and
it is critical that we ensure we use active risk management to
Refer ‘Non-financial performance statement’ within manage the execution risks.
‘Sustainability’.
We will also perform periodic risk assessments, including against
Key developments and risk profile strategies, to help ensure retention of key personnel for our
continued safe operation.
Key developments in 2020 We use a comprehensive risk management framework across the
In 2020, we undertook a number of initiatives to enhance our organisation and across all risk types, underpinned by the Group’s
approach to the management of risk. These included: culture and values. This outlines the key principles, policies and
practices that we employ in managing material risks, both
• In line with the increasing threat landscape that the industry financial and non-financial.
faces within non financial risk, a new Operational & Resilience
Risk sub-function has been implemented. The sub-function The framework fosters continual monitoring, promotes risk
provides robust first line of defence oversight and risk steward awareness and encourages sound operational and strategic
oversight, supported by clear plans and evidenced by effective decision making. It also ensures a consistent approach to
and timely independent challenge; identifying, assessing, managing and reporting the risks we accept
and incur in our activities.
• HSBC Risk management framework has been simplified
through the combination of the Enterprise Risk Management Risk management framework
Framework (‘ERMF’) and the Operational Risk Management An established risk governance framework and ownership
Framework (‘ORMF’) that allows HSBC to manage more structure ensures oversight of, and accountability for, the effective
efficiently and easily its risks; management of risk within the group. HSBC's risk management
• The HSBC Group simplified its risk taxonomy through framework ('RMF') fosters the continuous monitoring of the risk
consolidating certain existing risks into broader categories, for environment and an integrated evaluation of risks and their
example Resilience Risk. We adopted this approach. These interactions. Integral to the RMF and risk appetite, stress testing
changes streamline risk reporting and promote common and the identification of emerging risks.
language in our risk management approach. Further The HSBC Continental Europe Risk Committee is aligned with the
simplification will continue during 2021; Bank approach focusing on risk governance and provides a
• We continued to focus on HSBC Third Party Risk Management forward-looking view of risks and their mitigation. The Risk
Framework and Cloud framework further to the implementation Committee is a committee of the Board and has responsibility for
of the EBA Guidelines on Outsourcing; oversight and advice to the Board on, amongst other things, the
bank’s risk appetite, tolerance and strategy, systems of risk
management, internal control and compliance. Additionally,
members of the Risk Committee attend meetings of the

Nominations and Remuneration Committee at which the The control framework
alignment of the reward structures to risk appetite is considered.
In compliance with the requirements of the French Order of
In carrying out its responsibilities, the Risk Committee is closely 3 November 2014 and the HSBC Group requirements, a
supported by the Chief Risk Officer, the Chief Financial Officer, the permanent control and risk management framework has been
Head of Internal Audit, the Head of Financial Crime Compliance established in HSBC Continental Europe.
and the Head of Regulatory Compliance, with other business
functions for risks within their respective areas of responsibility. The Chief Risk Officer of HSBC Continental Europe is responsible
of the permanent control within HSBC Continental Europe's
Responsibility for managing both financial and non financial risk perimeter.
lies with our people. They are required to manage the risks of the
business and operational activities for which they are responsible. The key responsibility for control falls to the managers of the
We maintain oversight of our risks through our various Risk various businesses, functions and HSBC Operations, Services and
Stewards, as well as the accountability held by the Chief Risk Technology who must ensure that primary controls are conducted
Officer. in a proper manner and covered by a second-level independent
controls process. This framework is detailed in the part ‘Risk
Non financial risk includes some of the most material risks HSBC Management Framework’. HSBC Group risk management
faces, such as cyberattacks, poor customer outcomes and loss of framework is defined through the ‘Three Lines of Defence’ as
data. Actively managing non-financial risk is crucial to serving our described hereafter.
customers effectively and having a positive impact in the social
environment. Non financial (or operational) risks
During 2020 we continued to strengthen the control environment The operational risk or non financial risk, is the risk that might be
and our approach to the management of non financial risk, as the result of inadequacy, ineffectiveness or failure of internal
broadly set out in our risk management framework. The processes, performed manually or automatically and external
management of non financial risk focuses on governance and risk events.
appetite, providing a single view of the key non financial risks, and HSBC Continental Europe manages its non financial risks
associated controls. It incorporates a risk management system following Risk Stewards recommendations and under the
designed to enable the active management of non financial risk. supervision of Operational & Resilience Risk function that ensures
Our ongoing focus is to simplify our approach to non financial risk a holistic vision of non-financial risks for the bank.
management, while driving more effective oversight and better Financial risks
end-to-end identification and management of non financial risks.
HSBC Group has established standards, policies and control
In compliance with the requirements of the French order of
procedures dedicated to monitoring and management of risk
3 November 2014 and HSBC Group requirements, HSBC
linked to its activities.
Continental Europe has established a permanent control and risk
management framework detailed in the following chapters. All the HSBC Continental Europe's activities involve analysis,
evaluation, acceptance and management of some degree of risk or
Risk governance
combination of different types of risks.
HSBC Continental Europe Risk Management Meeting (‘RMM’), is
the overarching committee of risk management, next to the
Tools
committee in charge of overseeing more specifically the Financial In compliance with the French Order of 3 November 2014 related
Crime Risk and Sanctions Risk (ensuring the supervision of risks to bank permanent control, each entity has set up a framework to
related to financial criminality and disrespect of international monitor its risks. Inherent and residual risks are listed in the
sanctions): the Financial Crime Risk Management Committee. businesses risk maps specific to each business (Commercial
Chaired by the Chief Risk Officer (‘CRO’), the Risk Management Banking, Global Banking and Global Market, Retail Banking and
Meeting gathers monthly the members of the Executive Wealth Management and Private Banking). These maps
Committee in order to examine major risks faced by HSBC summarise the risk assessment by business and the related
Continental Europe following a previously agreed agenda. HSBC controls on a risk-based approach.
Continental Europe Executive Committee members are also The update of the internal control framework and in particular the
members of the HSBC Continental Europe Risk Management risks and controls assessments is undertaken on an ongoing basis
Meeting. and follow trigger events, which lead to reassess the related risks
It reviews monthly financial and non-financial risks of businesses and controls linked to it. Businesses, and most of the Functions
and functions, the ones from HSBC Operations, Services and risk profile is presented formally at least annually to the Chief Risk
Technology, the evolution of action plans put in place in order to Officer in attendance of concerned Risk Stewards, the Head of
mitigate identified risks, and operational losses. The HSBC Operational & Resilience Risk function and Audit. The objective of
Continental Europe Risk Management Meeting reports functionally the exercise is to ensure that assessment and management of
to its European equivalent in the HSBC Group: the HSBC Europe non-financial risks is consistent across Businesses and Functions
Risk Management Meeting. in respect of HSBC operational risk management framework and
French regulation.
This framework is completed by dedicated risk forums and
working groups for specific risks in businesses and functions Three lines of defence
combining the various levels of internal control, in order to To create a robust control environment to manage risks, we use
manage, monitor and control all HSBC activities within HSBC an activity-based three lines of defence model, whereby the
Continental Europe. Main functions acting as second line of activity a member of staff undertakes, drives which line they
defence hold a monthly or quarterly meeting, chaired by the reside in.
function’s head and attended by function’s members and experts,
businesses representatives, Operational & Resilience Risk
representatives and for some of them the Chief Risk Officer of
HSBC Continental Europe.

Risk
The model underpins our approach to risk management by and decisions in order to deliver good customer outcomes and not
clarifying responsibility, encouraging collaboration and enabling to disturb the orderly and transparent operations of financial
efficient coordination of risk and control activities. markets. Speak up culture is encouraged in order to detect and
The three lines are summarised below: prevent risks but also to manage them promptly and appropriately.
• the first line of defence owns the risks and is responsible for Risk function
identifying, recording, reporting and managing them, and The Risk function is headed by the Chief Risk Officer, which is
ensuring that the right controls and assessments are in place to responsible for the risk management framework of HSBC
mitigate them; Continental Europe. This responsibility includes establishing risk
• the second line of defence is responsible for ensuring that all policy, monitoring risk profiles, and forward-looking risk
risks it oversees are effectively managed and provides advice, identification and management. Risk is made up of sub-functions
guidance and challenge to the first line of defence. This line has covering all risks of our activities. Risk function is part of the
been reinforced by Assurance teams, in particular within second line of defence. It is independent from commercial
Compliance, which are dedicated to reviews based on a activities.
comprehensive understanding of specific risk types.
Enterprise-wide risk management tools
• the third line of defence is the Internal Audit function, which
HSBC Continental Europe uses a range of tools to identify, monitor
provides independent and objective assurance of the adequacy
and manage risk. The key enterprise-wide risk management tools
of the design and operational effectiveness of the group’s risk
are as follows:
management framework and internal control governance
process. Risk appetite
• In 2020, our risk management practice has evolved by Our approach to identifying and monitoring risk appetite is
introduction of a new role into the Three Lines of Defence described on page 81.
model. The first line of defence has been reinforced with the
Risk map
Business Service Owner role, accountable for the delivery of
one of more end-to-end business key service offered to our The risk map provides a point-in-time view of the risk profile
customers. They are responsible for overseeing and managing across HSBC’s risk taxonomy based on the accountable Risk
each of HSBC’s material Business Services end-to-end, Stewards judgemental assessment of the First line of defence
including the risk, control effectiveness and resilience of that activities. It assesses the potential for these risks to have a
service. material impact on the Group’s financial results, reputation and
the sustainability of its business. Risk stewards assign ‘current’
Risk culture risk ratings, supported by commentary. Risks that have an ‘amber’
Our risk culture is reinforced by our values. It is instrumental in or ‘red’ risk rating require monitoring and mitigating action plans
aligning the behaviours of individuals with our attitude to to be either in place or initiated to manage the risk down to
assuming and managing risk, which helps to ensure that our risk acceptable levels.
profile remains in line with our risk appetite. Top and emerging risks
We use clear and consistent employee communication on risk to
Our approach to identifying and monitoring top and emerging
convey strategic messages and set the tone from senior
risks is described on page 85.
management and the Board. We also deploy mandatory training
on risk and compliance topics to embed skills and understanding Stress testing
in order to strengthen our risk culture and reinforce the attitude to
HSBC Continental Europe operates a comprehensive stress testing
risk in the behaviour expected of employees, as described in our
programme that supports our risk management and capital
risk policies.
planning. It includes execution of stress tests mandated by our
The risk culture is reinforced by HSBC Group’s policy on regulators. Our stress testing is supported by dedicated teams and
performance management and remuneration through both infrastructure, and is overseen at the most senior levels of the
financial and non financial annual objectives setting that are bank. Our stress testing programme assesses our capital strength
aligned to our risk appetite, our Group’ values and our global through a rigorous examination of our resilience to external
strategy, through reward of individual or collective initiatives shocks. It also helps us understand and mitigate risks and informs
targeted to improve our risk management and/or allowing our decisions about capital levels. As well as undertaking
identification and prevention of frauds, through identification of regulatory-driven stress tests, we conduct our own internal stress
breaches on our internal rules and practices. tests (e.g. concentration risk stress tests on specific portfolios,
Since 2016, the programme ‘Embedding FCC Culture’ allowed market risk stress tests and capital sensitivity analysis from several
HSBC Continental Europe to strengthen employees’ knowledge risk factors). Stress test impacts are measured on the profit and
and the effectiveness of the framework enabling the bank to better loss account, the risk-weighted assets and capital. The stress test
identify financial crime risks and to terrorism risks from the first outcomes are submitted to the HSBC Continental Europe Risk
line of defence and HSBC Operations, Services and Technology. Committee and Board.
The ‘Conduct Programme’, applicable to every HSBC employee, In 2020, HSBC Continental Europe performed a range of stress
aims to ensure that actions and decisions taken as part of our tests within the stress testing programme, examining both capital
activities are in compliance with Group’s objectives. Trainings and and liquidity adequacy in line with the assessed top and emerging
communications are regularly deployed in order to enhance risks. These included possible exit scenarios from the Covid-19
employees’ knowledge completing a global mandatory training for pandemic, including the potential of a U-shaped recovery or a
all employees called ‘Values, Conduct and Me’. Furthermore, a double dip. The results of these stress tests were reported to
conduct handbook has been issued, highlighting for employees, senior management and to the other governance committees of
the best ways to incorporate conduct outcomes in their actions the bank.

In addition to locally driven scenarios, HSBC Continental Europe adverse economic or financial developments.
also contribute to the HSBC Group stress testing programme, The results inform the regulators and the bank senior management
including a Global Internal Stress Test and a Reverse Stress Test. of the capital adequacy of individual institutions and could have a
Reverse stress tests require a firm to assess scenarios and significant effect on minimum capital requirements and planned
circumstances that would render its business model unviable, capital actions, including the payment of dividends, going forward.
thereby identifying potential business vulnerabilities. In 2020, HSBC Continental Europe, along with HSBC Group, were
In stress testing exercises, the scenarios usually rely upon a set of due to participate in the EBA Stress Test 2020. As the highest
macroeconomic and financial variables (e.g. GDP, consumer price point of consolidation within the EEC, HSBC Group were to be
index, interest and exchange rates, unemployment, stock index) required to submit consolidated results to the EBA via the Bank of
projected upon a pre-determined period. Several scenarios are England. HSBC Continental Europe were requested to submit a
usually defined: standalone submission to the ECB as part of the SREP (the ECB’s
annual Supervisory Review and Evaluation Process).
• a base scenario considered as the most likely scenario over the
projected period, taking into consideration the economic and In March, the EBA and ECB agreed to postpone the EBA Stress
financial environments and their forward-looking evolution; Test to 2021 due to the pandemic. Post the end of the transition
period on 31 December 2020, HSBC Continental Europe is the
• one or several adverse scenarios describing one or several
highest point of consolidation of HSBC within the EEC, and the
potential shocks affecting the economic and financial
EBA have communicated that HSBC Continental Europe will be
environments, like the materialisation of one or several risks
required to submit on a standalone basis to the EBA via the ECB
weighting on the base scenario.
as part of the EBA Stress Test 2021 exercise.
For macroeconomic stress tests, the base and adverse scenarios
HSBC Continental Europe, HSBC Bank plc and HSBC Group also
are usually centrally coordinated by HSBC Risk and Finance
take part in the Bank of England’s stress test programme, which
teams, and broken down into regional and country scenarios to
involves all major UK banks. However, the Bank of England
ensure global consistency.
cancelled the 2020 Stress Testing exercise in March. In 2021 the
To ensure an appropriate coverage of the specific risks faced by Bank of England are running two exercises, the ‘Solvency Stress
HSBC Continental Europe, scenarios specific to France are also Test’ and an ‘Exploratory Scenario’ that will be focused on Climate
developed by HSBC Continental Europe’s risk and finance teams, Risk. HSBC Continental Europe will participate in these 2021
with the support of expert panels. exercises alongside HSBC Bank plc and HSBC Group.
Regulatory stress tests
Stress testing is an important prudential regulatory tool to assess
the resilience of the banking sector and of individual banks to
Our material banking and insurance risks
The material risk types associated with our banking and insurance manufacturing operations are described in the following tables.
Description of risks – banking operations

Risks Arising from Measurement, monitoring and management of risk
Credit risk
The risk of financial loss if a Credit risk arises principally Credit risk is:
customer or counterparty fails to from direct lending, trade • measured as the amount that could be lost if a customer or counterparty fails to
meet an obligation under a finance and leasing business, make repayments;
contract. but also from certain other
• monitored within limits approved by individuals within a framework of delegated
products such as guarantees
authorities; and
and derivatives.
• managed through a robust risk control framework that outlines clear and
consistent policies, principles and guidance for risk managers and risk owners.
Liquidity and funding risk
Liquidity Risk is the risk that we Liquidity risk arises from Liquidity and funding risk is:
do not have sufficient financial mismatches in the timing of • measured using a range of different metrics including the liquidity coverage ratio
resources to meet our cash flows. Funding risk arises and net stable funding ratio;
obligations as they fall due or when illiquid asset positions
• monitored against the group’s liquidity and funding risk framework; and
that we can only do so at an cannot be funded at the
excessive cost. Funding Risk is expected terms and when • managed on a stand-alone basis with no reliance on any group entity (unless pre-
the risk that funding considered required. committed) or central bank unless this represents routine established business-as-
to be sustainable, and therefore usual market practice.
used to fund assets, is not
sustainable over time.
Market risk
The risk that movements in Exposure to market risk is Market risk is:
market factors will reduce our separated into two portfolios: • measured and monitored using VaR, stress testing and other measures,
income or the value of our • trading portfolios; and including the sensitivities of the portfolio value to the different market data; and
portfolios.
• non-trading portfolios. • managed using risk limits approved by the Risk Management Meeting (‘RMM’).

Risk

Operational risk
The operational risk is the risk to Operational risk arises from Operational risk is:
achieving our strategy or day-to-day operations or • measured using the risk and control assessment process, which assesses the level
objectives as a result of external events, and is relevant of risk and the effectiveness of controls;
inadequate or failed internal to every aspect of our business.
• monitored using key indicators and other internal control activities; and
processes, people and systems Regulatory compliance risk and
or from external events. • managed primarily by global business and functional managers that identify and
financial crime compliance risk
assess risks, implement controls to manage them and monitor the effectiveness of
are detailed below.
these controls by using the operational risk management framework.
Regulatory compliance risk
The risk that we fail to observe Regulatory compliance risk is Regulatory compliance risk is:
the letter and spirit of all relevant part of operational risk, and • measured by reference to identified metrics, incident assessments, regulatory
laws, codes, rules, regulations, arises from the risks associated feedback and the judgement and assessment of our Regulatory Compliance teams;
internal and external standards with breaching our duties to
• monitored against our regulatory compliance risk assessments and metrics, the
of good market practice, and customers and other
results of the monitoring and control activities of the second line of defence
incur fines and penalties and counterparties, inappropriate
functions, and the results of internal and external audits and regulatory inspections;
suffer damage to our business market conduct and breaching
and
as a consequence. other regulatory and good
conduct standards. • managed by establishing and communicating appropriate policies and procedures,
training employees in them, and monitoring activity to assure their observance.
Proactive risk control and/or remediation work is undertaken where required.
Financial crime risk
The risk that the letter and spirit Financial Crime risk may arise Financial Crime Risks are measured through a set of controls and metrics reflecting
of all relevant laws, codes, rules, when: the effectiveness of the different processes and solutions in place to fight financial
regulations, internal and external • our services are used to crime risks.
standards related to Anti-Money transform the profits of crime These risks are monitored and managed by the Financial Crime Risk Management
Laundering, Sanctions and and corruption into Committee (‘FCRMC’), chaired by the CEO and attended by all business Heads, the
related to Fraud and Tax Fraud legitimate assets, or to COO and Head of FCR.
and/or Bribery & Corruption finance terrorism; HSBC Continental Europe has carried out FCC transformation and organisation’s
activities are not observed.
• the bank services are used to setting programmes in 2020, particularly focusing on Transaction Monitoring
try and transfer money to framework.
sanctioned countries or
individuals.
Model risk
The risk of business decisions Model risk arises when Model Risk is:
being made on the basis of business decision making • Measured by a regular independent model validation activity, resulting in
unreliable model output. includes some reliance on identification of deficiencies (findings) and overall performance assessment.
models, which are increasingly Aggregate metrics allow to measure the reliance on non-validated models or
used across many areas of the models with serious identified issues.
bank in both financial and non-
• Monitored by ongoing performance controls from the first line of defence (model
financial contexts.Models are
owner and user functions) and control activities from the second line of defence
characterised by predictive
(Model Risk Management function). Targeted internal and external audits and
elements and are at best only a
regulatory reviews are also taken into account in the bank’s surveillance of its
proxy for uncertain real-world
model risk.
behaviours and outcomes.
• Managed by ensuring appropriate actions are taken to lower, mitigate or control
Model risk can be caused by
identified risk for each model, by creating and communicating appropriate policies,
errors in methodology or design
procedures and guidance, and monitoring their delivery to ensure operational
of models, by errors in how
effectiveness.
they are implemented in
systems, by being used outside
of the business context for
which they were intended, or
simply by failure to take into
account the full complexity of
real-world phenomena.

Resilience risk
Resilience risk is the risk of our Resilience risk can arise from a Resilience risk is:
inability to provide critical myriad of failures or • Defining maximum acceptable impact tolerances;
services to our customers, inadequacies in processes,
• Oversight of risk and control environment;
affiliates, and counterparties as a people, systems or external
result of sustained and events. Operational resilience • Continuous monitoring and thematic review.
significant operational threats have been exemplified
disruption. in recent years. Examples of
drivers of heightened resilience
focus include: rapid
technological innovation,
changing behaviours of our
consumers, increasing cyber-
threats and attacks,
crossborder dependencies, and
third party relationships.
Other material risks

Reputational risk
The risk of failure to meet Primary reputational risks arise Reputational risk is:
stakeholder expectations as a directly from an action or • measured by reference to our reputation as indicated by our dealings with all
result of any event, behaviour, inaction by HSBC Continental relevant stakeholders, including media, regulators, customers and employees;
action or inaction, either by the Europe, its employees or
• monitored through a reputational risk management framework that is integrated
bank itself, our employees or associated parties that are not
into the bank’s broader risk management framework; and
those with whom we are the consequence of another
associated, that might cause type of risk. Secondary • managed by every member of staff, and covered by a number of policies and
stakeholders to form a negative reputational risks are those guidelines. There is a clear structure of committees and individuals charged with
view of HSBC Continental arising indirectly and are a result mitigating reputational risk.
Europe. of a failure to control any other
risks.
Our insurance manufacturing subsidiaries are regulated separately Our insurance operations are also subject to some of the same
from our banking operations. Risks in our insurance entities are risks as our banking operations, which are covered by the group’s
managed using methodologies and processes that are subject to risk management processes.
Group oversight.
Description of risks – insurance manufacturing operations

Financial risks
Our ability to effectively match Exposure to financial risks arises Financial risk is:
liabilities arising under insurance from: • measured (i) for credit risk, in terms of economic capital and the amount that
contracts with the asset • market risk affecting the fair could be lost if a counterparty fails to make repayments; (ii) for market risk, in
portfolios that back them is values of financial assets or terms of economic capital, internal metrics and fluctuations in key financial
contingent on the management their future cash flows; variables; and (iii) for liquidity, in terms of internal metrics, including stressed
of financial risks and the extent operational cash flow projections;
• credit risk; and liquidity risk of
to which these are borne by
entities not being able to make • monitored through a framework of approved limits and delegated authorities;
policyholders.
payments to policyholders as and
they fall due. • managed through a robust risk control framework that outlines clear and
consistent policies, principles and guidance. This includes using product design
and asset liability matching and bonus rates.
Insurance risk
The risk that, over time, the cost The cost of claims and benefits Insurance risk is:
of the contract, including claims can be influenced by many • measured in terms of life insurance liabilities and economic capital allocated to
and benefits may exceed the factors, including mortality and insurance underwriting risk;
total amount of premiums and morbidity experience, as well as
• monitored though a framework of approved limits and delegated authorities; and
investment income received. lapse and surrender rates.
• managed through a robust risk control framework that outlines clear and
consistent policies, principles and guidance. This includes using product design,
underwriting, reinsurance and claims-handling procedures.

Risk
Credit Risk industry, country and customer groups. These include portfolio
and counterparty limits, approval and review controls, and stress
Credit risk is the risk of financial loss if a customer or counterparty testing.
fails to meet a payment obligation under a contract. It arises
principally from direct lending, trade finance and leasing business, Large Credit Exposure Policy – ‘LCEP’
but also from off-balance sheet products such as guarantees and The LCEP sets out the policy of HSBC Continental Europe on
credit derivatives, and from the holding of debt securities. controlling large risks, and it also forms part of the policy of HSBC
Credit Risk Management Bank plc, HSBC Holdings plc and meets the requirements of the
French banking regulator, the Autorité de Contrôle Prudentiel et de
Of the risks in which we engage, credit risk generates the largest Résolution (‘ACPR’) and the European Central Bank (‘ECB’). The
regulatory capital requirements. purpose of the LCEP is to ensure that:
The principal objectives of our credit risk management are: • HSBC Continental Europe adhere to the French regulatory
• to maintain across the group a strong culture of responsible requirements on large lending commitments;
lending and a robust risk policy and control framework; • there is an appropriate framework procedure to monitor and
• to both partner and challenge Global Businesses in defining, control large commitments and concentrations of risk;
implementing, and continually re-evaluating our risk appetite • the commitments by a bank to one individual borrower, or to a
under actual and scenario conditions; and group of connected borrowers, should not become excessive in
• to ensure there is independent, expert scrutiny of credit risks, comparison to its capital base;
their costs and mitigation. • excessive concentration and/or the combining of major
Within the bank, the Credit Risk function is headed by the Chief exposures are excluded; and
Risk Officer who reports to the Chief Executive Officer, with a • commitments to geographical areas or specific business
functional reporting line to the Regional Chief Risk Officer. Its sectors are strictly monitored to ensure that risky assets are
responsibilities include: diversified.
• formulating the local credit policy aligned where possible with
Concentration risk by counterparty
group policies;
Risk exposure limits are classified into three categories:
• validating HSBC Continental Europe’s appetite for credit risk
exposure to specified market sectors, activities and banking • category A: all financing recognised on the balance sheet and
products and controlling exposures to certain higher-risk all commitments such as guarantees, documentary credits and
sectors; standby letters of credit;
• undertaking an independent review and objective assessment • category B: off-balance sheet market risks such as currency
of risk. Credit risk assesses each request except for the certain and interest rate swaps taken at their maximum expected risk
modest level proposals (for the Retail and Commercial bank) during the life of the exposure; and
where detailed credit approval delegations have been • category S (settlement risk): principally intraday settlement risk
established; on payment commitments and foreign exchange business with
• monitoring the performance and management of portfolios customers or for their account.
across HSBC Continental Europe; Commitments to a single counterparty or group of
• vetting and controlling exposure to sovereign entities, banks counterparties, excluding central governments/central banks
and other financial institutions, as well as debt securities which The approved commitments (total of category A and B limits on
are not held solely for the purpose of trading; one side and category S limits on the other) for any single
• setting HSBC Continental Europe’s policy on large credit counterparty or group of connected counterparties, after taking
exposures, ensuring that concentrations of exposure by into account any risk mitigation/deduction techniques permitted
counterparty, sector or geography do not become excessive in under the regulations may not exceed 25 per cent of the HSBC
relation to the HSBC Continental Europe’s capital base, and Continental Europe consolidated capital.
remain within internal and regulatory limits; It should be noted that all commitments, as defined above, which
• maintaining and developing HSBC Continental Europe’s risk exceed 10 per cent of the HSBC Continental Europe consolidated
rating framework and systems via the local Model Oversight capital require the approval by HSBC Bank plc independently of
Committees, which oversees the local risk rating model the credit approval authorities in place.
management for both wholesale and retail businesses; Furthermore, commitments (categories A and B) to financial
• reporting on retail and wholesale portfolio performance, high institutions with:
risk portfolios, risk concentrations, large impaired accounts, • exposures with a maturity of more than one year;
impairment allowances and stress testing results and
recommendations to HSBC Continental Europe’s Risk • exposures to subsidiaries of financial institutions that are not
Committee and the Board; and financial institutions themselves; should not exceed 10 per cent
of HSBC Continental Europe’s consolidated capital.
• acting on behalf of HSBC Continental Europe as the primary
interface, for credit-related issues, with the ACPR, the ECB and A quarterly report on all single counterparty or groups of
rating agencies. connected counterparties for which the HSBC Continental Europe
commitments (the total of categories A and B on one hand, and
Concentration of credit risk exposure category S on the other) exceed 10 per cent of its consolidated
Concentrations of credit risk arise when a number of capital are submitted to the Risk Management Meeting, to the
counterparties or exposures have comparable economic Risk Committee and to the Board of HSBC Continental Europe and
characteristics, or are engaged in similar activities, or operate in to the various Risk committees in HSBC bank plc.
the same geographical areas/industry sectors, so that their
collective ability to meet contractual obligations is uniformly
affected by changes in economic, political or other conditions.
The group uses a number of controls and measures to minimise
undue concentration of exposure in the group’s portfolios across

As at 31 December 2020, for HSBC Continental Europe, six groups The exposures for Germany and the Netherlands were principally
individually exceeded 10 per cent of the net capital comprised of 0 per cent weighted counterparties (articles 115 to
(31 December 2019: four groups). 118 of the CRR).
Sectorial concentration risk The exposure to other countries, notably China, Italy or Turkey are
not significant for HSBC Continental Europe.
It is an HSBC Continental Europe principle to avoid excessive
concentration in any business sector, and to take corrective Credit Risk Mitigation Techniques
measures if necessary. The Wholesale Credit Risk Department is Credit risk mitigants are taken into account in conformity with the
responsible for supervising the compliance with this principle. To regulations derived from the Basel agreements.
do so, the Wholesale portfolio split by industry sector is monitored
on a quarterly basis during the Risk Committee, the risk appetite They fall into two main categories:
by sector being limited to 10 per cent of HSBC Continental • collateral pledged, in favour of the Bank, is used to secure
Europe’s total exposure (‘EAD’). timely performance of a borrower's financial obligations;
In addition, some business sectors, such as Commercial Real • a guarantee is the commitment by a third party to substitute for
Estate (‘CRE’) and Leveraged Buy Outs (‘LBOs’), are governed by the primary obligor in the event of default. By extension, credit
their own specific caps and business sector directives laid down insurance and credit derivatives (purchased protection) also fall
by HSBC Continental Europe and/or the HSBC Group. The caps are into this category.
monitored quarterly.
For the perimeter under the Internal Ratings Based (‘IRB’),
In addition, and depending on the macroeconomic environment, guarantees and collaterals are taken into account, provided they
ad-hoc sector analysis can be undertaken to determine whether are eligible, by decreasing the Loss Given Default (‘LGD’)
mitigating actions are required or not. parameter corresponding to an increase in the recovery rate that
Geographical area concentration risk applies to the transactions in the banking book. The value, taken
into consideration, takes into account a haircut depending on the
The overall risk limits for countries and central governments/ enforceable nature of the commitment and the anticipated fall in
central banks are determined by experience, current events and the market value of the pledged asset.
local knowledge as well as by the latest political, economic and
market information. For the perimeter under the standardised approach, guarantees
are taken into account, provided they are eligible, by applying the
For these types of counterparties, exposures (defined as the more favourable risk weight of the guarantor to a portion of the
aggregate of category A and B limits) are not permitted to exceed secured exposure adjusted for currency and maturity mismatches.
25 per cent of HSBC Continental Europe’s Eligible Capital except Collateral is taken into account as a decrease in the exposure, after
in the following circumstances: adjustment for any currency and maturity mismatches.
• exposures to central governments/central banks located in The assessment of credit risk mitigation effects, follow a
countries which qualify for a zero per cent risk weighting under methodology for each activity which is common to the entire
the Standardised Approach; HSBC Group.
• exposures to specific multilateral development banks (as Collateral
quoted in the FCA and PRA Handbook Glossary) and specific
international organisations (as quoted in CRR Art. 117 and 118) Collateral is divided into two categories: financial collateral and
which qualify for zero per cent risk weighting; other collateral:
• exposures to EEA States’ central government and central banks • financial collateral consists of cash amounts, life insurance
denominated and funded in their domestic currency which also contracts, mutual fund units, equities (listed or unlisted) and
attract a zero per cent risk weighting (CRR Art. 114 (4)). bonds;
However, it should be noted that regardless of how the country • other diverse forms of collateral include real estate mortgages
with zero weighting is qualified, all requests are submitted for risk or ship mortgages, pledge of equipment or inventories, transfer
approval and the corresponding authorisations are recorded in the of commercial receivables or any other rights to an asset of the
normal manner. counterparty.
The exposure risk on countries, central governments and central To be eligible as part of the credit risk analysis, collateral must
banks is monitored by the HSBC Group Risk Department, which fulfil the following conditions:
establishes all overall limits on the basis of the recommendations • the pledge must be documented;
made by the Head of Wholesale Credit and Market Risk and
relationship Managers in charge of central governments and • the pledged asset should be able to be sold rapidly on a liquid
central banks. Overall limits for single countries are revised at least secondary market;
annually or more frequently depending on circumstances. These • the Bank should have a regularly updated value of the pledged
limits are monitored continuously and adjustments may be made asset;
at any time.
• the Bank should have reasonable comfort in the potential
A quarterly report on country risk exposure (total of limits to appropriation and realisation of the asset concerned.
categories A and B) in excess of 10 per cent of HSBC Continental
Guarantee
Europe’s capital is given to Senior Management, the Risk
Committee and the Board of Directors of HSBC Continental Guarantee is the commitment by a third party to substitute for the
Europe. primary obligor in the event of default. By extension, credit
insurance and credit derivatives (purchased protection) also fall
Concerning 2020 and in accordance with its credit guidelines,
into this category. Credit Logement can insure the risk of default of
HSBC Continental Europe’s exposures to countries other than
a borrower for property loans.
France was limited. Only two countries had commitments
(category A and B) in excess of EUR 2 billion: Germany and the
Netherlands.

Risk
Guarantors are subject to the same credit risk assessment process For individually significant exposures, risk ratings are reviewed
as primary obligors. regularly and amendments are implemented promptly when
necessary. Within the HSBC Group’s retail portfolios, risk is
Guarantees could be granted by the borrower’s parent company or
assessed and managed using a wide range of risk and pricing
by other entities such as financial institutions. Hedging via credit
models.
derivatives, guarantees from public insurers for export financing or
private insurers are other examples of guarantees. This risk rating system is based on the probability of default and
loss estimates, in accordance with the internal rating methods
The consideration of a guarantee consists of determining the
required by the Basel II framework for calculating regulatory
average amount the Bank can expect to recover if a guarantee is
capital.
called in following the default of a borrower. It will depend on the
amount of the guarantee and on the enforceable nature of the The five credit quality classifications defined below encompass a
commitment. range of more granular, internal credit rating grades assigned to
wholesale and retail lending business, as well as the external
Optimising Credit Risk Mitigation via CDS
rating, attributed by external agencies to debt securities.
As part of its mandate of optimising credit risk management for
There is no direct correlation between the internal and external
Global Banking and Markets Portfolio Management (‘PM’) sets up
ratings at granular level. Insofar as both fall within one of the five
hedges using credit derivatives, and primarily credit default swaps
classifications.
(‘CDS’). These CDS are used as part of an active management
policy, the main aim being to hedge migration and concentration All distinct HSBC customers are rated using the PD scale, except
risks and manage significant exposures. The underlying assets are for those still under the Standard Basel II method.
loans made to large corporates provided by Global Banking and Each customer risk rating (‘CRR’) band is associated with an
Markets (Banking). external rating grade by reference to long-run default rates for that
Considered as guarantees and treated under the Internal Ratings grade, represented by the average of issuer-weighted historical
Based Approach, CDS hedges totalled EUR 199 million at default rates. This mapping between internal and external ratings
31 December 2020 and subject to eligibility, they have for effect of is indicative and may vary over time.
decreasing the risk-weighted assets of the bank. For debt securities and certain other financial instruments, external
ratings have been aligned to the five quality classifications.
Credit quality of financial instruments
The HSBC Group’s credit risk rating systems and processes
differentiate exposures in order to highlight those with greater risk
factors and higher potential severity of losses.
Credit quality classification

Sovereign debt Other debt
securities securities Wholesale lending
and bills and bills and derivatives Retail lending
12-month Basel
Internal credit probability of 12-month probability
External credit rating External credit rating rating1 default % PD Band2 of default %
Strong BBB and above A- and above CRR 1 to CRR 2 0 – 0.169 band 1 to band 2 0.000 – 0.500
Good BBB- to BB BBB+ to BBB- CRR 3 0.170 – 0.740 band 3 0.501 – 1.500
BB- to B and BB+ to B and
Satisfactory unrated unrated CRR 4 to CRR 5 0.741 – 4.914 band 4 to band 5 1.501 – 20.000
Sub-standard B- to C B- to C CRR 6 to CRR 8 4.915 – 99.999 band 6 20.001 – 99.999
Credit-impaired Default Default CRR 9 to CRR 10 100 band 7 100
1 Customer risk rating (‘CRR’).

2 12-month point-in-time (‘PIT’) probability weighted probability of default (‘PD’).
Quality classification definitions

• ‘Strong’: exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default and/or low levels of
expected loss.
• ‘Good’: exposures require closer monitoring and demonstrate a good capacity to meet financial commitments, with low default risk.
• ‘Satisfactory’: exposures require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default
risk.
• ‘Sub-standard’: exposures require varying degrees of special attention and default risk is of greater concern.
• ‘Credit Impaired’: exposures have been assessed, individually or collectively, as impaired.

Distribution of financial instruments by credit quality
Gross carrying/notional amount
Sub- Credit Allowance
Strong Good Satisfactory standard impaired Total for ECL Net
€m €m €m €m €m €m €m €m
In-scope for IFRS 9
Loans and advances to customers held at
amortised cost 26,137 8,737 16,576 4,203 1,392 57,045 (820) 56,225
– personal1 19,305 1,606 1,444 100 430 22,885 (193) 22,692
– corporate and commercial 5,560 6,487 14,166 3,837 937 30,987 (605) 30,382
– non-bank financial institutions 1,272 644 966 266 25 3,173 (22) 3,151
Loans and advances to banks held
at amortised cost 5,534 231 1,015 2 — 6,782 (1) 6,781
Cash and balances at central banks 29,405 — 104 — — 29,509 (1) 29,508
Items in the course of collection from other
banks 224 — — — — 224 — 224
Reverse repurchase agreements – non-trading 20,174 1,288 60 — — 21,522 — 21,522
Financial investments — — 6 — — 6 — 6
Prepayments, accrued income and other assets 18,845 445 1,189 7 3 20,489 (1) 20,488
– endorsements and acceptances 7 — — — — 7 — 7
– accrued income and other 18,838 445 1,189 7 3 20,482 (1) 20,481
Debt instruments measured at fair value through
other comprehensive income2 14,612 2,321 205 — — 17,138 (8) 17,130
Out-of-scope for IFRS 9
Trading assets 12,778 80 96 — — 12,954 — 12,954
Other financial assets designated and otherwise
mandatorily measured at fair value through
profit or loss 2,454 313 170 — — 2,937 — 2,937
Derivatives 52,376 3,329 458 271 41 56,475 — 56,475
Total gross amount on balance sheet 182,539 16,744 19,879 4,483 1,436 225,081 (831) 224,250
Percentage of total credit quality 81.1% 7.4% 8.8% 2.0% 0.5% 100%
Loan and other credit related commitments 74,669 12,315 9,478 1,373 57 97,892 (21) 97,871
Financial guarantees 544 154 125 198 30 1,051 (9) 1,042
In-scope for IFRS 9: Irrecoverable loan
commitments and financial guarantees 75,213 12,469 9,603 1,571 87 98,943 (30) 98,913
Loan and other credit related commitments 591 681 388 4 — 1,664 — 1,664
Performance and other guarantees 2,962 2,301 2,596 312 142 8,313 (43) 8,270
Out-of-scope for IFRS 9: Revocable loan
commitments and non-financial guarantees 3,553 2,982 2,984 316 142 9,977 (43) 9,934
Total nominal amount off-balance sheet 78,766 15,451 12,587 1,887 229 108,920 (73) 108,847
At 31 Dec 2020 261,305 32,195 32,466 6,370 1,665 334,001 (904) 333,097
1 Of which EUR 16,827 million EUR guaranteed loans by Credit Logement as at 31 December 2020.
2 For the purposes of this disclosure gross carrying value is defined as the amortised cost of a financial asset, before adjusting for any loss
allowance. As such the gross carrying value of debt instruments at FVOCI as presented above will not reconcile to the balance sheet as it excludes
fair value gains and losses.

Risk
Distribution of financial instruments by credit quality (continued)

Sub- Credit Allowance for
Strong Good Satisfactory standard impaired Total ECL Net
€m €m €m €m €m €m €m €m
In-scope for IFRS 9
Loans and advances to customers held at
amortised cost 25,541 12,162 16,512 2,184 1,239 57,638 (682) 56,956
– personal1 17,376 2,519 1,879 107 472 22,353 (183) 22,170
– corporate and commercial 6,312 8,333 13,344 1,860 712 30,561 (452) 30,109
– non-bank financial institutions 1,853 1,310 1,289 217 55 4,724 (47) 4,677
Loans and advances to banks held
at amortised cost 6,547 172 76 3 — 6,798 — 6,798
Cash and balances at central banks 19,323 50 90 — — 19,463 — 19,463
Items in the course of collection from other
banks 774 1 — — — 775 — 775
Reverse repurchase agreements – non-trading 42,851 3,010 112 — — 45,973 — 45,973
Financial investments — — 6 — — 6 — 6
Prepayments, accrued income and other assets 14,286 282 943 4 12 15,527 (1) 15,526
– endorsements and acceptances 18 — — — — 18 — 18
– accrued income and other 14,268 282 943 4 12 15,509 (1) 15,508
Debt instruments measured at fair value
through other comprehensive income2 12,762 1,863 621 — 1 15,247 (6) 15,241
Out-of-scope for IFRS 9
Trading assets 14,677 50 110 — — 14,837 — 14,837
Other financial assets designated and otherwise
mandatorily measured at fair value through
profit or loss 1,152 265 1,797 — — 3,214 — 3,214
Derivatives 34,818 5,267 5,630 9 — 45,724 — 45,724
Total gross amount on balance sheet 172,731 23,122 25,897 2,200 1,252 225,202 (689) 224,513
Percentage of total credit quality 76.7% 10.3% 11.5% 1.0% 0.5% 100.0%
Loan and other credit related commitments 62,824 14,279 10,269 991 59 88,422 (23) 88,399
Financial guarantees 640 188 257 115 9 1,209 (5) 1,204
In-scope for IFRS 9: Irrecoverable loan
commitments and financial guarantees 63,464 14,467 10,526 1,106 68 89,631 (28) 89,603
Loan and other credit related commitments3 348 646 266 11 — 1,271 — 1,271
Performance and other guarantees 3,503 1,906 3,400 364 83 9,256 (33) 9,223
Out-of-scope for IFRS 9: Revocable loan
commitments and non-financial guarantees 3,851 2,552 3,666 375 83 10,527 (33) 10,494
Total nominal amount off-balance sheet 67,315 17,019 14,192 1,481 151 100,158 (61) 100,097
At 31 Dec 2019 240,046 40,141 40,089 3,681 1,403 325,360 (750) 324,610
1 Of which EUR 15,678 million EUR guaranteed loans by Crédit Logement as at 31 December 2019 (Re-presented to include Individual
entrepreneurs balance of EUR 2,591 million).

Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage allocation
€m €m €m €m €m €m €m €m
Loans and advances to customers at amortised cost 26,137 8,737 16,576 4,203 1,392 57,045 (820) 56,225
– stage 1 26,132 8,559 11,877 1,615 — 48,183 (36) 48,147
– stage 2 5 178 4,699 2,588 — 7,470 (111) 7,359
– stage 3 — — — — 1,350 1,350 (661) 689
– POCI3 — — — — 42 42 (12) 30
Loans and advances to banks at amortised cost 5,534 231 1,015 2 — 6,782 (1) 6,781
– stage 1 5,493 231 1,014 2 — 6,740 (1) 6,739
– stage 2 41 — 1 — — 42 — 42
– stage 3 — — — — — — — —
– POCI3 — — — — — — — —
Other financial assets measured at amortised cost 68,648 1,733 1,359 7 3 71,750 (2) 71,748
– stage 1 68,648 1,722 1,358 — — 71,728 (1) 71,727
– stage 2 — 11 1 7 — 19 — 19
– stage 3 — — — — 3 3 (1) 2
– POCI3 — — — — — — — —
Loan and other credit-related commitments 74,669 12,315 9,478 1,373 57 97,892 (21) 97,871
– stage 1 74,658 11,725 8,200 381 — 94,964 (5) 94,959
– stage 2 11 590 1,278 992 — 2,871 (12) 2,859
– stage 3 — — — — 57 57 (4) 53
– POCI3 — — — — — — — —
Financial guarantees1 544 154 125 198 30 1,051 (9) 1,042
– stage 1 544 154 103 122 — 923 (2) 921
– stage 2 — — 22 76 — 98 (5) 93
– stage 3 — — — — 29 29 (2) 27
– POCI3 — — — — 1 1 — 1
Total on balance sheet and off balance sheet
excluding debt instrument at FVOCI 175,532 23,170 28,553 5,783 1,482 234,520 (853) 233,667
Debt instruments at FVOCI2 14,612 2,321 205 — — 17,138 (8) 17,130
– stage 1 14,557 2,263 190 — — 17,010 (2) 17,008
– stage 2 55 58 15 — — 128 (6) 122
– stage 3 — — — — — — — —
– POCI3 — — — — — — — —
At 31 Dec 2020 190,144 25,491 28,758 5,783 1,482 251,658 (861) 250,797
1 Excludes performance guarantee contracts to which the impairment requirements in IFRS 9 are not applied.
3 'POCI' Purchased or originated credit-impaired.

Risk
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and stage
allocation (continued)
€m €m €m €m €m €m €m €m
Loans and advances to customers at amortised cost 25,541 12,162 16,512 2,184 1,239 57,638 (682) 56,956
– stage 1 25,540 12,004 13,953 1,405 — 52,902 (43) 52,859
– stage 2 1 158 2,559 779 — 3,497 (50) 3,447
– stage 3 — — — — 1,195 1,195 (578) 617
– POCI3 — — — — 44 44 (11) 33
Loans and advances to banks at amortised cost 6,547 172 76 3 — 6,798 — 6,798
– stage 1 6,522 171 76 — — 6,769 — 6,769
– stage 2 25 1 — 3 — 29 — 29
– stage 3 — — — — — — — —
– POCI3 — — — — — — — —
Other financial assets measured at amortised cost 77,234 3,343 1,151 4 12 81,744 (1) 81,743
– stage 1 77,234 3,341 1,151 — — 81,726 — 81,726
– stage 2 — 2 — 4 — 6 — 6
– stage 3 — — — — 12 12 (1) 11
– POCI3 — — — — — — — —
Total on balance sheet excluding debt instrument at
FVOCI 109,322 15,677 17,739 2,191 1,251 146,180 (683) 145,497
Loan and other credit-related commitments 62,824 14,279 10,269 991 59 88,422 (23) 88,399
– stage 1 62,824 14,149 9,608 420 — 87,001 (6) 86,995
– stage 2 — 130 661 571 — 1,362 (3) 1,359
– stage 3 — — — — 59 59 (14) 45
– POCI3 — — — — — — — —
Financial guarantees1 640 188 257 115 9 1,209 (5) 1,204
– stage 1 640 188 218 75 — 1,121 (1) 1,120
– stage 2 — — 39 40 — 79 (4) 75
– stage 3 — — — — 6 6 — 6
– POCI3 — — — — 3 3 — 3
Total on balance sheet and off balance sheet
excluding debt instrument at FVOCI 172,786 30,144 28,265 3,297 1,319 235,811 (711) 235,100
Debt instruments at FVOCI2 12,762 1,863 621 — 1 15,247 (6) 15,241
– stage 1 12,707 1,853 588 — — 15,148 (5) 15,143
– stage 2 55 10 33 — — 98 (1) 97
– stage 3 — — — — — — — —
– POCI3 — — — — 1 1 — 1
At 31 Dec 2019 185,548 32,007 28,886 3,297 1,320 251,058 (717) 250,341
3 'POCI' Purchased or originated credit-impaired.
Impairment assessment results in forgiveness or postponement of principal, interest or

fees; and
Management regularly evaluates the adequacy of the established
allowances for impaired loans by conducting a detailed review of • a deterioration in the financial condition or outlook of the
the loan portfolio, comparing performance and delinquency borrower such that its ability to repay is considered doubtful.
statistics with historical trends and assessing the impact of current Impairment of loans and advances
economic conditions.
For details of HSBC Continental Europe's policy concerning
Impaired loans – identification of loss events impairments of loans and advances, please refer to notes in the
The criteria used by HSBC Continental Europe to determine that a Consolidated Financial Statements.
loan is impaired include: Summary of credit risk
• known cash flow difficulties experienced by the borrower; The disclosure below presents the gross carrying/nominal amount
• contractual payments of either principal or interest being past of financial instruments to which the impairment requirements in
due for more than 90 days; IFRS 9 are applied and the associated allowance for ECL. Due to
the forward-looking nature of IFRS 9, the scope of financial
• the probability that the borrower will enter bankruptcy or other
instruments on which ECL are recognised is greater than the
financial distress procedure;
scope of IAS 39. The following tables show the allocation of loans
• a concession granted to the borrower for economic or legal and ECL allowance according to the kind of loans and nature of
reasons relating to the borrower’s financial difficulty that counterparties.

Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
31 Dec 2020 31 Dec 2019
Gross carrying/ Allowance/ Allowance/
nominal provision for Gross carrying/ provision for
amount ECL1 nominal amount ECL1
€m €m €m €m
Loans and advances to customers at amortised cost: 57,045 (820) 57,638 (682)
– personal2 22,885 (193) 22,353 (183)
– corporate and commercial 30,987 (605) 30,561 (452)
– non-bank financial institutions 3,173 (22) 4,724 (47)
Loans and advances to banks at amortised cost 6,782 (1) 6,798 —
Other financial assets measured at amortised costs: 71,750 (2) 81,744 (1)
– cash and balances at central banks 29,509 (1) 19,463 —
– items in the course of collection from other banks 224 — 775 —
– reverse repurchase agreements – non-trading 21,522 — 45,973 —
– financial investments3 6 — 6 —
– prepayments, accrued income and other assets4 20,489 (1) 15,527 (1)
Total gross carrying amount on balance sheet 135,577 (823) 146,180 (683)
Loans and other credit related commitments: 97,892 (21) 88,422 (23)
– personal 1,352 (1) 1,189 (1)
– corporate and commercial 41,102 (12) 36,798 (21)
– financial 55,438 (8) 50,435 (1)
Financial guarantees5: 1,051 (9) 1,209 (5)
– personal 26 — 30 —
– corporate and commercial 531 (9) 573 (5)
– financial 494 — 606 —
Total nominal amount off-balance sheet6 98,943 (30) 89,631 (28)
Total nominal amount on balance sheet and off-balance sheet 234,520 (853) 235,811 (711)
Memorandum Memorandum
Fair allowance for Fair allowance for
value ECL7 value ECL7
€m €m €m €m
Debt instruments measured at Fair Value through Other Comprehensive Income
(‘FVOCI’) 19,139 (8) 16,967 (6)
1 The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial
asset, in which case the ECL is recognised as a provision.
2 Of which EUR 16,827 million guaranteed by Crédit Logement as at 31 December 2020 (2019: EUR 15,678 million, re-presented to include
individual entrepreneurs balance of EUR 2,591 million).
3 Includes only financial investments measured at amortised cost. ‘Financial investments’ as presented within the consolidated balance sheet on
page 167 includes financial assets measured at amortised cost and debt and equity instruments measured at fair value through other
comprehensive income.
4 Includes only those financial instruments which are subject to the impairment requirements of IFRS 9. ‘Prepayments, accrued income and other
assets’ as presented within the consolidated balance sheet on page 167 includes both financial and non-financial assets.
6 Represents the maximum amount at risk should the contracts be fully drawn upon and clients default.
7 Debt instruments measured at FVOCI continue to be measured at fair value with the allowance for ECL as a memorandum item. Change in ECL is
recognised in ‘Change in expected credit losses and other credit impairment charges’ in the income statement.

Risk
Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector
at 31 December 2020
Gross carrying/nominal amount1 Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI2 Total Stage 1 Stage 2 Stage 3 POCI2 Total Stage 1 Stage 2 Stage 3 POCI2 Total
€m €m €m €m €m €m €m €m €m €m % % % % %
Loans and advances
to customers at
amortised cost 48,183 7,470 1,350 42 57,045 (36) (111) (661) (12) (820) 0.1 1.5 49.0 28.6 1.4
– personal3 21,648 807 430 — 22,885 (9) (28) (156) — (193) — 3.5 36.3 — 0.8
– corporate and
commercial 23,521 6,529 895 42 30,987 (25) (82) (486) (12) (605) 0.1 1.3 54.3 28.6 2.0
– non-bank financial
institutions 3,014 134 25 — 3,173 (2) (1) (19) — (22) 0.1 0.7 76.0 — 0.7
Loans and advances
to banks at
amortised cost 6,740 42 — — 6,782 (1) — — — (1) — — — — —
Other financial
assets measured at
amortised cost 71,728 19 3 — 71,750 (1) — (1) — (2) — — 33.3 — —
Loan and other
credit-related
commitments 94,964 2,871 57 — 97,892 (5) (12) (4) — (21) — 0.4 7.0 — —
– personal 1,318 32 2 — 1,352 (1) — — — (1) 0.1 — — — 0.1
– corporate and
commercial 38,623 2,424 55 — 41,102 (3) (5) (4) — (12) — 0.2 7.3 — —
– financial 55,023 415 — — 55,438 (1) (7) — — (8) — 1.7 — — —
Financial
guarantees4 923 98 29 1 1,051 (2) (5) (2) — (9) 0.2 5.1 6.9 — 0.9
– personal 25 — 1 — 26 — — — — — — — — — —
– corporate and
commercial 448 54 28 1 531 (2) (5) (2) — (9) 0.4 9.3 7.1 — 1.7
– financial 450 44 — — 494 — — — — — — — — — —
At 31 Dec 2020 222,538 10,500 1,439 43 234,520 (45) (128) (668) (12) (853) — 1.2 46.4 27.9 0.4
2 Purchased or originated credit-impaired ('POCI').
3 Of which EUR 16,827 million guaranteed by Crédit Logement as at 31 December 2020.
Unless identified at an earlier stage, all financial assets are assets by those less than 30 and greater than 30 days past due
deemed to have suffered a significant increase in credit risk when and therefore presents those financial assets classified as stage 2
they are 30 days past due and are transferred from stage 1 to due to ageing (30 days past due) and those identified at an earlier
stage 2. stage (less than 30 days past due). Past due financial instruments
are those loans where customers have failed to make payments in
The disclosure below presents the ageing of stage 2 financial
accordance with the contractual terms of their facilities.
Stage 2 days past due analysis at 31 December 2020

Gross carrying amount Allowance for ECL ECL coverage %
Stage 2 Of which: Of which: Stage 2 Of which: Of which: Stage 2 Of which: Of which:
1 to 29 30 and > 1 to 29 30 and > 1 to 29 30 and >
DPD1 DPD1 DPD1 DPD1 DPD1 DPD1
€m €m €m €m €m €m % % %
Loans and advances to
customers at amortised cost 7,470 48 31 (111) (1) (1) 1.5 2.1 3.2
– personal 807 38 29 (28) (1) (1) 3.5 2.6 3.4
– corporate and commercial 6,529 9 2 (82) — — 1.3 — —
– non-bank financial institutions 134 1 — (1) — — 0.7 — —
Loans and advances to banks at
amortised cost 42 — — — — — — — —
Other financial assets measured
at amortised cost 19 — — — — — — — —
1 Days past due ('DPD'). Current accounts in stage 2 are not shown in amounts presented above.

Summary of credit risk (excluding debt instruments measured at FVOCI) by stage distribution and ECL coverage by industry sector
at 31 December 2019 (continued)
Gross carrying/nominal amount1 Allowance for ECL ECL coverage %
Stage 1 Stage 2 Stage 3 POCI2 Total Stage 1 Stage 2 Stage 3 POCI2 Total Stage 1 Stage 2 Stage 3 POCI2 Total
€m €m €m €m €m €m €m €m €m €m % % % % %
customers at amortised
cost: 52,902 3,497 1,195 44 57,638 (43) (50) (578) (11) (682) 0.1 1.4 48.4 25.0 1.2
– personal3 20,769 1,112 472 — 22,353 (4) (21) (158) — (183) — 1.9 33.5 — 0.8
– corporate and
commercial 27,518 2,331 668 44 30,561 (36) (28) (377) (11) (452) 0.1 1.2 56.4 25.0 1.5
– non-bank financial
institutions 4,615 54 55 — 4,724 (3) (1) (43) — (47) 0.1 1.9 78.2 — 1.0
banks at amortised cost 6,769 29 — — 6,798 — — — — — — — — — —
Other financial assets
measured at amortised
cost 81,726 6 12 — 81,744 — — (1) — (1) — — 8.3 — —
Loan and other credit-
related commitments 87,001 1,362 59 — 88,422 (6) (3) (14) — (23) — 0.2 23.7 — —
– personal 1,145 41 3 — 1,189 — (1) — — (1) — 2.4 — — 0.1
– corporate and
commercial 35,519 1,223 56 — 36,798 (5) (2) (14) — (21) — 0.2 25.0 — 0.1
– financial 50,337 98 — — 50,435 (1) — — — (1) — — — — —
Financial guarantees4 1,121 79 6 3 1,209 (1) (4) — — (5) 0.1 5.1 — — 0.4
– personal 29 — 1 — 30 — — — — — — — —
– corporate and
commercial 486 79 5 3 573 (1) (4) — — (5) 0.2 5.1 — 0.9
– financial 606 — — — 606 — — — — — — — —
At 31 Dec 2019 229,519 4,973 1,272 47 235,811 (50) (57) (593) (11) (711) — 1.1 46.6 23.4 0.3
2 Purchased or originated credit-impaired ('POCI').
3 Of which EUR 15,678 million guaranteed by Crédit Logement as at 31 December 2019 (Re-presented to include individual entrepreneurs balance
of EUR 2,591 million).
Stage 2 days past due analysis at 31 December 2019 (continued)

Gross carrying amount Allowance for ECL ECL coverage %
Stage 2 Of which: Of which: Stage 2 Of which: Of which: Stage 2 Of which: Of which:
1 to 29 30 and > 1 to 29 30 and > 1 to 29 30 and >
DPD1 DPD1 DPD1 DPD1 DPD1 DPD1
€m €m €m €m €m €m % % %
customers at amortised cost 3,497 60 44 (50) (1) (3) 1.4 1.7 6.8
– personal 1,112 44 38 (21) (1) (1) 1.9 2.3 2.6
– corporate and commercial 2,331 16 6 (28) — (2) 1.2 — 33.3
– non-bank financial institutions 54 — — (1) — — 1.9 — —
Loans and advances to banks at
amortised cost 29 — — — — — 0 — —
Other financial assets measured
at amortised cost 6 — — — — — 0 — —
1 Days past due ('DPD'). Current accounts in stage 2 are not shown in amounts presented above.
Maximum exposure to credit risk sheet, the exposure to credit risk equals their carrying amount. For
financial guarantees granted, the maximum exposure to credit risk
The following table presents the maximum exposure to credit risk
is the maximum amount that the group would have to pay if the
with respect to financial instruments, before taking account of any
guarantee were called upon. For loan commitments that are
collateral held or other credit enhancements, unless such credit
irrevocable over the life of the respective facilities, the maximum
enhancements meet offsetting requirements defined in the
exposure to credit risk is the maximum amount of the committed
accounting policies and principles. For financial assets recognised
facilities.
in the balance

Risk
Maximum exposure to credit risk

31 Dec 2020
Maximum
exposure Offset Net
€m €m €m
Loans and advances to customers held at amortised cost 56,225 — 56,225
– personal1 22,692 — 22,692
– corporate and commercial 30,382 — 30,382
– non-bank financial institutions 3,151 — 3,151
Loans and advances to banks at amortised cost 6,781 (242) 6,539
Other financial assets held at amortised cost 71,817 (2,638) 69,179
– cash and balances at central banks 29,508 — 29,508
– items in the course of collection from other banks 224 — 224
– reverse repurchase agreements – non-trading 21,522 (2,638) 18,884
– financial investments 6 — 6
– prepayments, accrued income and other assets 20,557 — 20,557
Assets held for sale 3 — 3
Derivatives 56,475 (56,201) 274
Total on-balance sheet exposure to credit risk 191,301 (59,081) 132,220
Total off-balance sheet 108,847 — 108,847
– financial and other guarantees2 9,312 — 9,312
– loan and other credit-related commitments 99,535 — 99,535
Total on and off-balance sheet amount 300,148 (59,081) 241,067

2 'Financial and other guarantees' represents 'Financial guarantees' and 'Performance and other guarantees' as disclosed in Note 30.
Maximum exposure to credit risk

31 Dec 2019
Maximum
exposure Offset Net
€m €m €m
Loans and advances to customers held at amortised cost 56,956 — 56,956
– personal1 22,170 — 22,170
– corporate and commercial 30,109 — 30,109
– non-bank financial institutions 4,677 — 4,677
Loans and advances to banks at amortised cost 6,798 (446) 6,352
Other financial assets held at amortised cost 81,836 (9,327) 72,509
– cash and balances at central banks 19,463 — 19,463
– items in the course of collection from other banks 775 — 775
– reverse repurchase agreements – non-trading 45,973 (9,327) 36,646
– financial investments 6 — 6
– prepayments, accrued income and other assets 15,619 — 15,619
Assets held for sale 3 — 3
Derivatives 45,724 (45,217) 507
Total on-balance sheet exposure to credit risk 191,317 (54,990) 136,327
Total off-balance sheet 100,097 — 100,097
– financial and other guarantees2 10,427 — 10,427
– loan and other credit-related commitments 89,670 — 89,670
Total on and off-balance sheet amount 291,414 (54,990) 236,424
1 Of which EUR 15,678 million guaranteed by Crédit Logement as at 31 December 2019, re-presented to include individual entrepreneurs balance
of EUR 2,591 million.
2 'Financial and other guarantees' represents 'Financial guarantees' and 'Performance and other guarantees' as disclosed in Note 30.
Measurement uncertainty and sensitivity analysis of Three of these scenarios are drawn from consensus. These include
ECL estimates a Central scenario, representing a most likely outcome, a
Downside and an Upside scenario that represent meaningfully
The recognition and measurement of ECL involves the use of
different outcomes from the Central. The Central scenario is
significant judgement and estimation. We form multiple economic
created using the average of a panel of external forecasters (‘the
scenarios based on economic forecasts, apply these assumptions
consensus’) while consensus Upside and Downside scenarios are
to credit risk models to estimate future credit losses, and
created with reference to distributions that capture forecasters
probability-weight the results to determine an unbiased ECL
views of the entire range of outcomes. Management has chosen
estimate. Management judgemental adjustments are used to
to use a fourth scenario to represent their view of severe downside
address late-breaking events, data and model limitations and
risks. The use of an additional scenario is in line with HSBC’s
model deficiencies.
Forward Economic Guidance (‘FEG’) methodology and has been
Methodology used over the course of 2020.
Four economic scenarios have been used to capture the
exceptional nature of the current economic environment and to
articulate management’s view of the range of potential outcomes.

Description of economic scenarios also raise concerns around the efficacy of vaccines as the virus
mutates. Some countries may keep significant restrictions to
The economic assumptions presented in this section have been
mobility in place for an extended period of time, at least until
formed by HSBC with reference to external forecasts specifically
critical segments of the population can be inoculated. Further risks
for the purpose of calculating ECL.
to international travel also arise.
Economic forecasts are subject to a high degree of uncertainty in
A number of vaccines have been developed and approved for use
the current environment. Limitations of forecasts and economic
at a rapid pace and plans to inoculate significant proportions of
models require a greater reliance on management judgement in
national populations in 2021 are a clear positive for economic
addressing both the error inherent in economic forecasts and in
recovery. While we expect vaccination programmes to be
assessing associated ECL outcomes. The scenarios used to
successful, governments and healthcare authorities face country-
calculate ECL are described below.
specific challenges that could affect the speed and spread of
The consensus Central scenario vaccinations. These challenges include the logistics of inoculating
The Central scenario features an improvement in economic growth a significant proportion of national populations within a limited
in 2021 as activity and employment gradually return to the levels timeframe and the public acceptance of vaccines. On a global
experienced prior to the outbreak of Covid-19. level, supply challenges could affect the pace of roll-out and the
efficacy of vaccines is yet to be determined. Government support
Despite the sharp contraction in activity, government fiscal programmes have provided households and firms with significant
support in advanced economies played a crucial role in averting support. An inability or unwillingness to continue with such
significant financial distress. At the same time, central banks support or the untimely withdrawal of support present a downside
implemented a variety of measures, which included lowering their risk to growth.
main policy interest rates, implementing emergency support
measures for funding markets, and either restarting or increasing While Covid-19 and related risks dominate the economic outlook,
quantitative easing programmes in order to support economies geopolitical risks also present a threat. The Trade and Co-operation
and the financial system. Agreement between the UK and EU has averted a disorderly UK
departure from the EU, but the risk of future disagreements
The key features of our Central scenario are: remain, which may hinder the ability to reach a more
• Growth in GDP in 2021. Economic activity will recover, comprehensive agreement on trade and services.
supported by a successful rollout of the vaccination programme The consensus Downside scenario
and effective non-pharmacological measures to contain the
virus, which will lead to a significant decline in infections by the In the consensus Downside scenario, economic recovery is
end of 2021. considerably weaker compared with the Central scenario. GDP
growth remains weak, unemployment rates stay elevated and
• Government support programmes will continue to provide asset and commodity prices fall before gradually recovering
support to labour markets and households in 2021. We expect towards their long-run trends. Further outbreaks of Covid-19,
a gradual reversion of the unemployment rate to pre-crisis coupled with delays in vaccination programmes, lead to longer-
levels over the course of the projection period as a result of lasting restrictions on economic activity. In this scenario, other
economic recovery and due to the orderly withdrawal of fiscal global risks also increase and drive increased risk-aversion in asset
support. markets.
• Fiscal support in 2020 led to large deficits and a significant Additional Downside scenario
increase in public debt. Fiscal support is expected to continue
as needed and deficits are expected to reduce gradually over An additional Downside scenario that features a global recession
the projection period. Sovereign debt levels will remain high but has been created to reflect management’s view of severe risks. In
our Central scenario does not assume fiscal austerity. this scenario, infections rise in 2021 and setbacks to vaccine
programmes imply that successful roll-out of vaccines only occurs
• Interest rates will remain at current levels for an extended towards the end of 2021 and it takes until the end of 2022 for the
period and will increase very modestly towards the end of our pandemic to come to an end. The scenario also assumes
projection period. Central banks – notably the ECB – will governments and central banks are unable to significantly increase
continue to provide assistance through their asset purchase fiscal and monetary programmes, which results in abrupt
programmes as needed. corrections in labour and asset markets.
The consensus Upside scenario Please refer to the HSBC Bank plc Annual Report and Accounts
Compared with the consensus Central scenario, the consensus 2020 for more detail on the key macroeconomic variables and the
Upside scenario features a faster recovery in economic activity probabilities assigned in the different scenarios.
during the first two years, before converging to longer-run trends.. Critical accounting estimates and judgements
The scenario relies on several key upside risk themes. These The calculation of ECL under IFRS 9 involves significant
include the orderly and rapid global abatement of Covid-19 via judgements, assumptions and estimates. The level of estimation
successful containment and prompt deployment of a vaccine; uncertainty and judgement has increased during 2020 as a result
continued support from fiscal and monetary policy and smooth of the economic effects of the Covid-19 outbreak, including in
relations between the UK and the EU which enables the two relation to:
parties to swiftly reach a comprehensive agreement on trade and
services. • the selection and weighting of economic scenarios, given
rapidly changing economic conditions in an unprecedented
Downside scenarios manner, uncertainty as to the effect of government and central
The year 2021 is expected to be a period of economic recovery, bank support measures designed to alleviate adverse economic
but the progression and management of the pandemic continue to impacts, and a wider distribution of economic forecasts than
weigh on global growth. A new and more contagious strain of the
virus increases the transmission rate in the UK and resulted in
stringent restrictions to mobility towards the year end. This viral
strain observed in the UK, together with aggressive strains
observed in other countries including South Africa and Brazil,
introduce the risk that transmission may increase significantly
within the national borders of a number of countries in 2021 and

Risk
before the pandemic. The key judgements are the length of We have internal governance in place to regularly monitor
time over which the economic effects of the pandemic will management judgemental adjustments and, where possible, to
occur, the speed and shape of recovery. The main factors reduce the reliance on these through model recalibration or
include the effectiveness of pandemic containment measures, redevelopment, as appropriate. During 2020 the composition of
the pace of roll-out and effectiveness of vaccines, and the modelled ECL and management judgemental adjustments
emergence of new variants of the virus, plus a range of changed significantly, reflecting the path of the pandemic,
geopolitical uncertainties, which together represent a very high containment efforts and government support measures, and this is
degree of estimation uncertainty, particularly in assessing expected to continue to be the case until economic conditions
Downside scenarios; improve. Wider-ranging model changes will take time to develop
and need more real data on which models can rely. Models will be
• estimating the economic effects of those scenarios on ECL,
revisited over time once the full impacts of Covid-19 are observed.
where there is no observable historical trend that can be
Therefore, we anticipate significant management judgemental
reflected in the models that will accurately represent the effects
adjustments for the foreseeable future.
of the economic changes of the severity and speed brought
about by the Covid-19 outbreak. Modelled assumptions and Please refer to the HSBC Bank plc Annual Report and Accounts
linkages between economic factors and credit losses may 2020 for more detail on management judgemental adjustments to
underestimate or overestimate ECL in these conditions, and ECL and sensitivity analysis.
there is significant uncertainty in the estimation of parameters
Reconciliation of changes in gross carrying/nominal
such as collateral values and loss severity; and
amount and allowances for loans and advances to
• the identification of customers who could represent significant banks and customers including loan commitments and
increases in credit risk and credit impairment, particularly financial guarantees
where those customers have accepted payment deferrals and
other reliefs designed to address short-term liquidity issues The following disclosure provides a reconciliation of the Group’s
given muted default experience to date. gross carrying/nominal amount and allowances for loans and
advances to banks and customers including loan commitments
Management judgemental adjustments and financial guarantees. The transfers of financial instruments
In the context of IFRS 9, management judgemental adjustments represents the impact of stage transfers upon the gross carrying/
are short-term increases or decreases to the ECL at either a nominal amount and associated allowance for ECL. The net
customer or portfolio level to account for late breaking events, remeasurement of ECL arising from stage transfers represents the
model and data limitations and deficiencies, and expert credit variation in ECL due to these transfers.
judgement applied following management review and challenge of
model outputs. The most severe projections at 31 December 2020
of macroeconomic variables are outside the historical observations
on which IFRS 9 models have been built and calibrated to operate.
Moreover, the complexities of country-specific governmental
support programmes, the impacts on customer behaviours and
the unpredictable pathways of the pandemic have never been
modelled. Consequently, the group's IFRS 9 models, in some
cases, generate outputs that appear overly sensitive when
compared with other economic and credit metrics. Governmental
support programmes and customer payment reliefs have
dislocated the correlation between economic conditions and
default rates on which models are based. Management
judgemental adjustments are required to ensure that an
appropriate amount of ECL impairment is recognised.

Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees1
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 POCI Total
Gross Gross Gross Gross Gross

carrying/ carrying/ carrying/ carrying/ carrying/
nominal Allowance nominal Allowance nominal Allowance nominal Allowance nominal Allowance
amount for ECL amount for ECL amount for ECL amount for ECL amount for ECL
€m €m €m €m €m €m €m €m €m €m
At 1 Jan 2020 103,688 (50) 4,967 (57) 1,260 (592) 47 (11) 109,962 (710)
Transfers of financial instruments (4,961) (31) 4,284 38 677 (7) — — — —
– Transfers from Stage 1 to Stage 2 (10,282) 14 10,282 (14) — — — — — —
– Transfers from Stage 2 to Stage 1 5,432 (46) (5,432) 46 — — — — — —
– Transfers to Stage 3 (116) 2 (687) 11 803 (13) — — — —
– Transfers from Stage 3 5 (1) 121 (5) (126) 6 — — — —
Net remeasurement of ECL arising
from transfer of stage — 33 — (26) — (1) — — — 6
New financial assets originated or
purchased 33,268 (19) — — — — 11 (1) 33,279 (20)
Asset derecognised (including final
repayments) (11,853) 3 (909) 11 (447) 138 (2) 1 (13,211) 153
Changes to risk parameters –
further lending/repayments (16,201) 14 2,159 9 72 134 (14) (1) (13,984) 156
Changes to risk parameters – credit
quality — 7 — (103) — (465) — — — (561)
Changes to model used for ECL
calculation — — — — — — — — — —
Assets written off — — — — (124) 124 — — (124) 124
Credit related modifications that
resulted in derecognition — — — — (2) 1 — — (2) 1
Foreign exchange (146) 1 (19) — (1) 1 — — (166) 2
Others 38 — — (2) — — — — 38 (2)
Transfer-in — — — — — — — — — —
At 31 Dec 2020 103,833 (42) 10,482 (130) 1,435 (667) 42 (12) 115,792 (851)
ECL release/(charge) for the period 38 (109) (194) (1) (266)
Recoveries 2
Others (6)
Total ECL release/(charge) for
the period (270)
At 31 Dec 2020
Gross carrying/nominal amount Allowance for ECL ECL release/(charge)
€m €m €m
As above 115,792 (851) (270)
Other financial assets measured at amortised cost 71,750 (2) —
Non-trading reverse purchase agreement commitments 46,975 — —
Performance and other guarantees not considered for IFRS 9 (17)
Summary of financial instruments to which the impairment requirements in
IFRS 9 are applied/ Summary consolidated income statement 234,517 (853) (287)
Debt instruments measured at FVOCI 19,139 (8) (2)
Total allowance for ECL/total income statement ECL charge for the period 253,656 (861) (289)

Risk
Reconciliation of changes in gross carrying/nominal amount and allowances for loans and advances to banks and customers including
loan commitments and financial guarantees1 (continued)
Non-credit impaired Credit impaired
Gross Gross Gross Gross Gross

carrying/ carrying/ carrying/ carrying/ carrying/
nominal Allowance nominal Allowance nominal Allowance nominal Allowance nominal Allowance
amount for ECL amount for ECL amount for ECL amount for ECL amount for ECL
€m €m €m €m €m €m €m €m €m €m
At 1 Jan 2019 80,597 (31) 4,270 (47) 1,016 (527) 19 (3) 85,902 (608)
Transfers of financial instruments (641) (25) 390 29 251 (4) — — — —
– Transfers from Stage 1 to Stage 2 (3,964) 4 3,964 (4) — — — — — —
– Transfers from Stage 2 to Stage 1 3,322 (29) (3,322) 29 — — — — — —
– Transfers to Stage 3 — — (283) 7 283 (7) — — — —
– Transfers from Stage 3 1 — 31 (3) (32) 3 — — — —
Net remeasurement of ECL arising
from transfer of stage — 19 — (12) — (1) — — — 6
New financial assets originated or
purchased 32,705 (19) — — — — 3 (2) 32,708 (21)
Asset derecognised (including final
repayments) (9,410) 2 (755) 8 (242) 87 (8) 2 (10,415) 99
Changes to risk parameters – further
lending/repayments (8,530) 12 (266) (2) 185 35 9 12 (8,602) 57
Changes to risk parameters – credit
quality — 8 — (22) — (233) — (26) — (273)
Changes to model used for ECL
calculation — — — — — — — — — —
Assets written off — — — — (98) 98 (88) 88 (186) 186
Credit related modifications that
resulted in derecognition — — — — (3) 2 — — (3) 2
Foreign exchange 35 — 3 — — — — — 38 —
Others 1,377 (5) 507 2 13 (1) (1) — 1,896 (4)
Transfer-in2 7,555 (11) 818 (13) 138 (48) 113 (82) 8,624 (154)
At 31 Dec 2019 103,688 (50) 4,967 (57) 1,260 (592) 47 (11) 109,962 (710)
ECL release/(charge) for the period 24 (26) (111) (13) (126)
Add: Recoveries 4
Add/(less): Others —
Total ECL release/(charge) for the
period (122)
At 31 Dec 2019
Gross carrying/ ECL release/
nominal amount Allowance for ECL (charge)
€m €m €m
As above 109,962 (710) (122)
Other financial assets measured at amortised cost 81,744 (1) —
Non-trading reverse purchase agreement commitments 44,105 — —
Performance and other guarantees not considered for IFRS 9 (6)
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied/ Summary
consolidated income statement 235,811 (711) (128)
Debt instruments measured at FVOCI 16,967 (6) —
Total allowance for ECL/total income statement ECL charge for the period 252,778 (717) (128)
2 Transfer-In includes amounts related to the acquisition of seven branches: Madrid branch, Milan branch, Ireland branch, Netherlands branch,
Belgium branch, Prague branch with effect from 1 February 2019 and Luxembourg branch from 1 March 2019.
Credit impaired loans are aligned as far as possible so that Stage 3 represents all loans
which are considered defaulted or otherwise credit-impaired.
HSBC determines that a financial instrument is credit-impaired and
in Stage 3 by considering relevant objective evidence, primarily Renegotiated loans and forbearance
whether: A range of forbearance strategies is employed in order to improve
• contractual payments of either principal or interest are past due the management of customer relationships by avoiding default, of
for more than 90 days; the customer where possible or the calling of guarantees obtained
whilst maximising the recoveries of the amounts due. They include
• there are other indications that the borrower is unlikely to pay
extended payment terms, a reduction in interest or principal
such as that a concession has been granted to the borrower for
repayments, approved external debt management plans, debt
economic or legal reasons relating to the borrower’s financial
consolidations, the deferral of foreclosures and other forms of loan
condition.
modifications and re-ageing.
The loan is otherwise considered to be in default. If such
unlikeliness to pay is not identified at an earlier stage, it is deemed
to occur when an exposure is 90 days past due, even where
regulatory rules permit default to be defined based on 180 days
past due. Therefore the definitions of credit-impaired and default

HSBC Continental Europe’s policies and practices are based on A renegotiated loan is presented as impaired when:
criteria which seek to enable wherever possible that the • there has been a change in contractual cash flows as a result of
repayment is likely to continue. These typically involve the a concession which the lender would otherwise not consider;
granting of revised loan terms and conditions. Loan forbearance is and
only granted in situations where the customer has showed a
willingness to repay their loan and is expected to be able to meet • it is probable that without the concession, the borrower would
the revised obligations. be unable to meet contractual payment obligations in full.
The contractual terms of a loan may be modified for a number of This presentation applies unless the concession is insignificant and
reasons, including changes in market conditions, customer there are no other indicators of impairment.
retention and other factors not related to the current or potential The renegotiated loan will continue to be disclosed as impaired,
credit deterioration of a customer. ‘Forbearance’ describes for at least one year and until there is sufficient evidence to
concessions made on the contractual terms of a loan in response demonstrate a significant reduction in the risk of non-payment of
to an obligor’s financial difficulties. We classify and report loans future cash flows, and there are no other indicators of impairment.
on which such concessions have been granted as ‘renegotiated For loans that are assessed for impairment on a collective basis,
loans’ when their contractual payment terms have been modified the evidence typically comprises a history of payment
as a result of serious concerns on the capacity of the borrower to performance against the original or revised terms, as appropriate
repay their contractual outstandings. to the circumstances. For loans that are assessed for impairment
Identifying renegotiated loans on an individual basis, all available evidence is assessed on a case-
by-case basis.
Concessions, on loans made to customers, which do not affect the
payment structure or basis of repayment, such as temporary or For retail lending the minimum period of payment performance
permanent waivers granted by the bank to take advantage of the required depends on the nature of loans in the portfolio, but is
non-respect of financial or security covenants, do not directly typically not less than 12 months. Where portfolios have more
provide concessionary relief to customers in terms of their ability significant levels of forbearance activity the minimum repayment
to service obligations as they fall due and are therefore not performance period required may be substantially more.
included in this classification. Renegotiated loans and recognition of impairment allowances
For retail lending, our credit risk management policy sets out For retail lending, renegotiated loans are segregated from other
restrictions on the number and frequency of renegotiations, the parts of the loan portfolio for collective impairment assessment to
minimum period an account must have been opened before any reflect the higher rates of losses often encountered in these
renegotiation can be considered and the number of qualifying segments.
payments that must be received. The application of this policy
varies according to the nature of the market, the product and the In the corporate and commercial sectors, Renegotiated loans are
management of customer relationships through the occurrence of typically assessed individually. Credit risk ratings are intrinsic to
exceptional events. the impairment assessment. A distressed restructuring is classified
as an impaired loan. The individual impairment assessment takes
Credit quality classification of renegotiated loans into account the higher risk of the non-payment of future cash
Under IFRSs, an entity is required to assess whether there is flows inherent in renegotiated loans.
objective evidence that financial assets are impaired at the end of
each reporting period. A loan is impaired and an impairment
allowance is recognised when there is objective evidence of a loss
event that has an effect on the cash flows of the loan which can
be reliably estimated.
Renegotiated loans and advances to customers at amortised costs by stage allocation

€m €m €m €m €m
Gross carrying amount
Personal — — 68 — 68
– first lien residential mortgages — — 49 — 49
– other personal lending — — 19 — 19
Wholesale 4 155 135 43 337
– corporate and commercial 4 155 135 43 337
– non-bank financial institutions — — — — —
At 31 Dec 2020 4 155 203 43 405
Allowance for ECL
Personal — — (13) — (13)
– first lien residential mortgages — — (10) — (10)
– other personal lending — — (3) — (3)
Wholesale — (4) (62) (12) (78)
– corporate and commercial — (4) (62) (12) (78)
At 31 Dec 2020 — (4) (75) (12) (91)

Risk
Renegotiated loans and advances to customers at amortised costs by stage allocation (continued)
€m €m €m €m €m
Gross carrying amount
Personal — — 51 — 51
– first lien residential mortgages — — 36 — 36
– other personal lending — — 15 — 15
Wholesale 134 48 103 43 328
– corporate and commercial 134 48 103 43 328
At 31 Dec 2019 134 48 154 43 379
Allowance for ECL
Personal — — (14) — (14)
– first lien residential mortgages — — (10) — (10)
– other personal lending — — (4) — (4)
Wholesale (2) — (46) (10) (58)
– corporate and commercial (2) — (46) (10) (58)
At 31 Dec 2019 (2) — (60) (10) (72)
Customer relief programmes

In response to the Covid-19 pandemic, governments around the The following table presents the number of customers and drawn
world have introduced a number of support measures for both loan values of customers under these schemes and schemes
personal and wholesale customers. independently implemented by the Group at 31 December 2020.
Personal lending
HSBC
Continental
Europe Group France Others1
Market-wide schemes
Number of customers granted mortgage customer relief — — —
Drawn loan value of customers granted mortgage customer relief €m — — —
Number of customers granted other personal lending customer relief 512 512 —
Drawn loan value of customers granted other personal lending customer relief €m 43 43 —
HSBC-specific measures
Number of customers granted mortgage customer relief 21 — 21
Drawn loan value of customers granted mortgage customer relief €m 3 — 3
Total personal lending to major markets under market-wide schemes and HSBC-specific
Number of customers granted mortgage customer relief 21 — 21
Drawn loan value of customers granted mortgage customer relief €m 3 — 3
Market-wide schemes and HSBC-specific measures mortgage relief as a proportion of total % 0.1 — 0.8
Market-wide schemes and HSBC-specific measures other personal lending relief as a proportion
of total other personal lending loans and advances % 0.7 0.7 —
Wholesale lending
HSBC
Continental
Europe Group France Others1
Market-wide schemes
Number of customers under market-wide measures 4,943 4,933 10
Drawn loan value of customers under market-wide schemes €m 4,452 4,330 122
HSBC-specific schemes
Number of customers under bank-specific measures 333 329 4
Drawn loan value of customers under bank-specific measures €m 1,437 1,201 236
Total wholesale lending to major markets under market-wide schemes and bank-specific
Number of customers 5,276 5,262 14
Drawn loan value €m 5,889 5,531 358
Market-wide schemes and HSBC-specific measures as a proportion of total wholesale lending
loans and advances % 21.0 21.5 16.0
1 Others include HSBC Continental Europe Madrid Branch, Athens Branch, Poland Branch and HSBC Middle East Leasing partnership.

HSBC Continental Europe has been taking exceptional measures industry-wide scheme proposed by the government in order to
to protect itself and its clients and participate in the prevention of support this sector particularly hit by the lockdowns. At the
an economic collapse, in particular through a quasi-systematic six beginning of the crises, new money financing has been granted to
month deferral of loan repayments for its smaller Commercial our customers, either state-guaranteed or not (depending on the
Banking clients, with limited exclusions or restrictions. For its individual situation). For Commercial Banking, 5,185 requests for
personal, professional and entrepreneur client base within the Pret Garanti d’Etat (‘PGE’) have been granted.
business line – Wealth and Personal Banking concessions were For Large Corporate and Global Banking clients, the number of
also provided through a 3-6 months’ interest only repayment PGEs is smaller but the amount is larger. An extension of one year
scheme. Granted concessions were assessed though the bank during which the client pays only the interest of the loan has been
punctual payment flexibility with additional conservatism (this applied to the mechanism of the PGEs, and customers can elect
includes individual assessment of the customer Income/ for a PGE until the end of 2020. New money financing have been
expenditure, quality, past behaviour). For the corporate segments, approved for large corporates to strengthen their short to mid-
deferral of repayments has been considered on a case-by-case term liquidity at the beginning of the crisis, usually to support their
basis. During August 2020, an additional period of six month rating or as a simple bridge to a refinancing in the debt market.
deferral of loan repayment has also been proposed to customers Some of these loans have been repaid at the end of the year.
in the Café/Hotel/Restaurant segment following on an
Wholesale lending
These sections provide further detail on wholesale loans and advances to customers and banks.
Total wholesale lending for loans and advances to banks and customers by stage distribution
Gross carrying amount Allowance for ECL
Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
€m €m €m €m €m €m €m €m €m €m
Corporate and commercial 23,521 6,529 895 42 30,987 (25) (82) (486) (12) (605)
– Industrial 5,145 1,426 129 13 6,713 (5) (14) (79) (4) (102)
– Commercial, international trade 11,482 3,980 519 29 16,010 (10) (47) (321) (8) (386)
– Commercial real estate 4,251 876 55 — 5,182 (5) (14) (23) — (42)
– Other property-related 310 43 80 — 433 (1) (1) (35) — (37)
– Governments 1,106 — — — 1,106 (1) — — — (1)
– Others 1,227 204 112 — 1,543 (3) (6) (28) — (37)
Non-bank financial institutions 3,014 134 25 — 3,173 (2) (1) (19) — (22)
Loans and advances to banks 6,740 42 — — 6,782 (1) — — — (1)
At 31 Dec 2020 33,275 6,705 920 42 40,942 (28) (83) (505) (12) (628)
Corporate and commercial 27,518 2,331 668 44 30,561 (36) (28) (377) (11) (452)
– Industrial 6,479 550 88 42 7,159 (8) (6) (62) (9) (85)
– Commercial, international trade 13,138 947 437 2 14,524 (12) (13) (249) (1) (275)
– Commercial real estate 4,814 785 55 — 5,654 (10) (9) (20) (1) (40)
– Other property-related 423 20 76 — 519 (1) — (36) — (37)
– Governments 933 — — — 933 — — — — —
– Others 1,731 29 12 — 1,772 (5) — (10) — (15)
Non-bank financial institutions 4,615 54 55 — 4,724 (3) (1) (43) — (47)
Loans and advances to banks 6,769 29 — — 6,798 — — — — —
At 31 Dec 2019 38,902 2,414 723 44 42,083 (39) (29) (420) (11) (499)
Total wholesale lending for loans and other credit-related commitments and financial guarantees1 by stage distribution
Nominal amount Allowance for ECL
€m €m €m €m €m €m €m €m €m €m
Corporate and commercial 39,071 2,478 83 1 41,633 (5) (10) (6) — (21)
Financial 55,473 459 — — 55,932 (1) (7) — — (8)
At 31 Dec 2020 94,544 2,937 83 1 97,565 (6) (17) (6) — (29)
Total wholesale lending for loans and other credit-related commitments and financial guarantees1 by stage distribution (continued)
Nominal amount Allowance for ECL
€m €m €m €m €m €m €m €m €m €m
Corporate and commercial 36,005 1,302 61 3 37,371 (6) (6) (14) — (26)
Financial 50,943 98 — — 51,041 (1) — — — (1)
At 31 Dec 2019 86,948 1,400 61 3 88,412 (7) (6) (14) — (27)

Risk
Wholesale lending: other corporate, commercial and financial (non-bank) loans and advances including loan commitments by level
of collateral by stage
31 Dec 2020 31 Dec 2019
Gross Gross carrying/
carrying/nominal ECL nominal ECL
amount coverage amount coverage
€m % €m %
Stage 1
Not collateralised 57,962 — 59,452 (0.1)
Fully collateralised 2,733 (0.1) 4,118 (0.1)
LTV ratio:
– less than 50% 815 (0.1) 940 —
– 51% to 75% 1,002 — 1,419 (0.1)
– 76% to 90% 515 — 888 (0.1)
– 91% to 100% 401 — 871 (0.1)
Partially collateralised (A): 3,759 (0.1) 2,265 (0.1)
– collateral value on A 3,112 1,786
Total 64,454 — 65,835 (0.1)
Stage 2
Not collateralised 4,673 (1.1) 2,698 (0.7)
Fully collateralised 707 (1.0) 173 (1.7)
LTV ratio:
– less than 50% 368 (0.8) 21 —
– 51% to 75% 50 (2.0) 54 —
– 76% to 90% 23 — 13 —
– 91% to 100% 266 (1.1) 85 (3.5)
Partially collateralised (B): 2,818 (0.6) 65 —
– collateral value on B 2,453 38
Total 8,198 (0.9) 2,936 (0.8)
Stage 3
Not collateralised 620 (63.4) 524 (67.6)
LTV ratio:
– less than 50% 7 (57.1) 11 (36.4)
– 51% to 75% 4 (75.0) 14 (28.6)
– 76% to 90% 2 (50.0) 9 (11.1)
– 91% to 100% 1 (84.0) 2 (50.0)
Partially collateralised (C): 214 (27.1) 92 (22.8)
– collateral value on C 152 11
Total 848 (54.2) 652 (59.0)
POCI
Not collateralised 39 (23.1) 39 (20.5)
Fully collateralised — — — —
LTV ratio:
– less than 50% — — — —
– 51% to 75% — — — —
– 76% to 90% — — — —
– 91% to 100% — — — —
Partially collateralised (D): 3 (100.0) 5 (40.0)
– collateral value on D 3 4
Total 42 (28.6) 44 (22.7)
At 31 Dec 73,542 (0.8) 69,467 (0.7)
Personal lending purchases such as residential property where the loans are
secured by Crédit Logement Guarantee or by the assets being
Total personal lending
acquired. We also offer consumer lending products such as
We provide a broad range of secured and unsecured personal overdrafts and personal loans which are mainly unsecured.
lending products to meet individual customer needs. Personal
lending includes advances to individual customers for asset
Total personal lending for loans and advances to customers at amortised costs by stage distribution
€m €m €m €m €m €m €m €m €m €m
First lien residential mortgages 2,914 173 196 — 3,283 (1) (7) (75) — (83)
Other personal lending 18,734 634 234 — 19,602 (8) (21) (81) — (110)
– other1 18,469 614 219 — 19,302 (6) (18) (80) — (104)
– credit cards 265 20 15 — 300 (2) (3) (1) — (6)
– second lien residential mortgages — — — — — — — — — —
At 31 Dec 2020 21,648 807 430 — 22,885 (9) (28) (156) — (193)

Total personal lending for loans and other credit-related commitments and financial guarantees2 by stage distribution
€m €m €m €m €m €m €m €m €m €m
Personal lending
At 31 Dec 2020 1,343 32 3 — 1,378 (1) — — (1)

Total personal lending for loans and advances to customers at amortised costs by stage distribution
€m €m €m €m €m €m €m €m €m €m
First lien residential mortgages 3,033 265 196 — 3,494 (1) (6) (76) — (83)
Other personal lending 17,736 847 276 — 18,859 (3) (15) (82) — (100)
– other1 17,440 817 258 — 18,515 (2) (13) (82) — (97)
– credit cards 296 30 18 — 344 (1) (2) — — (3)
– second lien residential mortgages — — — — — — — — — —
At 31 Dec 2019 20,769 1,112 472 — 22,353 (4) (21) (158) — (183)
Total personal lending for loans and other credit-related commitments and financial guarantees2 by stage distribution
€m €m €m €m €m €m €m €m €m €m
Personal lending
At 31 Dec 2019 1,174 41 4 — 1,219 — — — — —
1 Of which EUR 15,678 million guaranteed by Crédit Logement as at 31 December 2019 (Re-presented to include individual entrepreneurs balance
of EUR 2,591 million).
Mortgage lending The tables below show residential mortgage lending including off-
balance sheet loan commitments by level of collateral. They
We offer a wide range of mortgage products designed to meet
provide a quantification of the value of fixed charges we hold over
customer needs, including capital repayment, bridge loans and
borrowers’ specific assets in the event of the borrower failing to
regulated loans. HSBC Continental Europe has specific LTV
meet its contractual obligations.
thresholds and debt-to-income ratios in place for this type of
lending, which are compliant with the overall Group policy, The LTV ratio is calculated as the gross on-balance sheet carrying
strategy and risk appetite. amount of the loan and any off-balance sheet loan commitment at
the balance sheet date divided by the value of collateral.
Collateral and other credit enhancements held
The value of mortgage collateral is updated on a monthly basis
The most common method of mitigating credit risk for personal
using the notary price index (‘INSEE’). In addition professional
lending is to take collateral. For HSBC Continental Europe Retail a
valuations are obtained for high value mortgage loans (>3m)
mortgage over the property is often taken to help secure claims.
annually. Valuations of financial collateral are updated on a daily
Another common form of security is guarantees provided by a
basis for those portfolios held by HSBC Continental Europe and on
third-party company; Crédit Logement (a Société de Financement
annual basis for those held externally. The collateral valuation
regulated by the French Regulator ACPR). Crédit Logement
excludes any cost adjustments linked to obtaining and selling the
guarantees 100 per cent of the amount of the residential real
collateral and, in particular, loans shown as not collateralised or
estate loan in case of default. Loans may also be made against a
partly collateralised may also benefit from other forms of credit
pledge of eligible marketable securities or cash.
mitigants.

Risk
Personal lending: residential mortgage loans including loan commitments by level of collateral
31 Dec 2020 31 Dec 2019
Gross carrying/ ECL Gross carrying/ ECL
nominal amount coverage nominal amount coverage
€m % €m %
Stage 1
Fully collateralised 2,825 — 2,918 —
LTV ratio:
– less than 50% 1,406 — 1,307 —
– 51% to 60% 597 — 622 —
– 61% to 70% 443 — 495 —
– 71% to 80% 266 — 340 —
– 81% to 90% 78 — 105 —
– 91% to 100% 35 — 49 —
Partially collateralised (A): 89 — 115 —
LTV ratio:
– 101% to 110% 23 — 32 —
– 111% to 120% 13 — 21 —
– greater than 120% 53 — 62 —
– collateral value on A 84 111
Total 2,914 — 3,033 —
Stage 2
LTV ratio:
– less than 50% 93 (2.2) 123 (0.8)
– 51% to 60% 29 (3.4) 41 (2.4)
– 61% to 70% 22 (4.5) 35 (2.9)
– 71% to 80% 13 (7.7) 37 (2.7)
– 81% to 90% 3 — 10 —
– 91% to 100% 1 — 4 —
Partially collateralised (B): 12 (25.0) 16 (6.3)
LTV ratio:
– 101% to 110% 4 (25.0) 6 (16.7)
– 111% to 120% 3 (33.3) 3 —
– greater than 120% 5 (20.0) 7 —
– collateral value on B 11 15
Total 173 (4.6) 266 (1.9)
Stage 3
LTV ratio:
– less than 50% 50 (24.0) 68 (30.9)
– 51% to 60% 22 (31.8) 20 (20.0)
– 61% to 70% 28 (28.6) 12 (25.0)
– 71% to 80% 14 (42.9) 12 (25.0)
– 81% to 90% 5 (60.0) 5 (20.0)
– 91% to 100% 5 (40.0) 6 (33.3)
Partially collateralised (C): 72 (50.0) 74 (56.8)
LTV ratio:
– 101% to 110% 11 (54.5) 32 (53.1)
– 111% to 120% 9 (66.7) 17 (64.7)
– greater than 120% 52 (46.2) 25 (56.0)
– collateral value on C 39 58
Total 196 (37.8) 197 (38.6)
At 31 Dec 3,283 (2.5) 3,496 (2.3)
Counterparty Credit Risk Apart from that, a small portion of OTC products, the most
complex ones, shall remain outside of the scope because of
Counterparty Credit Risk exposure modelling issues. The Mark-to-Market Method is then used.
Counterparty credit risk (‘CCR’) means the risk that the Framework/Limits and Monitoring
counterparty to a transaction could default before the final
settlement of the transaction's cash flows. CCR management in HSBC Continental Europe is performed
through different levels:
The Calculation of the Counterparty Credit Risk
Exposure • Credit authority is held by Wholesale Credit Risk (‘WCR’) which
is part of the Wholesale Credit and Market Risk (‘WMR’) sub-
HSBC Continental Europe applies the Internal Model Method function, within the Risk function, either at local level or
(‘IMM’) of CRR Article 283 to determine the CCR exposures for regional level or even Group level.
OTC transactions.
SFTs are all excluded from the IMM, capital requirements for those
products shall remain under the Title II chapter 4 method as
allowed by CRR article 111(2).
Exchange Traded Derivatives (‘ETDs’) are also all excluded, the
Mark-to-Market Method of CRR Article 274 is then used.

• Credit exposure monitoring is performed by Traded Credit Risk Cat A facilities include on-balance sheet assets such as loans or
(‘TCR’), inside Traded Risk which is part of the WMR sub- lines of credit, as well as bond investments and trading lines. They
function. TCR is split into two teams: Traded Credit Risk may be either funded (loans, money market advances, bond
Management (‘TCRM’) and Traded Credit Risk Control (‘TCRC’). trading) or unfunded such as guarantees and underwriting limits.
CCR exposures are monitored intraday at close of business by the Cat A limits are set according to maturity bands.
TCR team. • Category B (‘Cat B') limits
TCRC is responsible for capturing the exceptions in CCR systems Cat B limits cover key counterparty credit exposures arising from
and providing the first level of analysis. Any new breach is off-balance sheet products and are used for the monitoring of the
escalated to the TCRM who performs the second level analysis PFE (Potential Future Exposure). Usage under Cat B represents the
and escalates any unauthorised breach to the Relationship cost of replacement of the OTC contracts. In most instances, Cat B
Manager, Front Office, Credit Officer and Senior Management. limits are set at entity level (known as the parent level) according
Main CCR limits/exposure movements are reported monthly in the to maturity bands. For Funds, risk is controlled at both an umbrella
GBM Risk Management Meeting. fund and individual fund level. Some complex corporates are
mainly controlled at entity level but may have shared limits under
Unauthorised breaches escalated to the Local or Regional head of
the total relationship.
TCR are reported for Business Committee (‘BCC’)/Key Indicators
(‘KRI’) in accordance with the Group policy. • Loan Look-Alike (‘LLA') limits
Credit authority for CCR LLA exposure is a parallel measure used to complement Cat B
exposure measurement for a subset of exposures. The exposure
HSBC Continental Europe WCR has a delegated approval authority
measure is used for trades with characteristics analogous to a
for Corporates, funds, Insurers and Asset Managers. Depending
bank borrowing facility but for which exposure is primarily being
on the level of the credit limit, credit approval might require
monitored under a Cat B facility. Exposure is measured as the
concurrence from HSBC Bank plc WCMR and Group WCMR if
amount financed to the counterparty.
above HSBC Continental Europe delegated approval authority.
• Category S (‘Cat S’) limits
Sovereigns, Intra-Group and Banks limits require HSBC Bank plc/
Group WCR concurrence whatever the amount of the limit. Cat S limits cover the risk that counterparties will fail to meet their
delivery obligations, either through payment systems ('PSL'), or
HSBC Continental Europe TCRM, within HSBC Continental Europe
through settlement processes for treasury and securities
Traded Risk, has no delegated credit approval authority.
transactions (‘TSL'). Where possible and where systems allow, to
All credit limits are reviewed at least once a year with: mitigate settlement risk, settlement are made DVP through
• Traded risk portfolio and market environment analysis and settlement service providers such as Euroclear or CLS.
recommendation performed by TCR. • Fluctuation Risk (‘FLU’) limits
• Risk profile assessment (internal rating), risk appetite update Commodity and cash securities trading give rise to counterparty
with limits validation performed by HSBC Continental Europe credit exposure due to the potential price fluctuation in the pre-
WCR (HSBC Bank plc WCR and Group WCR if required). settlement period between undertaking of the transaction and
At the request of the local Relationship Manager and potentially settlement of the contract. This is a standard, albeit typically very
the Global Relationship Manager, HSBC Continental Europe TCRM short-dated, risk of a market price-contingent replacement cost
might recommend credit limit application to the relevant credit whereby a counterparty defaults and is hence unable to honour its
authority, in the context of Global Annual Review and for specific obligations. The FLU process is used by TCR to monitor this risk.
limit requests. • Intra-Group limits
TCRM’s recommendations highlight the main risk drivers and is The processes for recording the limit for, and monitoring of, Intra-
based on the in depth analysis of the existing portfolio which Group exposures are the same as for third party bank exposures.
includies views on contingent market risk and stress exposure
and potentially include proposals to reduce the portfolio risk or
B) Portfolio-level limits
mitigate proposed transaction. TCR has established a number of portfolio-level limits to monitor
risk at an aggregate level. These are formalised through a mandate
Credit limit set up for CCR management
shared with the Trading Heads of Global Banking & Markets
Two groups of limits are used at TCR level in the management of (‘GBM’) and Balance Sheet Management (‘BSM’), subject to
CCR: annual review and ongoing monitoring routines.
• Counterparty-level limits; The traded credit metrics covered by this mandate are:
• Portfolio-level traded credit risk limits. • MtM limits
A) Counterparty-level limits MtM exposure is the sum of positive MtM across all
• Group Credit Risk Capacity (‘GCRC’) counterparties.
HSBC’s aggregated credit appetite to the client is reflected in the • Current Exposure (‘CE’) limits
GCRC. The GCRC is set during the Global Annual Review (‘GAR’) CE is the sum of positive MtM net of collateral across all
process. It is comprised of two elements, (i) limits (Cat A, Cat B, counterparties.
Cat S) which are already approved or proposed for approval in the
CARM application; and (ii) the Unallocated Appetite (‘UA’) which
represents an ‘Indication of Appetite’ for pipeline transactions or
generic headroom that supports the Global Relationship Banker’s
(‘GRB’) business development strategy over the next 12 months.
• Category A (‘Cat A') limits
Cat A facilities are those for which a credit limit is typically
recorded at the full notional amount of the facility, the bank being
actually or potentially at risk for 100 per cent of the committed
amount.

Risk
• Specific Wrong Way Risk (‘SWWR’) limits That adjustment reflects the current market value of the credit risk
of the counterparty to the institution, but does not reflect the
SWWR transactions are self-referencing transactions where future
current market value of the credit risk of the institution to the
exposure is expected to be high when the counterparty’s
counterparty.
probability of default is also high i.e. future exposure is positively
and directly correlated with the counterparty probability of default Institutions that hold internal model method approvals both for the
and this relationship is driven by transaction(s) with the specific risk and the counterparty credit risk can calculate the CVA
counterparty. capital charge under the advanced approach otherwise a standard
approach have to be used.
• General Wrong Way Risk (‘GWWR’) limits
HSBC Continental Europe applies the following methods to
GWWR occurs when a counterparty's probability of default is
determine the CVA capital charge:
positively correlated with moves in general market risk factors
such as foreign exchange rates. For example, the default • The advanced approach on all eligible OTC derivatives.
probability of a counterparty may increase with a depreciation of • The standardised approach on all other transactions that are
the domestic currency if the depreciation affects their business not in the IMM scope.
model. Trading OTC contracts with such a counterparty which
become more valuable to the bank as the currency depreciates Credit Valuation Adjustment (‘CVA’) hedges
represents GWWR. The responsibility for hedging and/or mitigating credit exposure
• Default Fund (‘DF’) limits lies within the remit of the Counterparty Exposure Management
(‘CEM’) Desk. Since 2018, this desk trades CDS hedges which are
DF limits covers HSBC’s funded and unfunded DF contribution to
eligible for the mitigation of the CVA own funds requirements.
CCPs.
Only single name or index CDS' are used as hedging instruments.
• Initial Margin (‘IM’) limits The monitoring of eligible hedges is made on a daily basis by
IM limits covers HSBC’s IM contribution to CCPs. Traded Risk.
• Stressed Mutualisation Loss limits Wrong-Way Risk

In addition to the usual counterparty credit risk exposure, HSBC The standard methodology of measuring risk exposure assumes
also has additional exposure to CCPs via their rights to mutualise there is no correlation between a counterparty’s creditworthiness
losses among Clearing Members. and the replacement cost of transactions undertaken with that
counterparty. Wrong-Way Risk occurs when exposure is materially
In the context of monitoring risk through stress test, a stressed adversely correlated with the credit quality of the counterparty and
mutualisation loss is computed to assess the potential loss arising arises when default risk and credit exposure increase strongly
during a stress period from Clearing activities not measured together.
through the stressed current exposure.
HSBC distinguishes two types of Wrong-Way Risk:
Mitigating actions for counterparty credit risk
• General Wrong-Way Risk
In order to reduce its counterparty credit risk, HSBC Continental
Europe has signed with the majority of its counterparties, close- • Specific Wrong-Way Risk
out netting master agreements with a Credit Support Annexes HSBC Continental Europe Traded Risk team uses a range of limits
(‘CSA’s). These ensure the regular revaluation of the collateral and procedures to monitor and control WWR on a daily basis,
required and the payment of any corresponding margin calls. including requiring deal pre-approvals before undertaking WWR
They also permit, in case of a counterparty default, to apply close transactions outside pre-agreed guidelines.
out netting across all outstanding transactions for all amounts due Counterparty Risk and Covid-19 impact
or to be paid. The collateral types permitted by HSBC Continental
In the early stage of Covid-19 pandemic, a review was performed
Europe are primarily cash or high quality and highly liquid assets.
on many sectors, concentrating notably on bank, Energy/Oil,
The management of the collateral is subject to close monitoring. Airline industries along with an Italy country review. Market risk
Specific controls exist to ensure the correct settlement/margin stress testing was also a management tool used to review the
calls are made. HSBC Continental Europe portfolio. The risk appetite has been
Credit Valuation Adjustment redefined.
Credit Valuation Adjustment (‘CVA’) means an adjustment to the During the development of Covid-19 crisis, vulnerable clients,
mid-market valuation of the portfolio of transactions with a sectors and countries have been defined. The risk management
counterparty. strongly focused on the collateral disputes and the failed
payments. All noteworthy trades especially concerning the
vulnerable sectors were escalated.

Counterparty risk – by type of exposure and by product
2020 2019
RWAs Capital required RWAs Capital required
€m €m €m €m
By exposure class
IRB advanced approach 769 62 955 76
– Central governments and central banks — — 75 6
– Institutions 769 62 880 70
– Corporates — — — —
IRB foundation approach 1,730 138 1,478 118
– Corporates 1,730 138 1,478 118
Standardised approach 712 57 506 40
– Central governments and central banks 7 1 6 —
– Regional government or local authorities — — — —
– Institutions 641 51 411 33
– Corporates 64 5 89 7
CVA advanced 307 25 571 46
CVA standardised 86 7 314 25
CCP standardised 132 11 159 13
By product
– Derivatives 3,012 241 2,710 217
– Securities financing transactions 265 21 322 26
– Others — — 1 —
– CVA advanced 307 25 571 46
– CVA Standardised 86 7 314 25
– CCP default funds 65 5 65 5
At 31 Dec 3,736 299 3,983 319
Treasury risk
Capital
Key capital numbers
At
31 Dec
CRD IV
2020 2019
€m €m
Capital resources
CET1 5,818 6,464
Tier 1 Capital 6,568 7,214
Total Capital 7,974 8,120
Risk weighted assets
Credit Risk1 36,431 36,426
Counterparty Credit Risk 3,736 3,982
Market Risk 2,663 4,494
Operational Risk 3,283 3,149
Basel 1 floor impact —
Total risk weighted assets 46,113 48,051
Capital Ratios (%)
Common equity tier 1 12.6% 13.5%
Total tier 1 14.2% 15.0%
Total capital 17.3% 16.9%
1 ‘Credit Risk’, here and in all tables where the term is used, excludes counterparty credit risk.
The policy on capital management is underpinned by the HSBC

Approach and policy Group capital management framework, which enables a
HSBC Continental Europe’s objective in managing the Bank's consistent management of the capital.
capital is to maintain appropriate levels of capital to support its Each HSBC Continental Europe’s subsidiary subject to individual
business strategy and meet regulatory requirements at all times. regulatory capital requirements manages its own capital to
HSBC Continental Europe manages its capital to ensure that it support its planned business growth and meet its local regulatory
exceeds current and expected future requirements. Throughout requirements.
2020, HSBC Continental Europe complied with the European
Central Bank (‘ECB’) regulatory capital adequacy requirements. To Capital Measurement
achieve this, HSBC Continental Europe manages its capital within
HSBC Continental Europe is supervised by the Joint Supervisory
the context of an annual capital plan, which is approved by the
Team of the ECB and the ACPR. The Joint Supervisory Team sets
Board and which determines the appropriate amount and mix of
HSBC Continental Europe’s capital requirements, in line with the
capital.
regulatory framework.

Risk
The Basel III framework, like Basel II, is structured around three Holdings of Tier 2 capital of financial sector entities are deducted.
‘pillars’: minimum capital requirements, supervisory review
process and market discipline. Basel III also introduces a number Leverage Ratio
of capital buffers, including the Capital Conservation Buffer
(‘CCB’), Countercyclical Buffer (‘CCyB’), and other systemic buffers The leverage ratio was introduced into the Basel III framework as a
such as the Globally/Other Systematically Important Institutions non-risk-based metric, to supplement risk-based capital
(‘G-SII’/’O-SII’) buffer. CRR and CRD legislations implemented requirements. It aims to constrain the build-up of excessive
Basel III in the EU. leverage in the banking sector, introducing additional safeguards
against model risk and measurement errors. The Basel III leverage
The capital management framework defines regulatory capital and ratio is a volume-based measure calculated as Tier 1 capital
economic capital as the two primary measures for the divided by total on- and weighted off-balance sheet exposures,
management and control of capital. further netting possibilities on market instruments and certain
Capital measures: exposures exclusions including a temporary exclusion until
27 June 2021 of central bank exposures as supervisory authorities
• Regulatory capital is the capital which HSBC Continental
publicly declared exceptional circumstances. This ratio has been
Europe is required to hold in accordance with the rules
implemented in the EU for reporting and disclosure purposes but,
established by regulators; and
at this stage, has not been set as a binding requirement.
• Economic capital is the internally calculated capital requirement
to support risks to which HSBC Continental Europe is exposed Pillar 3 market discipline
and forms a core part of the internal capital adequacy
assessment process. Pillar 3 of the Basel regulatory framework is related to market
Regulatory Requirements discipline and aims to make financial services firms more
transparent by requiring publication of wide-ranging information
As a result of the annual Supervisory Review and Evaluation on their risks, capital and management. HSBC Continental
Process (‘SREP’), the European Central Bank (‘ECB’) has set to Europe’s Pillar 3 Disclosure at 31 December 2020 is published on
3.00 per cent the minimum capital requirement under Pillar 2 HSBC’s website, www.hsbc.com, under ‘Investors’ section.
(‘P2R’) for HSBC Continental Europe for the year 2021. Following
the ECB decision on 8 April 2020 amending the composition of the Minimum Requirement for own funds and
Pillar 2 additional own funds requirement in the Covid-19 context, Eligible Liabilities (‘MREL’) – Total Loss
the P2R shall be held in the form of 56.25 per cent of CET1 and
75 per cent of Tier 1, as a minimum.
Absorbing Capacity (‘TLAC’)
HSBC Continental Europe will be required to meet on a HSBC Continental Europe became subject to MREL requirements
consolidated basis a minimum total capital ratio of at least 13.52 for the first time on 30 March 2020 following reception of decision
per cent, from 1 January 2021. The Overall capital requirement from the Autorité de Contrôle Prudentiel et de Résolution (’ACPR’).
(‘OCR’) is composed of: the 8 per cent minimum capital in respect This decision applies until a new decision is received and imposes
of article 92.1 of the 575/2013 Regulation, the 2.50 per cent for the an MREL requirement as a percentage of the Total Liabilities and
Conservation buffer in respect of article 129 of the 2013/36 Own Funds (‘TLOF’).
Directive, the 3 per cent Pillar 2 requirement mentioned above and Following the end of the UK withdrawal from the European Union
a countercyclical buffer of 0.02 percent based on the estimated transition period, HSBC Continental Europe becomes from
current levels. 1 January 2021 a material subsidiary (CRR article 4.1.135) of a
The requirement in respect of Common equity tier 1 is 8.71 per third-country G-SII and therefore bound by new internal TLAC
cent, excluding Pillar 2 guidance (‘P2G’). requirements (CRR article 92b). In order to meet the internal TLAC
requirements, HSBC Continental Europe issued internal TLAC
Regulatory Capital eligible Senior Non-Preferred bonds in December 2020.
HSBC Continental Europe’s capital base is divided into three main
categories, namely Common Equity Tier 1, Additional Tier 1 and
Tier 2, depending on their characteristics.
Common Equity Tier 1 (‘CET 1’) capital is the highest quality form
of capital, comprising shareholders’ equity and related non-
controlling interests (subject to limits). Under CRD/CRR various
capital deductions and regulatory adjustments are made against
these items – these include deductions for goodwill and intangible
assets, deferred tax assets that rely on future profitability as well
as negative amounts resulting from the calculation of expected
loss amounts under IRB.
Additional Tier 1 capital comprises eligible non-common equity
capital securities such as Additional Tier 1 eligible subordinated
debt as per CRR, and any related share premium. Holdings of
additional Tier 1 securities of financial sector entities are deducted
from additional Tier 1 capital.
Tier 2 capital comprises eligible subordinated debt and any related
share premiums.

Overview of changes of own funds ratios
Own funds disclosure
At 31 Dec 2020 At 31 Dec 2019
Ref* €m €m
Common equity tier 1 (‘CET1’) capital: instruments and reserves
1 Capital instruments and the related share premium accounts 2,628 2,628
– ordinary shares 2,137 2,137
2 Retained earnings 3,482 3,546
3 Accumulated other comprehensive income (and other reserves) 1,586 1,545
5 Transitional adjustments due to additional minority interests — —
5a Independently reviewed interim net profits net of any foreseeable charge or dividend (1,052) (63)
6 Common equity tier 1 capital before regulatory adjustments 6,645 7,656
Common equity tier 1 capital: regulatory adjustments
7 Additional value adjustments (174) (214)
8 Intangible assets (net of related deferred tax liability) (85) (376)
10 Deferred tax assets that rely on future profitability and do not arise from temporary differences net of associated tax
liabilities — (29)
11 Fair value reserves related to gains or losses on cash flow hedges (69) (34)
12 Negative amounts resulting from the calculation of expected loss amounts (39) (117)
14 Gains or losses on liabilities at fair value resulting from changes in own credit standing 81 84
19 CET1 instruments of financial sector entities where the institution has a significant investment (539) (508)
22 Amount exceeding the 15% threshold — —
28 Total regulatory adjustments to common equity tier 1 (827) (1,193)
29 Common equity tier 1 capital 5,818 6,464
Additional tier 1 (‘AT1’) capital: instruments
30 Capital instruments and the related share premium accounts 750 750
36 Additional tier 1 capital before regulatory adjustments 750 750
Additional tier 1 capital: regulatory adjustments
41b Residual amounts deducted from AT1 capital with regard to deduction from tier 2 (‘T2’) capital during the transitional
period — —
43 Total regulatory adjustments to additional tier 1 capital — —
44 Additional tier 1 capital 750 750
45 Tier 1 capital (T1 = CET1 + AT1) 6,568 7,214
Tier 2 capital: instruments and provisions
46 Capital instruments and the related share premium accounts 1,876 1,376
51 Tier 2 capital before regulatory adjustments 1,876 1,376
Tier 2 capital: regulatory adjustments
55 Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities
where the institution has a significant investment in those entities (net of eligible short positions) (470) (470)
57 Total regulatory adjustments to tier 2 capital (470) (470)
58 Tier 2 capital 1,406 906
59 Total capital (TC = T1 + T2) 7,974 8,120
60 Total risk-weighted assets 46,113 48,051
Capital ratios and buffers
61 Common equity tier 1 12.6% 13.5%
62 Tier 1 14.2% 15.0%
63 Total capital 17.3% 16.9%
64 Institution specific buffer requirement 2.5% 2.8%
65 – capital conservation buffer requirement 2.5% 2.5%
66 – countercyclical buffer requirement 0.02% 0.3%
68 Common equity tier 1 available to meet buffers1 8.1% 9.0%
Amounts below the threshold for deduction (before risk weighting)
72 Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant
investment in those entities (amount below 10% threshold and net of eligible short positions) 124 168
73 Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution
has a significant investment in those entities (amount below 10% threshold and net of eligible short positions) 623 680
75 Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability) 125 201
* The references identify the lines prescribed in the EBA template that are applicable and where there is a value.
1 Common equity tier 1 available to meet buffers after Pillar 1 capital requirements.
The main movements of the own funds are detailed on the Note 1 ‘significant events during the year’ of the HSBC Continental Europe's
Universal Registration Document 2020.

Risk
RWAs by risks types

Risk Weighted Assets Capital required1
2020 2019 2020 2019
€m €m €m €m
Credit risk2 36,431 36,426 2,914 2,914
Counterparty credit risk 3,736 3,982 298 319
Market risk 2,663 4,494 213 359
Operational risk 3,283 3,149 263 252
At 31 Dec 46,113 48,051 3,688 3,844
1 ‘Capital required’, here and in all tables where the term is used, represents the Pillar 1 capital charge at 8 per cent of RWAs.
2 ‘Credit Risk’, here and in all tables where the term is used, excludes counterparty credit risk.
RWA movement by global business by key driver

Credit risk, counterparty credit risk and operationnal risk
WPB CMB GB&M Corporate Centre Market risk Total RWA
€m €m €m €m €m €m
RWAs at 1 January 2020 7,137 17,783 17,679 959 4,493 48,051
Asset size (945) (1,710) (1,288) 71 (1,593) (5,465)
Asset quality — 199 475 (24) 650
Model updates 1,499 (38) (211) (3) — 1,247
Methodology and policy 1,748 120 244 (244) (238) 1,630
Foreign exchange movement — — — — — —
Total RWA movement 2,302 (1,429) (780) (200) (1,831) (1,938)
RWAs at 31 Dec 2020 9,439 16,354 16,899 759 2,662 46,113
RWA decreased by EUR 1,938 millions, mainly driven by business activity decrease in CMB and GBM and partially offset by model
updates and methodology changes on WPB business.
Leverage Ratio at 31 December

At
31 Dec
2020 2019
€m €m
Tier 1 Capital 6,568 7,214
Leverage Exposure 154,928 192,380
Leverage ratio % 4.2% 3.7%
Tier 1 capital reduced by EUR 646 millions to EUR 6,568 millions during 2020. The Leverage exposure decreased by EUR 37,4 billions to
EUR 154,9 billions.
Liquidity and funding risk management (‘ILAAP’) used to validate risk tolerance and set risk appetite.
Liquidity and funding risk management framework The HSBC Group’s operating entities are predominantly defined on
a country basis to reflect the local management of liquidity and
Liquidity risk is the risk that HSBC Continental Europe does not funding. In this context, liquidity and funding risk is managed by
have sufficient financial resources to meet its obligations as they HSBC Continental Europe on a standalone basis with no implicit
fall due, or will have to access such resources at excessive cost. reliance assumed on any other Group entity unless pre-committed.
The risk arises from mismatches in the timing of cash flows or
when the funding needed for illiquid asset positions cannot be HSBC Continental Europe’s policy is it should be self-sufficient in
obtained at the expected terms as and when required. funding its own activities.
HSBC Group has an internal liquidity and funding risk The Liquidity coverage ratio (‘LCR’) and Net stable funding ratio
management framework which aims to allow it to withstand very (‘NSFR’) are key components of the Liquidity and Funding Risk
severe liquidity stresses. It is designed to be adaptable to Framework.
changing business models, markets and regulations. The Liquidity and funding risk profile
management of liquidity and funding is undertaken in France in
compliance with the Group’s framework and with practices and Liquidity coverage ratio
limits set through by the RMM and approved by the Board. The Liquidity Coverage Ratio (‘LCR’) aims to ensure that a bank
The elements of this framework are underpinned by a robust has sufficient unencumbered high-quality liquid assets (‘HQLA’) to
governance framework, the two major elements of which are: meet its liquidity needs in a 30-calendar-day liquidity stress
scenario. HQLA consists of cash or assets that can be converted
• Asset, liability and capital management committees (‘ALCOs’); into cash very quickly with little or no loss of value in markets.
and
• Annual individual liquidity adequacy assessment process

At 31 December 2020, HSBC Continental Europe remained within This reflects the stock of unencumbered liquid assets at the
the LCR risk limits established by the Board and applicable under reporting date, using the regulatory definition of liquid assets.
the Group’s liquidity and funding risk framework.
Liquid assets
The following table displays the LCR levels for HSBC Continental
Estimated liquidity value at 31 Dec
Europe consolidated on an European Commission LCR Delegated
Regulation basis. 2020 2019
€m €m
Liquidity coverage ratio Level 1 38,968 38,176
At 31 Dec
Level 2a 297 880
2020 2019
Level 2b — 1
% % Level 1 liquid assets include HSBC Continental Europe balances with its
HSBC Continental Europe 143 152 central bank (excluding non-withdrawable reserves) and notes and
coins.
While HQLA increased due to deposit growth, the LCR for HSBC
Continental Europe declined, reflecting a reassessment of potential Liquidity stress testing
LCR outflows, particularly with respect to committed facilities. HSBC Continental Europe undertakes liquidity stress testing to
Net stable funding ratio confirm that its risk appetite is correct, to validate that it can
continue to operate under various stress scenarios and to confirm
The Net Stable Funding Ratio (‘NSFR’) requires institutions to
that the stress assumptions within the LCR scenario are
maintain sufficient stable funding relative to required stable
appropriate and conservative enough for the group's business.
funding and reflects a bank’s long-term funding profile (funding
HSBC Continental Europe also conducts reverse stress testing
with a term of more than a year). It is designed to complement the
with the specific aim of reviewing the remoteness of the scenarios
LCR over the longer term.
that would lead the bank to exhaust its liquidity resources. If the
The HSBC Continental Europe calibration of NSFR will be based on scenarios are not deemed remote enough then corrective action is
the CRR II (Regulation EU 2019/876) which will enter into force in taken.
June 2021 regarding the NSFR.
Stress testing scenarios are run to test the quality of liquidity
On the basis of the Basel Committee’s BCBS 295 interpretation, resources under stresses of varying durations and nature. The
the NSFR is assessed at the level of 130 per cent at the same ALCO approves the underlying assumptions and reviews results.
reference date. These results are also presented through the Internal Liquidity
These calculations require various interpretations of the texts, and Adequacy Assessment Process (‘ILAAP’) to the Board.
therefore HSBC Continental Europe’s NSFR may not be directly In addition to these stress-testing exercises, HSBC Continental
comparable with the ratios of other institutions. Europe produces an internal liquidity stress metric that is largely
At 31 December 2020, HSBC Continental Europe was within the involved in the Bank’s liquidity operational management.
NSFR risk limits established by the Board and applicable under the Finally, HSBC Continental Europe performs Fire Drill exercises to
liquidity and funding risk framework. test the knowledge and right application of its Contingency
The table below displays the NSFR levels for HSBC Continental Funding plan across the Bank.
Europe consolidated on its interpretation of CRR II. Sources of funding
Net stable funding ratio Our primary sources of funding are customer current accounts,
repo and wholesale issuances and capital instruments.
At 31 Dec
2020 2019 The following ‘Funding sources and uses’ table provide a
% % consolidated view of how HSBC Continental Europe’ balance
HSBC Continental Europe 136 127 sheet is funded, and should be read in light of the liquidity and
funding risk framework.
On the basis of the Basel Committee’s BCBS 295 interpretation, the The following table analyses HSBC Continental Europe’s
NSFR is assessed at the level of 130 per cent at 31 December 2020. consolidated balance sheet according to the assets that primarily
Depositor concentration and term funding maturity arise from operating activities and the sources of funding primarily
concentration supporting these activities. Assets and liabilities that do not arise
from operating activities are presented as a net balancing source
The LCR and NSFR metrics assume a stressed outflow based on a or deployment of funds.
portfolio of depositors within each deposit segment. The validity of
these assumptions is undermined if the underlying depositors do Wholesale funding markets are accessed by issuing senior debt
not represent a large enough portfolio so that a depositor securities (publicly and privately) and borrowing from secured repo
concentration exists. markets against high-quality collateral, to align asset and liability
maturities, currency mismatches and to maintain a presence in
In addition to this, HSBC Continental Europe is exposed to term local wholesale markets.
re-financing concentration risk if the current maturity profile
results in future maturities being overly concentrated in any The main financing transactions in 2020 are presented in the
defined period. Significant events during the year section on page 182.
These risks are managed by specific and dedicated ALCO limits.

Liquid assets
The table below shows the unweighted liquidity value of assets
categorised as liquid, which is used for the purposes of calculating
the LCR metric.

Risk
Funding sources and uses

2020 2019 2020 2019
€m €m €m €m
Sources Uses
Customer accounts 61,393 57,550 Loans and advances to customers 56,225 56,956
Deposits by banks 17,204 12,113 Loans and advances to banks 6,781 6,798
Repurchase agreements – non-trading 10,984 20,213 Reverse repurchase agreements – non-trading 21,522 45,973
Debt securities in issue 3,605 9,782 Cash collateral, margin and settlement accounts 18,388 13,786
Cash collateral, margin and settlement accounts 16,205 12,865 Assets held for sale 3 3
Liabilities of disposal groups held for sale — — Trading assets 12,954 14,837
Subordinated liabilities 1,876 1,376 – reverse repos 20 1
Financial liabilities designated at fair value 16,892 18,953 – stock borrowing 7 —
Liabilities under insurance contracts 23,228 23,292 – other trading assets 12,927 14,836
Trading liabilities 17,828 23,262 Financial investments 19,167 16,987
– repos — — Cash and balances with central banks 29,508 19,463
Net deployment in other balance sheet assets and
– stock lending — — liabilities 12,126 13,074
– other trading liabilities 17,828 23,262
At 31 Dec 176,674 187,877 At 31 Dec 176,674 187,877
Contingent liquidity risk arising from committed lending scenario any additional outflow generated by the increased
facilities utilisation of these committed facilities will not give rise to liquidity
risk for HSBC Continental Europe.
HSBC Continental Europe provides committed facilities such as
standby facilities and committed backstop lines to its customers. The table below shows the HSBC Continental Europe’s contractual
All of the undrawn commitments provided to conduits or external exposures as at 31 December. The increase of EUR 7.8 billion is
customers are accounted for in the LCR and NSFR in line with the mainly due to the pass-on to the real economy of the market and
applicable regulations. This, along with the live monitoring of the Central Bank’s funding in the 2020 challenged European economic
concentration over these instruments ensures that under a stress situation.
HSBC Continental Europe's contractual exposures as at 31 Dec monitored under the contingent liquidity risk structure
At
31 Dec 2020 31 Dec 2019
€bn €bn
Commitments to customers
– Corporates 42,332 37,311
– Retail and SME 1,709 1,871
– Financials 4,174 3,069
– Others 4,352 2,467
Commitments to customers
– 5 largest1 4,308 3,689
1 Sum of the undrawn balance of the five largest facilities excluding conduits.
Asset encumbrance and collateral management The objective of this disclosure is to facilitate an understanding
of instantly available and unrestricted assets that could be used
An asset is defined as encumbered if it has been pledged as
to support potential future funding and collateral needs. The
collateral against an existing liability and, as a result, is no
disclosure is not designed to identify assets which would be
longer available to the bank to secure funding, satisfy collateral
available to meet the claims of creditors or to predict assets that
needs or be sold to reduce the funding requirement. Collateral is
would be available to creditors in the event of a resolution or
managed on an HSBC Continental Europe basis consistent with
bankruptcy.
the approach to managing liquidity and funding. Available loan
collateral held in HSBC Continental Europe is managed as a
single consistent collateral pool from which HSBC Continental
Europe will seek to optimise the use of the available collateral.

Summary of assets available to support potential future funding and collateral needs (on- and off-balance sheet)
2020 2019
€m €m
Total on balance sheet assets as at 31 Dec 237,099 237,680
Less:
– reverse repo/stock borrowing receivables and derivatives assets (77,997) (91,698)
– other assets that cannot be pledged as collateral (31,496) (32,552)
Total on-balance sheet assets that can support funding and collateral needs as at 31 Dec 127,606 113,430
Add: off-balance sheet assets
– fair value of collateral received in relation to reverse repo/stock borrowing/derivatives that is available to sell or repledge 52,980 100,359
Total assets that can support funding and collateral needs as at 31 Dec 180,586 213,789
Less:
– on-balance sheet assets pledged (45,355) (31,938)
– re-pledging of off-balance sheet collateral received in relation to reverse repo/stock borrowing/derivatives (47,999) (73,499)
Total assets available to support funding and collateral needs as at 31 Dec 87,232 108,352
Market risk HSBC Continental Europe market risk governance

Market risk is the risk that the market rates and prices on which Locally, the Chief Risk Officer confers to WMR France the
the Group has taken views – interest rates, exchange rates, equity management of the market risks limits for HSBC Continental
prices etc – will move adversely relative to positions taken causing Europe and the business lines it operates. On top of their
losses to the Group. submission to Group WMR through Traded Risk Europe, the risks
mandates are also approved by the Head of WMR France within
All open market risk must be subject to limits. A governance
the risk appetite limits approved by the HSBC Continental Europe
process ensures that this rule is respected in all the HSBC Group
Board. These are subject to a formal review at least annually by
entities. These limits are defined in terms of lists of authorised
the HSBC Continental Europe Market Risk Forum.
instruments, underlying assets, markets and maturities, Value at
Risk (‘VaR’) limits, sensitivity levels, maximum losses and stress The HSBC Continental Europe Market Risk Forum (‘MRF’)
tests. They are revised at least once a year in the annual limit Its role is to oversee all market risk aspects, to ensure that
review process and are presented in the Market Risk Forum. appropriate controls are in place and to approve the main rules
The process for allocating market risk limits and the permanent included in the supervision system.
market risk control system as a whole involve a number of people The MRF is chaired by the Head of WMR France and is held on a
from the HSBC Group and HSBC Continental Europe, as well as monthly basis. It includes the heads of the businesses concerned
specific committees, the roles of which are set out below. by these risks and the main heads of the associated control
Market Risk governance functions: the Head of WMR France, the Head of Traded Risk
France, the Head of Independent Model Review (‘IMR’) and the
At the HSBC Group level, market risk is managed and controlled
Head of Product Control.
through limits approved by the Risk Management Meeting for
HSBC Holdings plc. These limits are allocated across business The HSBC Continental Europe Market Risk Forum reviews risks
lines and to the Group’s legal entities. Each major operating entity, and results indicators, analyses any significant events observed
such as HSBC Continental Europe, has an independent market risk during the previous month, including any breaches of significant
management and control sub-function which is responsible for limits, any requests for permanent or temporary limits.
measuring market risk exposures, monitoring and reporting these The Risk Management Meeting (‘RMM’)
exposures against the prescribed limits on a daily basis.
The the main areas of attention of the Market Risk Forum are
Group Wholesale credit and Market Risk (Group ‘WMR’) reported to the HSBC Continental Europe RMM on a monthly
In the HSBC Group, market risk supervision is carried out within basis.
the Wholesale credit and Market Risk department which is a sub- Wholesale Credit and Market Risk (‘WMR’) France
function of the Group Risk function. The Head of Group WMR
reports to the HSBC Group Chief Risk Officer. This department is WMR France is responsible for the wholesale credit risk and the
in charge, via its Traded Risk entity, of subsequently allocating risk market risk of the French balance sheet. The Head of Wholesale
limits to the various HSBC Group entities and business lines, via Credit and Market Risk France chairs the HSBC Continental
the Site Entity Room Mandates, once these have been validated by Europe Market Risk Forum. He is also a member of the HSBC
the appropriate HSBC Group governance body. Similarly, this Continental Europe Balance Sheet ALCO.
department is in charge of monitoring exposure at the HSBC Traded Risk France
Group level and of granting temporary limits. The Wholesale and
Market Risk department has a European dimension and a local Within WMR Risk, Traded Risk designs, develops and implements
dimension in certain countries including France. the market risk management policy. This in particular covers:
Europe Traded Risk • permanent monitoring of market risks;
The Head of Traded Risk Europe, who reports directly to the Global • development and implementation of procedures complying
Head of Traded Risk and to the Head WMR Europe, supervises the with regulatory requirements and with best practices;
mandates review process within his geographic zone of • allocation of market risk limits within HSBC Continental Europe
responsibility. He submits them for review to Group WMR. He is compatible with its strategy and its risk appetite;
also functional head of the Head of Traded Risk France.

Risk
• approval of new products; Independent Model Review

• calculations of market risks and Value at Risk (‘VaR’). Models developed by the front office research team are used for
The Head of Traded Risk France reports hierarchically to the Head managing, valuing and assessing the risks of some derivative
of Wholesale and Market Risk France. The Head of Traded Risk products. These models as well as VaR models are reviewed by an
France is responsible for both Market Risk Management and independent unit of experts, the Independent Model Review
Control (‘MRMaC’) France and Traded Credit France. He is (‘IMR’) previously called Quantitative Risk and Valuation Group
responsible for ensuring the consistency and effectiveness of the (‘QRVG’). Its manager reports at a local level to the Chief Risk
market risk control framework. In general, it is the responsibility of Officer in charge of risks and functionally to the Head of IMR
the Head of Traded Risk France to provide Senior Management Europe .
and HSBC Continental Europe’s Market Risk Forum with Product Control
comments and explanations concerning any significant breaches
Product Control is responsible for daily independent controls over
of max-loss and limits, or any positions he deems useful for Senior
the valuation of the positions. It produces daily and detailed
Management to know about.
explanations of the economical Profit and Loss, and reconciles it at
MRMaC is made up of two teams: the Market Risk Management month-end with the accounting Profit and Loss. It performs
(‘MRM’) and the Market Risk Control (‘MRC’). controls over off-market and off-margin transactions (this task is
Market Risk Management (‘MRM’) being transferred progressively to the Markets Surveillance team)
and is occasionally involved in the resolution of collateral disputes.
Market Risk Management (‘MRM’) defines market risk mandate
limits, deals with breaches of limits and exceptional situations, Definition, implementation and monitoring of Fair Value
monitor and analyses positions, depending on market movements, Adjustments are part of its remit, and it is also involved in the
analyses the appropriateness of risk metrics (sensitivity, VaR, monitoring of the different recommendations issued by IMR in
stress scenarios), defines and prepares a summary analysis of terms of model limitation. Head of Product Control locally reports
market risks for Senior Management, is involved in improving risk to HSBC Continental Europe Chief Finance Officer, and
monitoring procedures and implements new indicators, as functionally to the Head of Product Control for EMEA (Europe,
required by market developments. Middle-East & Africa).
The MRM team prepares the annual limit review jointly with the The HSBC Continental Europe Valuation Committee
business heads and submits it for approval to the Head of WMR The Valuation Committees meet on a monthly basis and features
France, by delegation from the Chief Risk Officer, and to Group representation from Front Office, Product Control, Market Risk
WMR via the Head of Traded Risk Europe. Management and IMR.
Market Risk Control (‘MRC’) It notably reviews and approves of the results of the month-end
The Market Risk Control teams are responsible on a day-to-day IPV and FVA calculation process as well as the prudent valuation
basis for checking adherence to all of the various market risk calculations on a quarterly basis. Approximate bookings where
limits, regardless of the level of the market risk mandate and the systems do not adequately reflect the economics of a transaction
nature of the limit in question. They report any breaches of these are also considered during this meeting.
limits and also any consumption in excess of a warning threshold All fair value adjustment methodologies are reviewed and
set at 80 per cent of the limit. They are responsible for reporting approved by this forum at least annually.
weekly the stress tests. They also carry out the back-testing of the
Market risk in 2020
VaR.
The world has been dramatically hit by the coronavirus sanitary
They also produce and distribute HSBC Continental Europe’s
crisis. The confinement measures stopped the economic activity
consolidated market risk reports for Senior Management and for
abruptly and forced governments and central banks to react
the HSBC Group Consolidation. The team is also responsible for
vigorously to avoid a severe and lasting economic depression.
producing the various periodical summary statements required for
both internal needs (packs for the RMM, Risk Committee, the See also page 92 Risk Factors – Market fluctuations may reduce
Board, annual reports, etc.) and external needs, such as our income or the value of our portfolios.
supervisory authorities. The announcement around vaccination readiness and efficiency
Market Risk Control reports hierarchically to the Head of Traded lead to a new rally on markets at year end.
Risk France. However, sanitary situation was still concerning with the winter
Traded Credit Risk period on Western countries and the lockdown measures still
impacting economy despite less thought than in spring.
Two teams are responsible for the daily monitoring of the
counterparty risk exposures of HSBC Continental Europe. Dedicated Covid-19 stress tests did not exhibit significant potential
market risk losses on Trading portfolios. They show significant
A first one is focusing on the reporting of counterparty risk. It
increase of the Counterparty Credit Risk exposure but
ensures completion of the scope, performs daily controls and
concentrated on collateralized or investment grade counterparties.
produces daily risk report to the second one, the risk managers.
Market risk measures
On top of controlling adherence to the dedicated limits, the Traded
Credit Risk Managers provide detailed and ad hoc analysis to Market Risk monitoring system
senior management, ensure that risk measures are fit-for-purpose
The objective is to manage and control market risk exposures
and runs regular stress tests on the portfolio.
while maintaining a market profile consistent with our risk
Both teams locally report into the Head of Traded Risk France. appetite. HSBC uses a range of tools to monitor and limit market
risk exposures including sensitivity analysis, Value at Risk and
stress testing.

The maximum exposure and risk that HSBC Continental Europe The back-testing process compares the ex-ante calculated VaR
intends to bear are defined by a set of mandates which cover the figures with ex post daily Profit and Loss (‘P&L’) figures. This
most significant limits in terms of: comparison tests the ability of VaR to control the expected P&L
variations and therefore helps assess the quality of the internal
• Value at Risk, overall, total trading, sub-limits of VaR on interest
model. Any shortcomings in the VaR model will particularly come
rates, foreign exchange, equities;
to light if the day’s P&L figures exceed 99 per cent VaR or where
• sensitivity to risk factors including option factors (interest rates, VaR systematically and overwhelmingly exceeds daily P&L figures.
government curve, inflation, volatility, exchange rates), and
The ‘back-testing violation’ exceptions are reported and analysed.
various ‘spread’ factors;
The model is back-tested by taking 99 per cent, one-day VaR
• Exposure-At-Default (‘EAD’) per bond issuers;
figures and comparing them with daily results determined from
• maximum daily and monthly losses, referred to as ‘max loss’; changes in market prices assuming constant positions. Back-
• authorised instruments. testing is done daily. Its results are reviewed monthly in a special
HSBC Group committee and in the MRF and notified quarterly to
Each business mandate encompasses several business units the regulator of HSBC Continental Europe.
called Volcker and FBL (‘French Banking Law’) desks which in turn
receive a set of limits from MRM after submission of a Trading Risk not in VaR framework
Desk Profile by the desk Head. This document summarises the VaR captures directly observable traditional risk factors on a daily
desk’s strategy, the required risk limits as well as any other basis, such as exchange rates, interest rates, equity prices, etc.,
relevant information for the desk’s operations. but does not take account of potential changes in more exotic
Sensitivity analysis factors such as correlations, basis risk, mean reversion
parameters, etc. Therefore, since 31 December 2007, HSBC
Sensitivity analysis measures the impact of individual market Continental Europe also calculates an additional VaR measure
factor movements on specific instruments or portfolios, including called ‘Add-On VaR’ or ‘Risk not in VaR’ in respect of these exotic
interest rates, foreign exchange rates and equity prices, such as risk factors.
the effect of a one basis point change in yield. HSBC uses
sensitivity measures to monitor the market risk positions within Stressed VaR
each risk type. Sensitivity limits are set for portfolios, products and HSBC Continental Europe calculates a Stressed VaR. Like VaR, it is
risk types, with the depth of the market being one of the principal calculated using historical simulations and a 99 per cent
factors in determining the level of limits set. confidence level. However, unlike VaR, Stressed VaR is based on a
Value at risk 10 day period and a stressed period historical dataset. Stressed
VaR can be rescaled to a one-day equivalent holding period by
One of the principal tools used by the Group to monitor and limit dividing it by the square root of 10.
market risk exposure is the VaR. An internal model of HSBC
Continental Europe is used to calculate VaR. Stress Testing
VaR is a technique that estimates the potential losses that could Stress testing is an important tool which is fully part of the
occur on risk positions as a result of movements in market rates Group's risk management framework. Their purpose is to assess
and prices over a specified time horizon and to a given level of the potential impact on portfolio values of more extreme, although
confidence (99 per cent for HSBC). HSBC Continental Europe plausible, events or movements in a set of financial variables. In
calculates VaR daily. The VaR model used by HSBC Continental such scenarios, losses can be much greater than those predicted
Europe, as for the Group, is based on historical simulation. by VaR modelling.
The historical simulation model derives plausible future scenarios Stress testing is implemented at the legal entity, regional and
from historical market rates time series, taking account of inter- Group levels. A standard set of scenarios is used consistently
relationships between different markets and rates, for example across all regions within the Group. Scenarios are tailored in order
between interest rates and foreign exchange rates. Potential to capture the relevant events or market movements at each level.
variations in market prices are calculated with reference to market The process is governed by the Stress Testing Review Group
data from the last two years. Since January 2007, HSBC forum which, in conjunction with Group Risk management,
Continental Europe has been calculating a one-day VaR. determines the scenarios to be applied at portfolio and
Although a useful guide to risk, VaR should always be viewed in consolidated level, as follows:
the context of its limitations. For example: • single risk factor stress scenarios that are unlikely to be
• the use of historical data as a proxy for estimating future events captured within the VaR models, such as the break of a
may not encompass all potential events, particularly those currency peg;
which are extreme in nature; • technical scenarios, which consider the largest move in each
• the use of a one-day holding period assumes that all positions risk factor without consideration of any underlying market
can be liquidated or hedged in one day. This may not fully correlation;
reflect the market risk arising at times of severe illiquidity, • hypothetical stress scenarios, which consider potential
when a one-day holding period may be insufficient to liquidate macroeconomic events, for example, the slowdown in
or hedge all positions fully; mainland China and the potential effects of a sovereign debt
• the use of a 99 per cent confidence level, by definition, does default, including its wider contagion effects; and
not take into account losses that might occur beyond this level • historical stress scenarios, which incorporate historical
of confidence; and observations of market movements during previous periods of
• VaR is calculated on the basis of exposures outstanding at the stress which would not be captured within VaR.
close of business and therefore does not necessarily reflect Other scenarios are designed locally to take into account activities
intra-day exposures. that are specific to HSBC Continental Europe and are presented to
the MRF on top of selected Group stress tests. Indeed, the whole
set of scenarios with a significant impact on portfolio valuations
are discussed and reviewed during the monthly Market Risk
Forum.

Risk
Local stress test scenarios defined in HSBC Continental Europe Trading portfolios
contemplates different scenarios on Eurozone (mixing different
Value at Risk of the trading portfolios
deformations of the yield curves of the sovereign issuers, including
serious tensions on these spreads) and are regularly recalibrated to Trading VaR remained within the risk appetite throughout the year
adjust to market conditions. Dedicated scenarios involving and remained limited on average.
deformation of the swap curve and the volatility surface are also The spike observed during the summer is actually technical and
applied to more exotic books in order to capture the convexity and linked to the IBOR transition programme: the change of indexes
the distortion of risks of these books. These results are presented for clearing houses collateral remuneration has been reflected with
on a monthly basis to the MRF. some delay in systems and VaR levels came back to spring levels
as soon as the change had been reflected.
Trading VaR by risk type (€m)
12
10
-2
-4
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Total IR Equity CS FX Diversification
Trading VaR by risk type
Foreign
exchange (‘FX’) and Interest Equity Credit Portfolio
commodity rate (‘IR’) (‘EQ’) Spread (‘CS’) Diversification Total
€m €m €m €m €m €m
Balance at 31 Dec 2020 0.16 2.64 — 0.40 (0.73) 2.46
Average 0.24 3.44 — 0.45 (0.62) 3.51
Maximum 0.51 11.04 — 0.96 (1.43) 10.58
Balance at 31 Dec 2019 0.26 5.38 — 0.30 (0.53) 5.42

Average 0.24 4.90 — 1.12 (1.33) 4.93
Maximum 0.37 7.64 — 1.74 (2.10) 8.00
1D SVaR of the Trading portfolio

Following decrease of USD swap curves, the level of stressed VaR strongly decreased at the beginning of the year together with the
decrease of USD structured rates exposures.
1D SVaR of the Trading portfolio

31 Dec 2020
€m
Average 21.72
Maximum 83.87
Minimum 3.71
At 31 Dec 2020 23.61

HSBC Continental Europe Backtesting
20
15
10
5
0
-5
-10
-15
-20
-25
Jan-18 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Jul-20 Nov-20
Hypothetical P&L Actual P&L VaR-
Non-Trading portfolios
Value at Risk of the non-trading portfolio
The VaR of the non-trading portfolio slightly increased in absolute terms following the increase of outright exposure in the Asset Liquidity
Buffer.
Total accrual VaR by risk type

Foreign Interest Credit Portfolio
Exchange Rate Equity Spread diversification Total
€m €m €m €m €m €m
Balance at 31 Dec 2020 — 3.25 — 4.79 (0.84) 7.19
Average — 3.43 — 4.82 (2.11) 6.14
Maximum — 4.78 — 6.91 (3.42) 8.86
Balance at 31 Dec 2019 0.01 2.93 — 3.52 (2.21) 4.25

Average 0.01 2.94 — 2.79 (1.8) 3.94
Maximum 0.03 4.88 — 3.83 (2.47) 5.49
Total non-trading VaR by risk type (€m)
10
-2
-4
-6
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Total IR CS FX Diversification

Risk
Market risk under standardised approach

2020 2019
Capital Capital
RWAs required RWAs required
€m €m €m €m
Risk type
1 Interest rate risk (general and specific) 146 12 128 10
2 Equity risk (general and specific) — — — —
3 Foreign exchange risk 100 8 127 10
4 Commodity risk — — — —
Options
5 Simplified approach — — — —
6 Delta-plus method 93 7 70 6
7 Scenario approach — — — —
8 Securitisation — — — —
9 Total 339 27 325 26
Market risk under IMA

2020 2019
Capital Capital
RWAs required RWAs required
€m €m €m €m
1 VaR (higher of values a and b) 444 35 704 56
(a) Previous day’s VaR 97 8 214 17
(b) Average daily VaR 444 35 704 56
2 Stressed VaR (higher of values a and b) 964 77 1,667 133
(a) Latest SVaR 329 26 666 53
(b) Average SVaR 964 77 1,667 133
3 Incremental risk charge (higher of values a and b) 350 28 891 71
(a) Most recent IRC value 278 22 610 49
(b) Average IRC value 350 28 891 71
5 Other 566 45 907 73
6 Total 2,324 186 4,169 333
Interest-rate risk of the banking book schedules, expected prepayments, contractual rate indices used
for re-pricing and interest rate reset dates are examples of
Overview elements transferred for risk management by Markets treasury.
Banking book interest rate risk is the risk of an adverse impact to The internal transfer pricing framework is governed by Asset,
earnings or capital due to changes in market interest rates. liability and capital management committee (‘ALCO’) whose
Interest rate risk in the banking book is generated by non-traded responsibility it is to define each operating entities transfer pricing
assets and liabilities and is monitored and controlled at Group level curve and review and approve the transfer pricing policy, including
by Group Treasury and at HSBC Continental Europe level by Asset, behaviouralisation assumptions used for products where there is
Liability and Capital Management. Group Treasury and ALCM either no defined maturity or customer optionality exists. HSBC
functions are supervised by RMM who approve risk limits used in Continental Europe ALCO is responsible for monitoring and
the management of interest rate risk. Banking book interest rate reviewing the bank's overall structural interest rate risk position.
risk is transferred to and managed by Markets treasury, who are Interest rate behaviouralisation policies have to be formulated in
overseen by Wholesale Market Risk and Product Control line with the Group’s behaviouralisation policies and approved at
functions. least annually by ALCO.
Governance Non-traded assets and liabilities are transferred to Markets
Group Treasury and ALCM monitor and control non-traded interest treasury based on their re-pricing and maturity characteristics. For
rate risk as well as reviewing and challenging the business prior to assets and liabilities with no defined maturity or re-pricing
the release of new products and proposed behavioural characteristics behaviouralisation is used to assess the interest
assumptions used for hedging activities. ALCM are also rate risk profile.
responsible for maintaining and updating the transfer pricing Markets treasury manages the banking book interest rate positions
framework, informing ALCO of the overall banking book interest transferred to it within the Markets Risk limits approved by RMM.
rate risk exposure and managing the balance sheet in conjunction Markets treasury will only receive non-trading assets and liabilities
with Markets treasury. as long as they can economically hedge the risk they receive.
The internal transfer pricing framework is constructed to ensure Hedging is generally managed through vanilla interest rate
that structural interest rate risk, arising due to differences in the derivatives or fixed rate government bonds. Any interest rate risk
re-pricing timing of assets and liabilities, is transferred to Markets which Markets treasury cannot economically hedge is not
treasury and business lines are correctly allocated income and transferred and will remain within the business line where the risk
expense based on the products they write, inclusive of activities to is originated.
mitigate this risk. Contractual principle repayments, payment

Measurement of Interest Rate Risk in the Banking Book These amounts concern HSBC Continental Europe legal perimeter
including branches. Given the interest rate risk management
The following measures are used by ALCM to monitor and control
policies, the inclusion of subsidiaries in this scope is considered
interest rate risk in the banking book:
non-material.
• Nominal Gap
The EVE Sensitivity is measured under varying interest rate
• Net Interest Income (‘NII’) sensitivity scenarios:
• Economic Value of Equity (‘EVE’) sensitivity • Parallel shock of the yield curve of +/-200 basis points;
• Value at risk ('VaR') • Basel Committee on Banking Supervision’s six predefined
The interest-rate risk is assessed monthly based on the nominal shock scenarios.
banking book gap between assets and liabilities by time bucket. Non-traded VaR uses the same models as those used in the
The maturity is either in line with contractual maturities or where trading book but for banking book balances. It will exclude the
the contractual maturities are not perceived to be a true reflection elements of risk which are not transferred to BSM.
of the underlying risk a theoretical, behaviouralised maturity is
used. The analysis is based on the next interest rate repricing date.
Key risk Drivers
The main behaviouralised items are Non-Interest Bearing Current The bank’s interest rate risk in the banking book can be
Accounts and fixed rate home loans with a prepayment option. segregated into the following drivers:
NII sensitivity reflects the sensitivity of earnings due to changes in • Gap risk – also known as Duration Risk or Repricing Risk –
market interest rates. Both one-year and five-year net interest arises from the term structure of banking book instruments,
income sensitivities are forecasted across a range of interest rate and describes the risk arising from the timing of instruments’
scenarios based on a static balance sheet assumption. This rate changes. The extent of gap risk depends on whether
includes assumptions on business line rate pass-on, re-investment changes to the term structure of interest rates occur
of maturing assets and liabilities and prepayment. Markets consistently across the yield curve (parallel risk) or differentially
treasury IRR position is modelled based on no management by period (non-parallel risk).
actions i.e. the risk profile at the month end is assumed to remain • Basis risk describes the impact of relative changes in interest
constant throughout the forecast horizon. rates for financial instruments that have similar tenors but are
The NII Sensitivity is measured under varying interest rate priced using different interest rate indices and
scenarios: • Option risk arises from option derivative positions or from
• Immediate parallel shock of the yield curve of +/-100 basis optional elements embedded in a bank’s assets, liabilities and/
points from beginning of first quarter; or off-balance sheet items, where the bank or its customer can
alter the level and timing of their cash flows.
• Immediate parallel shock of the yield curve of +/-25 basis
points from beginning of first quarter. Exposures
EVE sensitivity is a present value calculation of the banking book HSBC Continental Europe is exposed to a change of Eurozone
under different interest rate scenarios where equity is kept at interest rates curve on banking operations and structural elements
accounting value. of the balance sheet and would see its net interest income
The balance sheet is valued on a run off basis, no balance sheet decrease by EUR 57 million on one year as of 31 December 2020
growth or reinvestment and will incorporate assumptions on for an immediate decrease of 100 basis points. The impact of an
behaviouralisation of non-maturity products and customer up 200 basis points scenario on shareholders’ equity would be
optionality. EUR -592 million at 31 December 2020.
The following table sets out the interest rate gap by time buckets
as of 31 December 2020 before hedging transactions.
Exposures
(in millions of Euros) 1 year 3 years 5 years 7 years 10 years
Interest rate gap (1,361) (2,271) (1,751) (1,377) (323)
During the year 2020, in the context of the Covid-19 outbreak, Non Financial (or Operational) risks
HSBC Continental Europe has constantly monitored the interest
rate risk associated with the credit drawdowns and additional In accordance with the French Order of 3 November 2014 and the
customer deposits as well as a slowdown in home loans Operational Risk Functional Instructions Manual, operational risk is
prepayment and has adjusted its policy to better reflect the defined within HSBC Group as a risk that might be the result of:
exceptional circumstances. The historically low rates environment, • inadequacy, ineffectiveness or failure of internal processes,
should it last longer, would keep on burdening the banking book’s performed manually or automatically;
Net Interest Margin.
• external events.
Structural foreign exchange risk This risk includes notably external or internal fraud risk (article 324
Structural foreign exchange exposures represent the net of EU regulation No. 575/2013), non-authorised activities, errors
investments in subsidiaries, branches and associates, the and omissions including events characterised by a low probability
functional currencies of which are currencies other than euro. but with a high operational loss in case of occurrence, and risks
Unrealised gains or losses due to revaluations of structural foreign related to models.
exchange exposures are recognised in other comprehensive HSBC reviewed and, thus, simplified its Risk Taxonomy regrouping
income, whereas other unrealised gains or losses arising from its non-financial risks in seven level 1 categories (previously 16):
revaluations of foreign exchange positions are reflected in the Financial Reporting and Tax Risk, Financial Crime and Fraud Risk,
income statement. Regulatory Compliance Risk, Legal Risk, Resilience Risk, Model
HSBC Continental Europe's structural foreign exchange exposures Risk and People Risk.
are managed with the primary objective of ensuring, where
practical, that the group’s consolidated capital ratios and the
capital ratios of individual banking subsidiaries are largely
protected from the effect of changes in exchange rates. HSBC
hedge structural foreign exchange exposures only in limited
circumstances.

Risk
The Three Lines of Defence model is detailed earlier in the part Each of these methods is more complex than the other to
called ‘Risk Management’. determine the capital required to cover operational losses, leading
to more complexity in terms of operational risk management.
Operational Risk Functional Instruction Manual, which is used to
outline how specific risks are managed, has been reviewed in Each method is linked to specific requirements in terms of risk
2020 in order to enhance the role and responsibilities of the three management and external information on the framework of which
Lines of Defence stakeholders. implementation is a condition for the approach application.
In the first line of defence, risk owners are responsible of the risks Like HSBC Group, HSBC Continental Europe currently uses the
within their perimeters and are accountable for the execution of standardised approach in terms of operational risks.
operational controls for their risks. This approach is based on the application of different ratios
Control owners must ensure that all the processes, activities and (12 per cent, 15 per cent, 18 per cent) to the average gross income
systems within their perimeters are working properly. They work (over three years) of each one of the eight business lines defined
with risk owners in order to understand and manage risks. by the Basel II framework.
In 2020, the first line of defence has been reinforced with the It implies that a method has to be determined to divide the global
Business Service Owner role, accountable for the delivery of one gross income between business lines defined by the regulator.
of more end-to-end business key service offered to our customers. Among qualitative criteria used for this method, the
He is responsible for overseeing and managing each of HSBC’s implementation of an internal operational risk framework is
critical and material Business Services end-to-end, including the required and needs to include the following aspects:
risk, control effectiveness and resilience of that service.
• regular inventory of operational losses;
In the second line of defence, the Risk Stewards help overseeing
first line of defence activities playing the role of experts for a • potential operational risks identification for all entities;
specific risk. • implementation of risk management processes, by defining and
Operational Risk Function monitors this framework, supports implementing action plans to mitigate the risks and by
stakeholders already quoted and ensure the efficiency of the monitoring risk indicators;
framework composed by the first and second line of defence. • implementation of an independent structure to manage those
In 2020, in line with the increasing threat landscape that the risks;
industry faces within non-financial risk, we formed a new • regular communication of information about the evolution of
'Operational & Resilience Risk' sub-function, created from the these risks to the executive management.
merge between the former Operational risk team and the new
second-line of defense team: Resilience risks team. The sub- Quantitative aspects
function provides robust first line of defence oversight and risk The Finance department is in charge of calculating capital
steward oversight, supported by clear plans and evidenced by requirement related to operational risks and communicating it to
effective and timely independent challenge. The sub-function the Autorité de contrôle prudentiel et de résolution (‘ACPR’) and the
challenges the status quo ensuring that the first line of defence are European central bank (‘ECB’).
focusing firmly and priority tasks;
First, the Net Banking Income (‘NBI’) has to be divided between
Regulatory disposition the eight business lines defined by Basel II requirements to
Basel II regulatory dispositions require that banking institutions calculate the regulatory capital allocation. This task involves
take into account the operational risk management on three levels: splitting the NBI by entities.
• In terms of capital requirements to take into account all For operational losses, COREP (COmmon solvency ratio REPorting)
banking risks and their economic reality (Pillar I). statements are produced and communicated to the ACPR by the
Finance department on behalf of HSBC Continental Europe; the
• In terms of operational risk framework, meaning an Operational & Resilience Risk function with the support of the
implementation of an internal framework to manage risks Region contributes to the production of two of these three COREP
which should enhance the prudential supervision by the statements: Operational Risk Details and Operational Risk Large
national supervisors (Pillar II). Loss Details on the consolidated perimeter of HSBC Continental
• In terms of information and financial communication on the Europe, excluding its subsidiary HSBC SFH (France), 100 per cent
matter, intended to administrators, supervisory authorities, owned, which is specialised in the issuance of Covered Bonds and
shareholders, etc. (Pillar III). is monitored directly by the Finance department.
Beyond regulatory requirements, managing operational risks and COREP is a prudential reporting implemented by the European
the permanent evolution of the control framework depending on banking supervision committee. It has been created based on
changing activities and regulations to reduce losses from the Profit English words: COmmon solvency ratio REPorting. It relates to the
& Loss (‘P&L’) is a major strategic issue for HSBC Continental sovereign solvability ratio linked to Basel II agreement.
Europe and also improves customer experiences in our daily Using information recorded by Business Risk and Control
activities. Management (‘BRCM’)/Chief Control Officer (‘CCO’) in the
Operational Risk Management – Methodology defined operational risk management system, the Operational Risk
by the regulator function is in charge of the first level of controls of these
statements.
Regulators have defined three methods which are the following:
• Basic approach;
• Standardised approach;
• Advanced approach.

Regulatory Capital with Functions acting as second line of defence, responsible for
Charge % overseeing risks, within their perimeter. The function acts also
Basel Lines of Business as Risk steward for Resilience risks which includes risks related
Corporate Finance 18 to goods and people safety, business continuity, cybersecurity,
Trading and Sales 18 IT systems, third parties, transaction processing and data; and
Retail Banking 12 • lastly, number of committees, forums and working groups that
Commercial Banking 15 examine the results of controls and the main deficiencies.
Payments and Settlement 18
Agency Services 15
To comply with the American Sarbanes-Oxley law (‘SOX’), the
Asset Management 12
HSBC Group has implemented since 2006 a framework for
Retail Brokerage 12
documenting and assessing internal control, with regard to the
processes and operations involved in drawing up financial
statements.
Qualitative aspects
HSBC Continental Europe’s Finance Department is responsible for
Tasks include the following activities:
coordinating all SOX measures and summarising their results.
Specific organisation in charge of monitoring and managing
Twice a year, the ‘SOX 4 Way Meeting’, chaired by the Chief
operational risks:
Financial Officer, and primarily comprising the Statutory Auditors,
• identification, scoring and actualisation of potential risks to the Chief Accountant and the Periodic Control Officer of HSBC
which group entities are exposed and first level controls to Continental Europe, reviews:
mitigate them;
• any SOX deficiencies revealed by the three lines of defence;
• close monitoring of main material risks for the Group or
• the result of tests run by the Statutory Auditors;
concerned entities;
• action plans progress and status.
• definition and monitoring of action plans to mitigate the most
material risks; On a quarterly basis, HSBC Continental Europe’s Audit Committee
and the Risk Committee are informed of the results of controls
• annual definition of operational risk tolerance;
carried out for SOX compliance purposes and of progress made in
• recording and analysis of operational losses, notably regarding the action plans.
tolerance and reporting to executive management;
Within the permanent control process, the Risk function, overseen
• promotion of operational risk culture intended to all group by the Chief Risk Officer (‘CRO’), plays a major role. It is composed
entities, through work performed by Operational & Resilience by specialised directions:
Risk function and Business Risk and Control Management
• Operational & Resilience Risk – in charge of monitoring and
(‘BRCM’)/Chief Control Officer (‘CCO’) and training and
coordinating the permanent control framework and manages
awareness actions;
non financial risks. The function acts also as Risk steward for
• centralisation and coordination of HSBC Continental Europe risks related to goods and people safety, business continuity,
Operational Risk Meeting (‘ORM’) work chaired by the Chief cyber-security, IT systems, third parties, transaction processing
Risk Officer; and data;
• contribution to operational risk management systems evolution; • Retail Credit Risk – Credit Risk on the retail market;
• implementation and monitoring of operational risk indicators. • Wholesale Credit and Market Risk – Credit risk on the corporate
Permanent Control market and market risk;
The permanent control is primarily based on controls carried out • Independent Model Review;
by the managers responsible for each activity. The purpose of • Global Risk Analytics – Models elaboration and follow-up;
these controls is to ascertain that the activity is conducted in
• the Chief Risk Officer (‘CRO’) relies also on other functions to
accordance with all internal, external and regulatory rules and is
ensure a complete and accurate risk oversight (Human
up to standard. The key responsibility for control falls to the
Resources, Finance function as regards with accounting,
managers of the various businesses, functions and HSBC
liquidity, structural interest rate, forex and tax risks, and HSBC
Operations, Services and Technology.
Operations, Services and Technology in particular for the
An independent control framework completes this first level of oversight of IT and outsourced services). Functions at which we
control. This comprises mainly: can add Compliance function including, Financial Crime
• Business Risk and Control Management (‘BRCM’) and Chief Compliance and Regulatory Compliance, which report directly
Control Officer (‘CCO’) teams, who monitor and manage risks to the Chief Executive Officer.
in their business/function; All risk reports presented to the HSBC Continental Europe RMM,
• Functions acting as second line of defence, particularly feed the HSBC Continental Europe’s Executive Committee, the
Compliance, responsible for non-compliance risk for HSBC Audit Committee, the Risk Committee and the Board of Directors
Continental Europe as a whole as defined in the article 10 p) of of HSBC Continental Europe.
the French Order of 3 November 2014;
• Operational & Resilience Risk (‘ORR’) function, in charge of
overseeing the non-financial risks management framework. The
function oversees the work carried out by Business Risk and
Control Management (‘BRCM’)/Chief Control Officer (‘CCO’)
teams on operational risks within the businesses, functions and
HSBC Operations, Services and Technology, teams who report
hierarchically to these businesses and functions heads. The
Operational & Resilience Risk function works closely

Risk
HSBC Continental Europe RMM includes bank’s European effective and timely independent challenge. The sub-function
branches and is thus supported by risk committees from each challenges the status quo ensuring that the first line of defence are
business. focused firmly on priority tasks.
HSBC Group Manuals The Operational & Resilience Risk Function provides direction,
insight and challenge on the management of non financial risks,
The Group's Global Principles set an overarching standard for all
along with an overall assessment of the non financial risk
other policies and procedures and are fundamental to the Group’s
exposure versus Board appetite. The Operational & Resilience Risk
risk management structure. They inform and connect our purpose,
function also monitor use and adoption of HSBC’s non financial
values, strategy and risk management principles, guiding us to do
risk approach and reports on this to the Non Financial Risk
the right thing and treat our customers and our colleagues fairly at
Management Board, a subcommittee of the Group Risk
all times.
Management Meeting.
All the HSBC Group’s business activities must be fully
The Operational & Resilience Risk function, supervised directly by
documented in manuals or compendia of procedures. Functional
the Chief Risk Officer, brings a holistic vision of risks. It has a
Instruction Manuals are used to outline how specific risks are
consolidation and harmonisation role and provides an overview of
managed. They define the minimum risk management and control
the main operational risks and permanent control to the executive
requirements that must be adopted throughout the organisation to
management, the Risk Committee and HSBC Group, collaborating
ensure consistency and appropriate management of each risk in
with Business Risk and Control Management (‘BRCM’)/Chief
the taxonomy. They contain detailed policies and procedures
Control Officer (‘CCO’) teams and functions acting in the second
relating to a specific business or function, product or activity,
line of defence on critical subjects, such as risk maps reviews, the
which must be adhered to throughout the HSBC Group, barring
design and monitoring of action plans, incident reporting, risk
dispensation granted by the Functional Instruction Manual’s
indicators and control plans.
owner for the HSBC Group.
The function is also in charge of the HSBC Continental Europe Risk
Internal circulars are the key vehicle for communicating internal
Management Meeting secretariat which allows to achieve a
standards and rules derived from French regulatory requirements
transverse vision of risks, both complete and prioritised and if
or HSBC Group standards that apply to several or all the HSBC
possible, prospective of the main operational risk issues of all
Group structures operating in France or within its branches. They
HSBC Continental Europe entities, including International locations
are readily available on the HSBC Continental Europe Intranet and
to the Chief Risk Officer, Chair of the Risk Management Meeting,
have been communicated to the new branches of HSBC
and to the other members of the HSBC Continental Europe senior
Continental Europe, if applicable to them. The drafting, circulation
management.
and storing of circulars are governed by precise rules (also
formally set out in a circular) and are regularly updated. Previously composed by 16 level 1 risks, HSBC Continental
Europe’s operational risks (or non financial risks) taxonomy has
Handbook and codes of conduct
been simplified and is now composed by seven risks, which
The Internal Rules covers ethical provisions applied to all staff synthesise main non financial risks that a bank faces:
relating to adherence with confidentiality, compliance with laws
• Financial Reporting and Tax Risk
and regulations and professional integrity. In addition to these
rules, each of the bank’s businesses or activities may have a • Resilience Risk
specific code of conduct and/or compliance manuals that collate • Financial Crime and Fraud Risk
operational application procedures relating to staff ethic and
compliance with laws and regulations. Staff members qualified as • People Risk
‘High Risk Role’ are also subject to specific requirements relating • Regulatory Compliance Risk
to personal transactions. A conduct handbook available for all
• Legal Risk
employees illustrates with examples to help staff making actions
and decisions in accordance with the standards included in the • Model Risk
‘Global Principles’ document, with a key focus on values and Operational risks may have consequences on reputational risk.
conduct approach, applicable to every HSBC employees. Any lapse by HSBC Continental Europe in standards of integrity,
In 2020, HSBC deployed a code of conduct Anti Bribery & compliance, customer service or operating efficiency represents a
Corruption for France and its European branches. It has been potential reputational risk which may impact its relationship with
attached to the Internal Rules, to guide daily actions from all its clients, counterparts, shareholders, stakeholders and
people attached to HSBC entities in France. regulators. Safeguarding and building upon the Group’s reputation
is the responsibility of each employee of HSBC Continental
The internal committees, forums and working groups
Europe.
Risks and internal control oversight are driven by a number of
Identification and Management of Non financial (Operational)
dedicated committees, forums and working groups which
facilitate management, communication and monitoring of
Risks
operational risk. Governance
Senior Management is kept regularly informed of the organisation The general organisation of the permanent control is supported by
and findings of permanent and periodic controls, in particular Operational & Resilience Risk function regarding non financial
through various dedicated committees and working groups that risks. As mentioned earlier, this function works in close
will be presented further in the part called ‘Governance’. partnership with permanent control teams from businesses,
functions, HSBC Operations, Services and Technology and with
Non financial (or Operational) Risk Management
other functions working in the second line of defence. A
Framework
collaboration has also been implemented as soon as 2018 with the
In 2020, we combined the second line of defence Operational Risk HSBC Bank plc International Chief Risk Officer and Chief Risk
and second line of defence Resilience Risk sub-functions. The sub- Officers from international locations who report to him in order to
function provides robust first line of defence oversight and risk
steward oversight, supported by clear plans and evidenced by

ensure a comprehensive risk management of all entities within The establishment and update of risk maps are done on a
HSBC Continental Europe perimeter. continuous basis with the help of control owners based on:
Operational & Resilience Risk function hosts regularly a specific • results of controls performed by operational teams;
meeting called Operational Risk Meeting which deal with • recommendations from permanent control reviews performed
transversal subjects that have an operational impact, and by Business Risk and Control Management (‘BRCM’)/Chief
disseminate risk culture through businesses and functions. That Control Officer (‘CCO’);
framework is supported by forums and committees related to
permanent control and to operational risks in businesses and • results of independent controls done by Assurance teams from
functions, that are appealed to ensure the oversight of operational the second line of defence;
risk management and permanent control for each entity. • recommendations from Risk Stewards;
The HSBC Continental Europe group has policies covering the • recommendations from periodic control reports, or third parties
process for identification, reporting, management, control and reports (including regulators);
prevention of operational risks, specifying particularly that:
• internal or external events.
• operational risk management is first and foremost the
responsibility of managers through their operations; Risk maps for non financial risks are formally presented to the
Chief Risk Officer on a yearly basis, in order to ensure the
• IT systems are used to identify and report operational risks and relevance of those risks compared to the other risks that the bank
generate regular and appropriate reports; faces.
• identification and assessment of risks and controls across the Based on risk maps realised by businesses, functions and HSBC
entire scope are updated on an ongoing basis in order to Operations, Services and Technology, second level monitoring
identify every significant change; plans are defined and updated continually. Monitoring plans are
• operational losses are gathered and reported on a monthly elaborated following a risk-based approach in order to ensure a
basis. regular and comprehensive coverage of most significant risks.
Deficiencies identified are documented in the operational risk
HSBC Continental Europe uses the standardised approach for system, Helios.
calculating the regulatory capital needed to cover operational
risks. To estimate economic capital, HSBC Continental Europe Material issues identified in control plans are presented to the Risk
uses the same concept, but as applied to certain specific Management Meeting of HSBC Continental Europe and to the Risk
businesses in the HSBC Group’s structure instead of the eight Committee.
businesses of the regulatory approach. In 2020, the main risks identified by HSBC Continental Europe,
Operational Risk Assessment with specific action plans in place, are related to:
Risk Maps • Compliance;
Compliant with the Operational Risk Functional Instruction • Resilience – Information & Cyber Security;
Manual, the implementation of risk maps is under the • Model.
responsibility of Risk owners and Control owners. Business Risk
and Control Management (‘BRCM’)/Chief Control Officer (‘CCO’) Incidents management and escalation
teams coordinate the implementation and regular update of risk Major operational incidents linked to HSBC activities are reported
maps. to the HSBC Continental Europe Risk Management Meeting on the
They are designed for a predetermined perimeter thanks to a basis of information stored in the operational risk management
methodology called Risk and Control Assessment (‘RCA’) based system, Helios. That system manages in a centralised manner
on the assessment of inherent risks, which is the risk level without identification and updating processes, operational losses reports
considering the control in place, and on the assessment of residual and the follow-up of action plans that aim to mitigate the main
risks, which is the risk level remaining after taking into risks.
consideration the control framework. The result of the assessment Operational incidents nature
is registered in a four level scale:
The Functional Instruction Manual allows to categorise operational
• Very High Risk incidents in respect to different natures and also to distinguish
• High Risk various impact types associated to them. Significant incidents
result in a detailed analyse of root causes and in the review of
• Medium Risk other processes that might be impacted by the same root causes
• Low Risk in order to control them as soon as possible. A detailed analysis of
control deficiencies is established and associated risk maps and
This risk hierarchy allows risk owners and HSBC Continental procedures have to be updated consequently. Business Risk and
Europe senior management to prioritize risk management and Control Management (‘BRCM’)/Chief Control Officer (‘CCO’) are
facilitates the decision-making process. responsible of these tasks.
This approach by risk levels helps to elaborate and define first and Main risks, incidents and risk indicators may result in action plans
second level controls within a risk-based approach. integrated into the monitoring and control missions performed by
Risk maps cover non financial (or operational) risks to which Business Risk and Control Management (‘BRCM’)/Chief Control
entities are exposed and reflect key controls from the first level Officer (‘CCO’)and Assurance teams. These action plans are also
along with the second level control framework that enable to monitored by ‘risk’ bodies from businesses and functions
mitigate the most significant risks. concerned.

Risk
Operational risk losses: quantitative data starting from 2012
Operational losses from 2012 to end of 2020 per risk category (*) (in millions of EUR)
Building Informa-
unavail- tion, Security
ability Employ- Failure tech- of Finan- Breach
and ment in other nology, Trans- Regu- people Systems cial of
Acco work practices principal and action latory and and report- Finan Resilie fiduciar
unt- place and External risk cyber Internal pro- com- physical data ing -cial Model nce y
ing safety relations fraud pro- security fraud Legal cessin pliance assets integrity and tax Crime risk risk obliga-
risk event event event cessing risk risk risk g risk event event risk event *** *** tions Total
2012 1,1 — 0,7 10,5 2,1 0,1 0,5 (0,8) 7,5 5,1 0,1 1 0,3 — — — — 28,200
2013 0,3 — 1,6 12,1 2,6 0,2 0,2 0,1 3,2 0,4 — 2,2 (2,5) — — — — 20,400*
2014 — 0,1 1,3 6,4 0,6 — 0,1 0,3 5,3 (2,8) — (0,3) (0,1) — — — — 10,900
2015 0,1 — 1,1 4,8 1,8 — 0,1 0,6 4,6 3,4 — 0,5 — — — — — 17,000
2016 — — 0,6 11,1 (0,2) — — 0,1 (15,7) 36,2 — 0,3 — — — — — 32,400
2017 — 0,1 0,9 2,9 1,4 — 0,2 — 3,4 0,7 — 0,1 1 — — — — 10,700
2018 7,83 — (0,07) 2,4 0,68 — — 0,7 3,36 2 — 0,1 0,4 — — — — 17,400
2019 — 0,016 0,99 2,48 1,68 1,22 0,023 (0,04) 8,09 (1,19) — — 1,8 — — — 0,019 15,083
2020 — 0.035 0.27 2.31 1.35 0.22 0.006 0 54.32 2.7 — — 0.09 — 17.1 3.28 0.008 81.699
(*)
Figures Source: Operational risk system (Helios). Level 1/level 2 from the risk taxonomy to take into consideration the successive risks taxonomy
changes since 2012.
(**)
Excluding a one-off legacy internal event within GBM.
(***)
New risks created in 2020 as part of the changes operated in the risk taxonomy.
Number of events (financial impact) per risk category(*)

Building Informa-
Unavail- tion, Security
ability Employ- Failure tech- of Finan-
and ment in nology, Regu- people Systems cial Breach
Accou work practices other and Trans- latory and and report- Finan Resilie of
nt- -place and External principal cyber Internal action comp- physical data ing cial Model nce fiduciary
ing safety relations fraud risk pro- security fraud Legal pro- liance assets integrity and tax Crime risk risk obliga-
risk event event event cessing risk risk risk cessing risk event event risk event *** *** tions Total
2012 3 — 27 137 52 1 4 35 200 108 2 21 5 — — — — 595
2013 1 — 38 133 46 2 9 34 150 39 1 31 7 — — — — 491*
2014 — 2 34 227 33 1 1 21 146 53 1 19 6 — — — — 544
2015 1 — 57 153 40 — 5 17 149 56 — 7 2 — — — — 487
2016 — — 26 134 41 — 2 19 140 51 — 10 — — — — — 423
2017 1 1 33 112 32 1 5 5 248 41 — 7 3 — — — — 489
2018 4 — 34 112 35 — — 8 276 26 — 17 6 — — — — 518
2019 — 1 38 101 63 8 2 2 194 27 — — 9 — — — 10 455
2020 — 1 35 70 42 8 3 0 183 38 — — 2 0 2 27 6 417
(*)
Figures Source: Operational risk system (Helios).Level 1/Level 2 from the risk taxonomy to take into consideration the successive risks taxonomy
changes since 2012.
(**)
Excluding a one-off legacy internal event within GBM.
(***)
New risks created in 2020 as part of the changes operated in the risk taxonomy.
RWA and capital requirements related to operational risk to the As part of the Group NFRO (Non-Financial Risk Optimisation)
end of 2020 Programme, aiming to simplify and enhance non financial risks
approach, certain existing risks have been consolidated into
Capital
(in millions of euros) RWAs requirements broader categories, which is the case for Resilience risk. It
WPB 969 78
includes Cybersecurity, Systems and data, transaction processing,
CMB 1,085 87
business continuity, workplace safety and third party
GBM 1,115 89
management.
Corporate Centre 114 9 The Covid-19 outbreak, as a new systemic risk, is still a key point
Total 3,283 263 of attention within the Bank, requiring robust contingency plans in
a context where the Banks assume critical financial service roles.
The year’s highlights 2020 Operational & resilience risk function has been fully involved to
ensure appropriate management of non financial risks during the
In 2020, in line with the increasing threat landscape that the period. The crisis has been an opportunity to demonstrate the
industry faces within non-financial risk, we formed a new maturity of Conduct principles applied in all decisions and actions
Operational & Resilience Risk sub-function, created from the with a balanced exchange of value between the bank and
merge between the former Operational Risk team and the new customers and to strongly collaborate across Lines of Business to
second line of defence team: Resilience risk team. optimise best practices and processes to deliver good outcomes to
customers.

The Covid-19 pandemic highlighted the robustness of the business 2020 has been significantly impacted by the containment due to
continuity plan as well as the professionalism of our well trained the state of health emergency caused by the Covid-19 which
staff. directly impacted Bank' distribution strategy and processes in
place. The announced economic challenges have required a focus
Risk culture spread has continued and mandatory trainings related
on those of our clients in difficult financial situations and a
to Non-financial Risks, including Financial Crime Risks, IT Security
strengthened attention brought to our conduct setting.
and Regulatory Compliance have been deployed throughout the
year. The Compliance Advisory function has monitored information
related to coronavirus and has provided its support to the business
Compliance in order to provide adequate measures and notably, the risks
In 2020, the level of inherent Compliance risk remained medium. mitigation measures where necessary.
The industry continued to experience greater regulatory scrutiny All Compliance Advisory teams contributed to ensure the right
and heightened levels of regulatory oversight and supervision from level of continuity in their risk stewardship over the activities of
the ECB, the SRB, the ACPR, AMF, and the AFA. their respective HSBC Continental Europe business lines, despite
the difficulties related with the Covid crisis.
HSBC Continental Europe has continued to improve Financial
Crime and Regulatory Compliance frameworks. Throughout 2020, the Compliance Advisory function further
improved its monitoring of the EEA branches of HSBC Continental
Due to the integration, in 2020, at the regional level, of the
Europe acquired or created in 2019.
Regulatory Conduct and Financial Crime into a single Compliance
function, the Chief Compliance Officer of Continental Europe Lastly, during the year 2020, HSBC Continental Europe continued
(hereafter ‘CE CCO’) oversees now both functions as well as its work to develop effective responses to the challenges of the
shared compliance teams. UK's withdrawal from the European Union and of the IBOR
transition, in line with the requirements of the regulators.
The CE CCO reports the exercise of his role directly to the
Executive Directors as well as the supervisory body via the Risk Staff training and awareness
Committee and the Board of Directors in accordance with Articles
The Compliance Function of the HSBC Group, in conjunction with
30 and 31 of the French Order of 3 November 2014.
the Training Department, draws up an annual staff training
The CE CCO carries out the roles of Head of Compliance for programme covering RC risks. Training sessions, classroom-based
Investment Services (‘RCSI’) for HSBC Continental Europe in or in the form of e-learning, are organised in the different
respect of Articles 312-1 and 312-2 of the General Regulation of businesses and functions. These trainings include notably a focus
the AMF. The different Heads of Compliance for Investment on the requirements of regulators and supervision authorities and
Services (‘RCSI’), Heads of Compliance and Internal Control the importance of effective relationships with them.
(‘RCCI’) for the legal entities of HSBC Continental Europe, come
In 2020, training programmes were provided on the following
under the responsibility of the Head of the Compliance function.
themes :
As a key function holder within the meaning of Article L.354-1 of
the Insurance Code, the Head of RC for HSBC Assurances Vie • four mandatory trainings for all the HSBC Continental Europe’s
remains accountable to the ACPR for Financial Crime matters. employees (included those of the branches) on the following
Reporting mechanisms have been established to ensure the Conduct themes: Conflicts of Interest, Market Conduct Risks,
appropriate level of information of the key function holder. For the values of HSBC Continental Europe (Global Principles,
EEA branches of HSBC Continental Europe, the organisation Regulatory Conduct, Workplace Harassment with guidance for
principles described above apply to them in a similar way. ‘speaking up’), and Volcker rule ;
Regulatory compliance • several training depending on the business line, on the
following themes: the client assets, the benchmark and the
Risk Management Framework IBOR, the swap and the Swap Execution Facility, the protection
The Compliance Advisory function is in charge of the regulatory of the customer interests (the training was about ‘Putting
compliance risk control framework of the HSBC Continental customer first’ and regarded the communicating products, the
Europe). The Compliance Advisory function relies, on the post-sale servicing and the complaints handling).
regulatory monitoring of its Regulatory Affairs teams and also on In France, an additional training about the financially fragile
the monitoring of the Legal function in order to identify the clients, has also been assigned to involved teams.
modifications of legislative and regulatory texts as well as
developments of jurisprudence having an impact on the activities Regarding the mandatory training, it was rolled out among all the
of the HSBC Continental Europe. employees of HSBC Continental Europe and had to be completed
within a prescribed time. The company’s Management monitored
The analysis of RC risks is documented in maps recording the the completion rate for this training programme each month and
legislative, regulatory, professional provisions, as well as the took corrective measures, where applicable, enabling all
provisions specific to the HSBC Group, applicable to each employees to complete the programme within short timeframes.
business or function, and the procedures and controls
implemented to ensure compliance with said provisions. The RC In addition to global trainings, information is provided annually on
risk maps are updated on a regular basis depending on trigger the update of RC policies to the impacted teams of HSBC
events. Continental Europe.
The RC risks relating to the activities of HSBC Continental Europe Compliance examination procedures and detection and
stem primarily from the following areas: customer protection, prevention tools
compliance with conduct rules relating to client interests, HSBC Continental Europe has specific compliance examination
complaint handling, the protection of the integrity and procedures, in accordance with the provisions of Articles 35 to 38
transparency of financial markets, the preservation of the
confidentiality of information, employees code of ethics, the
prevention of conflicts of interest and compliance with the
applicable rules in terms of marketing (both on a domestic and a
cross-border basis).

Risk
of the Order of 3 November 2014 relating to banks’ internal control • The oversight of conduct implemented by the business lines
systems, as well as tools for detecting and preventing RC risks. through achievement, initiatives and risks regarding customer
fair treatment and market integrity;
These procedures and tools are the subject of regular updates and
upgrades. • The findings of the controls carried out by the Compliance
Assurance team, the status of its recommendations and their
Control System
implementation by action owners in the first line of defence;
The Compliance function is considered to be first and foremost a
• Cross-business items of significance regarding Regulatory
Second Line of Defence player in the HSBC Group. This role is
Compliance, whether for information, for action and/or for
ensured:
decision by Senior Management.
• firstly, by implementing the policies or circulars, by advising
Furthermore, regarding the risks related to new products and
and training the operating staff in the businesses or functions;
services as well as material changes and withdrawal for existing
• secondly, by conducting cross-functional theme-based reviews products, the majority of the businesses have specific bodies for
carried out by the Compliance Assurance team. the examination of products and services. In HSBC in France, all
The reporting of issues and RC Risk Control Forums new products and material changes for existing products are
subject to the approval from the Product Approval Committee,
Monitoring of the functioning of the control compliance chaired by the Chief Executive Officer of HSBC Continental
framework relies in the first instance on existing reporting Europe, and whose secretariat is managed by RC.
procedures within the Compliance function, as well as on the
information made available through governance forums. To finish, in 2020, Compliance function organized on a quarterly
basis a Forum on Whistleblowing with the main investigative
Problems identified in the implementation of the compliance functions (Human Resources, Compliance and FCI) with the
obligations are the subject of an incident report that is drawn up following agenda:
and must be transmitted to the appropriate level within the
Compliance Function, followed by regular monitoring of the • Monitor the whistleblowing activities with KPIs and MIs;
actions implemented to rectify the situation, using a dedicated tool • Ensure a follow-up of cases, and especially the older ones;
called IRIS (Integrated Regulatory Information System).
• Develop any amendment to the governance arrangements in
The incidents identified as having a high risk are also monitored in place;
a specific tool (Helios) and constitute a trigger event to review the
• Share best practices; and
risk identified.
• Address any outstanding or common issues.
Supervision and recording of Regulatory Engagements
Financial Crime
Under the consolidated approach to non-compliance risks, the
Compliance Function ensures centralised monitoring of Regulatory System of control and identification of non-compliance risks
Engagements within entities of the HSBC Group regarding notably
The Financial Crime (‘FC’) function relies, in particular, on the local
FC and RC risks, mostly via the Regulatory Affairs team. Since
legal monitoring of the French Legal function in order to identify
February 2018, the HSBC Group records the Material Regulatory
the modifications of legislative and regulatory texts as well as
Engagements between HSBC and its regulators and supervision
jurisprudential developments having an impact on the activities of
authorities in a tool dedicated to the supervision.
HSBC Continental Europe.
RC Risk Control Forums The analysis of non-compliance risks is documented in maps
The functioning of the framework and the main RC risks identified recording the legislative, regulatory, professional provisions, as
are reviewed through dedicated control forums, consisting of both well as the provisions specific to the HSBC Group, applicable to
compliance representatives and operating managers. RC risks are each business or function, and the procedures and controls
also reviewed by governance risk management forums within implemented to ensure compliance with the said provisions.
business lines or functions. Noncompliance risk maps are regularly updated.
These forums either have a decision-making role, in terms of The non-FC risks relating to the activities of HSBC Continental
managing the regulatory compliance control system, or the role of Europe stem primarily from the following areas: Anti-Money
providing information to Senior Management on the functioning of Laundering, Counter Terrorism Financing, Anti-Bribery &
the system, identified issues, and the corrective measures Corruption, international financial sanctions respect, Fraud, and
undertaken. Tax-fraud.
RC risks are reviewed by the Risk Management Meeting (‘RMM’), Staff training and awareness
which is the governance forum within HSBC Continental Europe
Staff training relating to fight against financial crime principally
for risk management and permanent control. It has a decision-
includes:
making power regarding the organisation of the risk control and
management frameworks. • Mandatory e-learnings ensuring all employees having sufficient
Financial Crime Risks knowledge and their respective roles;
The quarterly Conduct & Regulatory Compliance Forum meets
under the chairmanship of the Chief Executive Officer, and • Certifying training classroom-based for the FCC Risks
includes Executive Committee members who are Business Heads. employees most exposed: new employees follow a training and
receive a certification within 90 days following their arrival in
To ensure the appropriate level of information of the Senior
HSBC;
Management of HSBC Continental Europe on the functioning of
the risk control framework, the main topics raised during the
Forum include:

• A re-certification is performed annually; and operating managers. These fora either have a decision-making
role, in terms of managing the Financial crime risk and associated
• Ad hoc Training Plans: for employees who require further
controls or the role of providing information to Senior
training for the realisation of their daily tasks in terms of
Management on the functioning of the system, identified issues,
Financial Crime.
and the corrective measures undertaken.
Mandatory trainings are part of the staff performance assessment
The main governance body is the Financial Crime Risk
and are included in their variable pay.
Management Committee (‘FCRMC’), which is held on a monthly
Compliance examination procedures and detection and basis, and is chaired by the Chief Executive Officer in presence of
prevention tools the Head of FC France and among others, the Head of each Line
The HSBC Continental Europe group has specific compliance of Business.
examination procedures, in accordance with the provisions of The FCRMC ensures monitoring of financial crime risks within the
Articles 35 to 38 of the order of 3 November 2014 relating to bank and has a decision-making role to define priorities and
banks’ internal control systems, as well as tools for detecting and ensure the robustness of the system. From January 2020 to
preventing non-FC risks. These procedures and tools are subject of October 2020 the France FCRMC and HSBC Continental Europe
regular updates and upgrades. overseas branches management committees were segregated.
In 2020, HSBC Continental Europe has further progressed the Since October 2020, the committee has been united as one under
programmes to reinforce the framework and mitigate the Financial the title of Continental Europe FCRMC, reporting directly to the
Crime risks, particularly in relation to transaction monitoring, HSBC Continental Europe Executive Committee, without
sanction efficiency and identification of attempts to finance discrepancy or demise from existing scope, as per previous year
terrorism. report.
Control System The HSBC in Continental Europe FCRMC is fed by the Line of
Business and HSBC Operations, Services and Technology FCRMCs
This role is ensured:
with formalize governance. The Line of Business and HSBC
• firstly, by implementing the policies or guidances, by advising Operations, Services and Technology FCRMCs are also held
and training the operating staff in the businesses or functions; monthly, and are chaired by each Heads of Line of Business and
• secondly, by conducting cross-functional theme-based reviews the COO of the Bank. Moreover, these FCRMCs enable the
carried out by the Compliance Assurance team (‘Compliance management of financial crime compliance at a more granular
assurance). level.
• In addition, FC France is in charge: Legal risks and litigation management

– of the oversight of different branches in Europe in relation to The HSBC Continental Europe Legal Department is responsible for
Financial Crime, with a view to comply with HSBC Group HSBC Continental Europe’s legal risks oversight as a second line
policy and local regulatory requirements. of defence, and helps the various HSBC Continental Europe group
businesses and functions to prevent and control legal risk. The
– of the oversight of other HSBC Continental Europe countries
Legal Department is in charge of litigation follow-up. The Legal
in relation to Financial Crime with a view to comply with
Department also supervises the legal teams of HSBC Continental
HSBC Group policy.
Europe’s subsidiaries and branches abroad.
Issues reporting and the FC Compliance Committee
Prevention of legal risks
The control compliance framework follows up potential identified
The Legal Department is responsible for running the Legal Risks
issues, relying on existing reporting procedures within FC,
Forum which meets quarterly to examine situations likely to give
Compliance Assurance, Investigations and COO functions, as well
rise to specific and significant legal risks. It also runs the Complex
as on information in regard to the supervisory bodies.
and Structured Transactions Meeting, which examines the legal,
Issues reporting accounting, tax, financial, and reputational risks arising from
Potential issues identified are raised to the attention of the complex structured transactions. The Legal Department
management and reported in the Integrated Regulatory participates in the Products Examination Committee, in the
Information System (‘IRIS’) tool for appropriate action and Operational Risks Forum, and in the Risk Management Meeting
follow-up, as well as to regulators when above previously defined (‘RMM’) of HSBC Continental Europe, and is involved in due
thresholds as per Article 98 of the French Order of 3 November diligence procedures for market operations, structured
2014. As part of a non-compliance risk consolidated approach, the transactions and any new acquisition (or disposal) of an entity or
FCC Function ensures, furthermore, a centralised monitoring of business by the HSBC Continental Europe.
any supervisory authorities contacts within group’s entities of The Legal Department is also responsible for managing risks,
HSBC Continental Europe. directly or indirectly, connected with defence litigation matters. It
is involved in dealing with credit files requiring special
The FC Compliance Committee
management or in default. The Legal Department monitors other
The functioning of the framework and the main non-compliance risks that might have a legal impact.
risks identified are reviewed through dedicated risk and control
forums, consisting of both compliance function representatives
Control framework of legal risk
The Legal Risks Forum, chaired by the Chief Risk Officer, meets
quarterly to ensure that the risks framework for legal risks remains
adequate in the face of changes in laws, regulations and group
organisation.
The Forum also examines the monitoring of incidents raised
previously, the results of implemented controls, along with any
new incidents and measures taken. It reports on its activities to
the HSBC Continental Europe Operational Risks Forum.
This framework is wholly effective and a detailed description of it
is given in a regularly updated internal procedure. In the
operational risk framework,

Risk
The Legal Department operates as First and Second line of On 21 December 2017, the Paris Court of Appeal decided that the
Defence. A legal risks taxonomy has been defined to harmonise banks, including HSBC Continental Europe, did infringe
their identification and control. The Legal Department is deeply competition law. The amount of the fine against HSBC Continental
involved in the review and control of the legal risks assessed by Europe is unchanged.
the businesses and functions in their Risk and Control HSBC Continental Europe has appealed the 21 December 2017
Assessments. Paris Court of Appeal’s decision before the French Supreme court.
Litigation monitoring with regard to HSBC Continental On 29 January 2020, the Supreme Court decided to quash the
Europe entities 2017 appeal decision and to refer the case back to the Paris Court
of Appeals.
The situation of the risks arising from significant litigation in
progress against the HSBC Continental Europe is examined The Apollonia case
monthly by a committee run by Chief Accounting officer, chaired As was the case for around 20 other banks, HSBC worked during
by the Chief Financial Officer and the Chief Risk Officer and is a limited period of time (from early 2006 to April 2007), and mainly
made up notably of representatives of the Finance Department, in one branch, with a financial adviser and estate agent, known as
the Credit Department and the Legal Department. This committee Apollonia. The latter offered its clients (mainly independent
decides upon the amount of the litigation provision to be charged professionals) ‘turnkey’ tax efficient products of the Loueur
or written back. Meublé Professionnel (‘LMP’) (professional lessor of furnished
Cases in progress as at 31 December 2020 involving legal risks accommodations) type and for a small number of investors ‘Loi
likely to have a significant effect on the financial situation of the Robien’ type tax efficient products.
HSBC Continental Europe net assets are set out below. These Between April 2006 and April 2007, 184 property loan applications
cases have given rise to appropriate provisions, as necessary. were approved, for a total of EUR 29 million, bearing in mind that
Interbank commissions relating to electronic cheque different media have said the total amount of operations by
processing Apollonia with all banks purportedly reached around EUR 2 billion.
In 2002, a number of banks with retail networks, including HSBC At the end of September 2008, HSBC Continental Europe became
Continental Europe forming part of an inter-branch committee aware of the use of inappropriate marketing methods by
sponsored by the French Banking Federation, introduced a system Apollonia. Moreover, it appeared that most of the borrowers took
of interbank fees applying to the new electronic cheque out several loans through Apollonia from various banks without
processing termed Echange d’Images Chèques (‘EIC’), the cheque notifying HSBC Continental Europe.
image exchange system. HSBC Continental Europe is involved as a civil law party, giving it
In March 2008, the French Competition Authority sent notification access to the criminal file. From this, it has become apparent that
of a complaint to the 12 members of the committee – including a very large proportion of the official agency authorisations, signed
HSBC Continental Europe – for the introduction of interbank fees by the buyers giving authority to sign purchase and sales deeds,
when the EIC was set up. were not properly prepared.
On 20 September 2010, the French Competition Authority took an HSBC Continental Europe systematically files proceedings against
unfavourable decision as regards the scheme introduced in 2002. those investors with loan repayments due but the hearings are
In substance, it found that the EIC constituted an illegal scheme, often held in abeyance because of the criminal proceedings under
the purpose of which included effects on the cost of processing way. However, in order to settle the financial aspects of the
cheques causing an increase in costs charged on ‘major remitter’ matter, without waiting for the outcome of criminal proceedings,
customers. The banks involved in setting up this charging system out-of-court settlements have already been reached with some
were fined a total of EUR 384.9 million. HSBC Continental Europe borrowers and talks are continuing with other borrowers.
was ordered to pay a fine of EUR 9.05 million. HSBC Continental Proceedings have also been commenced against the notaries
Europe, together with the other banks that were fined, except the involved and their insurer MMA. These proceedings have also
Banque de France, decided to appeal this unfavourable decision. been adjourned for the time being.
The banks actually contest as much the anticompetitive purpose Adequate provisions have been recorded for the Apollonia case in
as the anticompetitive effect of the EIC-related commission and the light of information available to Senior Management.
argue that it has no significant effect on the costs of banking HSBC Bank Polska S.A.: ACTION Case
services. The banks, including HSBC Continental Europe, further
question the method used in calculating the fines imposed upon On 29 June 2018, HSBC Continental Europe acquired from HSBC
them. Bank plc 100 per cent of the shares of HSBC Bank Polska S.A.
Pursuant to the terms of the Sale and Purchase Agreement, HSBC
On 23 February 2012, the Paris Court of Appeal overturned the Continental Europe and/or its subsidiaries will be indemnified by
decision of the French Competition Authority, finding that the
Authority had failed to demonstrate a restriction by object. The HSBC Bank plc in respect of certain liabilities relating to the
Paris Court of Appeal cleared the banks of wrongdoing and activities of HSBC Bank Polska S.A. prior to the acquisition of
ordered the repayment of fines paid by the banks. HSBC Bank Polska S.A. HSBC Bank Polska S.A. is involved in the
proceeding as described below. In April 2017, ACTION brought an
The French Competition Authority appealed to the Supreme Court action against HSBC Bank Polska S.A. alleging, among other
against the decision. things, breach of a facility agreement and claiming damages and
On 14 April 2015, the French Supreme Court overturned the indemnification for lost profits. The proceeding is ongoing.
decision of the Paris Court of Appeal of 23 February 2012 solely on European interbank offered rates investigations and litigation
procedural grounds.
See Note 36 of the consolidated financial statements with regard
Consequently, the banks had to transfer back the sums to other significant legal proceedings and regulatory matters
reimbursed on the basis of the decision of the Paris Court of relating to HSBC Group entities generally, including HSBC
Appeal of 23 February 2012. Continental Europe.
The French Supreme Court referred the parties back to the Paris
Court of Appeal.

Other regulatory, civil law or arbitration proceedings Global Internal Audit is responsible for providing independent
assurance that HSBC is managing tax risk effectively.
To date, as far as HSBC Continental Europe is aware, it is not
threatened by any other regulatory, civil law or arbitration Key developments 2020
proceedings that are in progress or in suspense against it that HSBC continues to apply global initiatives to improve tax
might have, or over the last 12 months have had, any significant transparency such as:
effect on the financial situation or the profitability of the company
and/or of the group. • The US Foreign Account Tax Compliance Act (‘FATCA’);
Tax risk • The OECD Standard for Automatic Exchange of Financial

Account Information (also known as the Common Reporting
Overview Standard);
HSBC seeks to apply the spirit and the letter of the law in all • The Capital Requirements Directive IV (‘CRD IV’) Country by
territories where we operate. As a consequence, we pay our fair Country reporting;
share of tax in the countries where we operate.
• The OECD Base Erosion and Profit Shifting (‘BEPS’) initiative;
HSBC does not undertake transactions whose sole purpose is to and
abuse the tax system or otherwise employ tax avoidance
• DAC6 disclosure of aggressive operations.
strategies, for example by artificially diverting profits to low tax
jurisdictions. Accounting risk
HSBC does not deal with customers who are not tax transparent The accounting procedures
or who may want to use our products to avoid taxation.
The Finance Department is responsible for the effective
HSBC will use tax incentives or opportunities for obtaining tax enforcement of accounting policies and accounting control
efficiencies where these: processes in compliance with the framework of HSBC Continental
• Are aligned with the intended policy objectives of the relevant Europe. It defines, for all the entities of HSBC Continental Europe,
government; and the procedures and controls to be applied. This particularly
concerns the procedures and accounting policies, the procedures
• Are aligned with business or operational objectives. of certification and justification of Balance Sheet and Off Balance
Governance and structure Sheet and the Analytical Review of accounts that support the
preparation of the financial statements.
The HSBC Continental Europe Tax Department (‘DAF’), oversees
as a Second Line of Defence the HSBC Continental Europe group The accounting and regulatory audit trail is documented as per the
tax risk. procedures and documentations established under the
responsibility of the departments of Financial Control (‘FC’).
DAF attends the Product Examination Committee, the Committees
related to Internal Control and Operational Risk and Wealth The Finance Department updates and circulates the procedures
Management Oversight Committee (‘WMOC’) and is part of the and accounting guidance which complies with the French GAAP
GBM Due Diligence process. and International Financial Reporting Standards (‘IFRS’). These
principles are compliant with the French Commercial Law, French
Key risk management process
accounting standards and IFRS.
Tax risk is managed in accordance with Non Financial Risk
The enforcement of IFRS by all the entities of HSBC Continental
Optimisation Program (‘NFRO’) which defines minimum standards
Europe group is also in compliance with the accounting principles
and processes, and the governance structure for the management
of the HSBC Group.
of operational risk and internal control.
Organisation of accounting production and financial
Responsibility for minimising operational risk lies with all HSBC
employees. Specifically, all staff are required to manage
reporting
operational risks, including tax risks of the business and The vast majority of reporting documents are produced monthly
operational activities for which they are responsible. and on both a non-consolidated and consolidated basis. These
reportings present on year on year analysis including full
The Tax Policy covers three key risks:
substantiation of significant variances.
• Tax payments – risk of failure to withhold, charge or pay taxes;
Two sets of accounts are prepared, one under French GAAP and
• Tax compliance – risk of failure to report and file accurate tax one under IFRS. The HSBC Group’s integrated ‘SARACEN’
returns including customer information; consolidation software produces IFRS-compliant consolidated
• Tax avoidance – risk that HSBC enters into transactions on its financial reporting statements that also meet all the requirements
own account or promotes products and services to customers of the local regulator and the parent company.
that are not consistent with the spirit of the law (tax avoidance); A financial and balance sheet datawarehouse enables
HSBC manages the three key tax risks by: reconciliation and ensures that accounting, financial, regulatory
and management reports are consistent with financial accounting.
• Identifying the risks; The datawarehouse stores data from both HSBC Continental
• Ensuring that the right controls are in place to prevent, manage Europe and most of its subsidiaries. It contains various types of
and reduce risk; data: accounting data, inventories, or detailed breakdowns of
carrying values depending on the information required for internal
• Setting policy and guidelines for managing tax risks;
and external disclosure. Consistency controls have been
• Providing support and guidance to support the above policies; established within the datawarehouse, which feeds the
and consolidation software and is used to produce the various French
• Employing an experienced, professionally qualified in-house tax regulatory reports via the Report Authority software.
team. Our in-house team is supported by advice from external
advisers whenever in-house expertise is not available.

Risk
Control of accounting production to HSBC Holding, duly signed by the CEO, the CFO and the Head
of Internal Audit, attesting the effectiveness of internal financial
The financial control of the Bank is organised around three main
controls.
axes:
• The monthly accounting certification; Resilience risk
• The analytical review of the financial statements; Resilience risk is the risk that we are unable to provide critical
services to our customers, affiliates and counterparties, as a result
• The financial Internal Control Sarbanes-Oxley (‘SOX’). of sustained and significant operational disruption.
HSBC Continental Europe prepares, on a monthly basis, a Sustained and significant operational disruption means events that
certificate of accounting reconciliations which is addressed to the affect:
HSBC Group Europe Finance Department. This certificate, which is • the stability of the financial system;
an attestation of the full reconciliation and substantiation of
Balance Sheet and Off Balance Sheet, is signed off by the CFO, • the viability of the bank and our industry peers; or
based on a consolidation of certificates of accounting • the ability of our customers to access our services.
reconciliations transmitted by the heads of accounting and
We seek to understand the effects and outcomes of these events,
financial reporting of HSBC Continental Europe and its entities.
prioritising services which are both vulnerable to disturbance and
These certifications are formalised using the Group managed
critical to our customer service offering.
accounting certification tool AssureNET.
The monthly accounting certification reporting is based on the Information and cyber security risk
principle according to which each account of a general balance is Overview – Risk description
assigned to an owner, which is responsible for its reconciliation.
The anomalies detected lead to the determination of corrective The bank operates a three lines of defence model to manage its
actions for the teams and business concerned. The BRCM risks, the first line of defence (Cybersecurity) being responsible for
(Business Risk & Control Managers) of the entities of HSBC the day to day operation and management of the information
Continental Europe group, internal controllers of the First Line of security control environment; the second of line of defence
Defence, ensure these controls during their work programme on a (Resilience Risk) being the risk stewards responsible for
risk based approach. determining the information security risk appetite, policy
development and governance and oversight of the activity of
Balance sheet and profit and loss analytical reviews are performed Cybersecurity; and the 3rd line of defence being the (Internal
by operational accounting and Business Finance/Management Audit) team whole role is to provide Senior management and the
Reporting and Analysis teams on a monthly basis. These variance Board with an independent vision concerning risk management
analysis are performed against business plans, budgets, trends and internal control governance and processes.
comparisons vs prior month or year-on-year and all major
variations according to thresholds are investigated and explained. The threat from cyber-attacks remains a concern for our
These reports are sent to the HSBC Group Europe Finance, Heads organisation, and failure to protect our operations from internet
of businesses and functions, as well as CFO. Financial reporting is crime or cyber-attacks may result in financial loss, business
presented monthly by the CFO to the Executive Committee of disruption and/or loss of customer services and data or other
HSBC Continental Europe and quarterly to the Audit Committee, sensitive information that could undermine our reputation and our
the Risk Committee and the Board of HSBC Continental Europe. ability to attract and keep customers. Ransomware and
The Audit Committee and the Risk Committee examine quarterly, Distributed Denial of Service (‘DDoS’) attacks are an increasingly
half-yearly and annually the accounts submitted to the Board. dominant threat across the industry.
In order to comply with the requirements of American Law of Ransomware are mostly distributed via spear phishing and aim to
Sarbanes-Oxley (‘SOX’), enforced by the HSBC Group, HSBC extort money from the victim or used to issue fraudulent payments
Continental Europe thoroughly evaluates the controls in place within the internal bank systems.
while establishing the financial statements. The main processes Key Developments 2020
supporting the establishment of these statements are part of a
HSBC, through the Cybersecurity Maturity Improvement
detailed documentation and proper controls, and regularly
Programme, succeeded to implement key cyber controls such as:
supervised within periodic review framework. These detailed
analysis of operations flows till the accounts contribute to the • Secure Development & Vulnerability Remediation tools leading.
improvement of control of the audit trail. Defects identified during Such tools are divided in three categories:
this process must be corrected in the given period of time defined – Static Application Security Testing, allowing to scan source
by the owners of remediation action plans and should be quarterly code and to identify known vulnerabilities;
reviewed by the Finance SOX internal controller.
– Dynamic Application Security Testing, allowing to identify
The Internal Audit team takes actively part in the supervision of potential security vulnerabilities in the web application and
the correct implementation of SOX process, while performing their
periodic controls. The Finance SOX internal controller has access
via the Audit databases of HSBC Group (ARAMIS and AID – Audit
Issues Database), to the audit points raised by the different teams
of audit, which permits to follow-up SOX recommendations issued
by the periodic control team. In addition, the external statutory
auditors perform every year the review of the control organisation
on the behalf of HSBC Group and give their opinion on the
SOX 404 report prepared by the management of HSBC Holding
PLC.
Every quarter, the Audit Committee and Risk Committee of HSBC
Continental Europe are informed of the results of these controls
and the progress of main action plans in case of deficiencies. A
certificate is half-yearly sent by HSBC Continental Europe

architectural weaknesses; Functions. Finally, Cyberstar for Business training focusing on
phishing & ransomware risks was also deployed for all
– Mobile Application Security Testing used to analyze and
employees.Group Cloud strategy and to review data privacy,
identify vulnerabilities in applications used with mobile
regulatory compliance, Legal and IT aspects.
platforms;
A monthly Third Party Risk Forum is in place to ensure that third
• Vulnerability Management. A new tool used to consolidate the
parties are managed in line with Group standards and regulatory
view of all vulnerabilities identified during scans was
expectations.
implemented and is now available.
• Patch management automation processes were optimised to Third Party Risk
enhance patching capability and deploy patches within 48 Risk Overview
hours of being released by the vendors greatly decreasing the
number of critical vulnerabilities. Third Party Risk is the risk to which HSBC France is exposed
arising from the receipt of goods and/or services from a Third
• Data Loss prevention (‘DLP’) system. OCR (Optical character Party. This risk covers both external and HSBC intra-Group third
recognition) capability was implemented to extract the data parties.
embedded in images attached to outgoing e-mail, enabling to
use pre-existing text based DLP polices to scan for sensitive Third Party Risk Management
data. A robust framework is implemented to ensure an effective
Governance management of the Third Party Risk.
HSBC is committed to maintaining and continually improving Each business and function across the first line of defence is in
information security to meet our responsibilities to our customers charge of monitoring the Third Parties under its perimeter to
and regulators and to reduce exposure to legal sanction, ensure that any service considered for outsourcing is adequately
operational loss or reputational damage. We are committed to risk-assessed, that appropriate due diligence and controls are
ensuring the confidentiality, integrity and availability of corporate, conducted, that the service is duly approved by the appropriate
client and customer information. level of Management prior to the contract commencement date
and that the service is adequately monitored all along the contract
HSBC has implemented a risk management framework across the lifecycle. Each business and Function is in charge of monitoring
lines of defence to identify, assess, report and manage risks adherence to the Third Party Policy through continuous control
across the organisation. Information security frameworks within monitoring and thematic reviews performed by the CCO (Chief
HSBC follow internationally recognised best practice standards. Control Officer) teams and to reflect the effectiveness of the
The governance of the Cyber and Information security risks control environment into the Group Risk Management tool, Helios.
includes the Cybersecurity & Vulnerability Steering, the Cyber Within the second line of defence, the Resilience Risk is in charge
Defence Forum, the HSBC Operations, Services and Technology of defining the strategy and the policy for an effective
Control Environment Management Meeting, the business risk and management of the Third Party Risk, Regulatory Compliance and
control oversight meetings and ultimately the Risk Management Operational Risk are systematically engaged to review and
Meeting. approve the materiality assessment proposed by the first line of
defence, Legal is engaged to review the contractual agreements
Key Management Process where predefined contract templates cannot be used or in case of
Security incidents: In 2020, the bank was the target of limited request from the provider to adjust the contract, and each Risk
number of DDoS attacks on our external facing websites across Steward is engaged to review the risk assessment undertaken by
the Group. Additionally, the bank did not suffer any ransomware the first line of defence within his area of expertise.
attacks. However, the bank has seen an increase of ransomware In addition to the above, the Regulatory Compliance Risk
attacks on some of its third parties although these had no impact Assurance team is in charge for conducting thematic reviews to
on HSBC data or availability of services. Although cyber-attacks in ensure that the policy is correctly implemented across the different
2020 had a negligible effect on our customers, services or firm, business lines and functions.
due to the increasing sophistication of cyber-attacks there is the
potential for future attacks to have a material adverse effect on our Governance
business, prospects, financial condition, reputation and results of Any outsourcing of a material service needs to be formally
operations. HSBC had not reported any significant security approved by the Bank Risk Management Meeting prior to the
incidents in the past 12 months. contract commencement date.
Training & awareness: HSBC has an ongoing security awareness A dedicated Cloud Committee is implemented to review each
programme employing various channels to engage staff including, project to outsource on a Cloud to ensure adherence to the Group
mandatory annual online training, intranet content, posters, Cloud strategy and to review data privacy, regulatory compliance,
emails, new employee education and monthly thematic awareness Legal and IT aspects.
power point packs. All HSBC staff has been covered by the
awareness training. High risk profiles such as Board of Directors A monthly Third Party Risk Forum is in place to ensure that third
also attended a dedicated Cyber and Information Security parties are managed in line with Group standards and regulatory
awareness training session. expectations.
In addition to this annual mandatory on line training, every staff is Security of People and Physical Assets
encouraged to registered to a Cyber shield Programme. The Overview – Risk description
programme consists of three hours training per month on Cyber to
enhance their awareness. Furthermore, the Cyber monthly Heightened global terror threat, organised crime, political and
awareness newsletters are sent to all Business Information Risk social unrest, activism and the results of sanitary crisis place a
Officers and communicated to all Global Business/Global greater emphasis on the need to ensure the physical protection of

Risk
our people, premises and property through careful analysis of resilience; third party and protective security risk, including
current and emerging security threats. Contingency Risk area.
Protective Security is in charge of managing physical risks, In the 2nd half of 2020, a transformation occurred to merge the
identifying them and preventing them. The department Operational Risk and Resilience Risk within one team called
implements physical, electronic and operational solutions to Operational and Resilience Risk (‘ORR’).
ensure the security of personnel, assets and information held by In parallel, the Business Continuity & Incident Management team
HSBC against any malicious or criminal action. now sits within the HSBC Operations, Services & Technology Chief
Key developments Operating Office Office function. The Business Continuity &
Incident Management team located in France is now part of the
After the previous yellow vests crisis of 2019, this year saw the
Europe Business Continuity & Incident Management team who
increase in the terrorist threat, the Covid-19 pandemic and the
has accountability for the oversight of all delivery aspects of
long lockdown periods that required daily adaptation to ensure the
Business Continuity Management and Incident Management for
necessary security staff presence, a permanent fitting of our
the countries within HSBC Europe.
procedures, and the continuity of the management and
maintenance of security and access control systems. Covid-19: From the beginning, it has been decided to coordinate
the contingency response across Europe, based on lesson learned
The Protective Security team has also been heavily involved in the
from the first wave in Asia where HBSC’s teams had to respond
change of Head Office from l’avenue des Champs Elysées, to
first. Thus, the massive usage of work from home was anticipated
l’avenue Kléber, particularly for Elysées strong rooms transfers
and related actions timely implemented, so no country suffered
and relocating customer safes; as well as in the design and
from partial/full lockdown impacts. In parallel, a global Covid-19
monitoring of the security systems implementation in the new
Working Group was setup to ensure coordination across the
headquarters on avenue Kléber.
regions, to share best practices, define procedures for accounting
Governance staff, and guidance for planning phased return to office after the
The Protective Security team drafts procedures and circulars event.
relating to security within the scope of HSBC Continental Europe, The global response to the Covid-19 resulted in a significant
based on Group standards and regulatory complaints. increase in business processes being undertaken remotely. This
As 1st line of defence, Protective Security implements the required put an increased focus on resilience risks including contingency
security controls in accordance with the instructions and risks at service providers as part of Third-Party Management risk
taxonomy issued at the global level. and raised specific attention towards data leakage for staff
working from home due to lack of management oversight.
The Protective Security team provides advice to business lines or
functions, and, because of its cross-functional role, is involved in Overall it was found that the bank responded swiftly and
crisis management committees. efficiently to the situation as it could leverage the legacy usage,
equipment and infrastructure of occasional remote working and
Contingency risk succeeded in rapidly putting in place a governance to manage the
business exceptions processes.
Overview
Contingency Risk covers the risk that we are unable to provide
Governance and structure
critical services to our customers, affiliates and counterparties, as Business Continuity & Incident Management has established a
a result of a sustained and significant disruption due to various quarterly local committee, headed by the Chief Operating Office
kinds of events. Continetal Europe in which are presented the status of the
The management of this risk is performed by the first and second contingency risk controls and the management of any major
line of defence. Within the first line of defence, the Global incidents.
businesses and functions own the risk and implement adequate In this committee are also reviewed the issues and risk identified
controls. The Business Continuity & Incident Management with the risks Businesses or Global Functions. These elements
function support them and ensure control monitoring. The could also be presented and escalated to the HSBC Europe RCMM
stewardship role of this risk is discharged by the Resilience Risk (Risk and Control Management Meeting).
function from a second line of defence perspective.
Business Continuity & Incident Management also has an internal
The aim is to ensure that the group’s critical services, processes management and escalation structure implemented through
and functions have the resilience to maintain continuity in the face Regional/GSC and GBM Team Meetings (‘TM’) as well as the
of major disruptive events. Within this very large perimeter, Global Business Continuity & Incident Management Leadership
business continuity management covers the planning for recovery Team Meetings (‘LTM’) in order to ensure that noteworthy points
through Business Continuity plans, seeking to minimise the are escalated to the Regional/GSC/LOB and Global Business
adverse effects of major business disruption, either globally, Continuity & Incident Management Heads.
regionally or within country, against a range of actual or emerging
Key risk management processes
risks.
The resilience risk team oversees the identification, management
Key developments 2020
and control of contingency risks. The Risk Taxonomy & Control
In 2020, the Group has finalised the implementation of the Library (‘RTCL’) linked to contingency risk is beng reviewed as part
Resilience Risk function, linked to the revision of the Non-Financial of the Non Financial Risk Optimisation programme.
Risk simplified risk taxonomy. Resilience risk function sits in the
Global policy and procedures are also being re-written to align
second line of defence and is in charge to provide guidance and
with the changes in the organisation and the new role of Business
oversight to our businesses and global functions for: strategic
Continuity & Incident Management.
change and emerging threats, systems and cyber resilience,
information and data resilience, payments and processing Business Continuity & Incident Management will going forward
now assess the key operational controls and attest using
continuous monitoring to their effectiveness.

IT Systems risk • oversees the results of any key control indicators (‘KCIs’) that
call into question the effectiveness of the control environment;
As part of the Non-Financial Risk Optimization programme
(‘NFRO’), a new Risk Taxonomy and Control Library (‘RTCL’) for • oversees the adequacy and implementation status of key and/
Information, Technology and Cyber Security (‘ITCS’) risk has been or aged remedial actions relating to controls;
created this year. • oversees programs with a material impact on IT control
What does the new RTCL deliver for HSBC? environment (e.g. CS-MIP, Ever greening etc.) and assess the
implications of potential delays or funding challenges;
The ITCS RTCL replaces the two legacy technology-focused
RTCLs: Information and Cyber Security Risk (‘ICSR’) library which • oversees the identification and escalation of, and
covered malicious and misuse events and the Systems and Data appropriateness of action taken towards, material internal and
Integrity (‘SDI’) library which covered non-malicious, accidental external events.
and poor operating events. The new library gives HSBC a Where further improvement of the control environment is not
significant improvement in its ability to assess technology-related achievable:
risk. Aligned to current industry standards (e.g. National Institute
• it takes action to reduce exposure or propose risk acceptances
of Standards and Technology (‘NIST’)), the combination of the
to the corresponding risk owners and;
legacy libraries has simplified the control architecture. It has also
given HSBC a better clarity into the control environment, with an • reviews and ratifies the approach to monitoring the
increased number of precisely defined controls which now include effectiveness of key controls relied on to manage the material
activities and processes not covered formally by either legacy inherent risks.
library. Additionally, the introduction of a more flexible library In undertaking the above, the CEMM considers internal and
allows HSBC to adjust to changes in technology, such as the move external events which could impact the risk taxonomy and
to Cloud adoption. evaluates whether or not this merits a change in control
This greater definition improves transparency for Risk Owners, effectiveness ratings.
allowing greater scrutiny of the performance of IT controls. CEMM membership consists of Technology Control Owners,
Why was a new library required? Technology Executives within the defined perimeter, CCO Tech
Leads, Second Line Risk Stewards and Third Line Internal Audit
The Information and Cyber Security Risk (‘ICSR’) legacy library
partners. External audit is also a member of this committee.
was introduced in 2017; the Systems and Data Integrity (‘SDI’) in
2018. While they represented an improvement in our ability to The meeting escalates all matters to the attention at Group and
control technology-related risk, the lack of granularity made it hard Regional level as well as the Global and Regional Business RMMs.
for Risk Owners to fully understand the mitigations in place
Model risk
against their risks. This was further exacerbated by changes to
technology, regulatory expectations and the threats HSBC face. Overview
As a result, a remediation programme, the new Technology and Model Risk Management is a second line of defence function that
Cyber Security (‘ITCS’) RTCL has been developed and launched as encompasses three areas: Independent Model Validation, which
part of NFRO. provides challenge to our most material models; Model Risk
Governance, which defines and manages model policy; and Risk
Governance and Control Environment Management
Stewardship, who are our senior executives providing oversight,
Europe and UK-Non Ring Fenced Bank (‘NFRB’) Chief Information review and challenge to First Line, and guide model risk
Officer (‘CIO’) is accountable for the end-to-end technology management activities to facilitate responsible development,
services provided to the European and UK-NRFB businesses. This understanding and use of models and analytics in support of
includes managing the regional technology investment, strategic objectives across HSBC.
overseeing internally and externally sourced technology services
and leading efforts to maintain an effective technology controls
Key developments in 2020
environment on behalf of the regional businesses. A new Model Risk Policy was designed, and is being progressively
The purpose of the Europe IT Control Environment Management implemented. This drives the following developments.
Meeting (‘CEMM’) is to give oversight and management of the • The definition of ‘models’ was clarified, and the actual
four Core Design Principles as detailed below: inventory of the models used by the bank is being revised.
• Control Environment; • The Model Risk Policy is applied to each Model Use Case
• Key Control indicators and; instead of each model, as different use cases call for different
kinds and levels of scrutiny.
• Continuous Monitoring of the control environment.
• A new model risk control library was designed and
The Control Environment Management Meeting (‘CEMM’) implemented.
supports technology control owner responsibilities as described in
the Operational Risk Mandatory Policy: • A more ambitious model life cycle was designed, with well-
defined steps from Planning and Development to Validation,
• oversees the effectiveness, assessment and management of Approval and Implementation, and clear requirements for the
the technology controls operated and owned by their Business monitoring of live models.
Lines or Functions;
• The roles and responsibilities in the Model Risk Policy are
redefined, in particular with a new role of Model Sponsor.

Risk
designed to encourage awareness of model risk within In accordance with article 27 of the French order of 3 November
businesses. 2014, the periodic control framework applies to the entire HSBC
Continental Europe company, including its European branches, as
• The required depth of scrutiny is made commensurate to the
well as to companies under exclusive or joint control.
materiality of model risk, allowing to allocate resources to key
models. Global Internal Audit (‘GBL INA’) is comprised of six global audit
teams whose role is to provide expert coverage of HSBC Group’s
• The role of Model Risk Management function is now well
businesses and functions:
defined, giving the Second Line the authority to stop or impose
conditions to use the models. • Wealth and Personal Banking (‘WPB’) Audit;
Governance and structure • Commercial Banking (‘CMB’) and Global Banking (‘GB’) Audit;
At the level of HSBC Group, Model Risk Management is headed by • Global Markets (‘GM’) Audit;
the Chief Model Risk Officer, and is structured as a global sub • Finance and Risk Audit;
function, with regional Model Risk Management teams which
support and advise each global business and global function. At • Compliance Audit; and
the level of HSBC Continental Europe, Model Risk Management is • HSBC Operations, Services and Technology Audit.
headed by its local head, reporting to the Chief Risk Officer, and
functionally to the EMEA Head of Model Risk Management. The GBL INA is also comprised of, four regional audit teams (United
HSBC Continental Europe head of Model Risk Management is Kingdom, Asia Pacific, United States and Rest of the World) that
supported by a team of independent model review and model risk include Country Audit Teams (‘CATs’). Global Internal Audit France
overnance staff based locally, and by teams in HSBC Centres of (‘INA FRA’) being one of the CATs, whose responsibility is to cover
Excellence in Poland and India. the risks within HSBC Continental Europe legal perimeter
(Belgium, Czech Republic, France, Greece, Ireland, Italy,
Key risk management processes Luxembourg, Netherlands, Poland, Spain and Sweden), supported
HSBC regularly reviews its model risk management policies and by local teams in Luxembourg and in Poland.
procedures, which require model owning/using businesses and HSBC Continental Europe periodic control is therefore covered
functions to demonstrate a set of comprehensive and effective conjointly by two GBL INA entities, functionally linked and
model risk controls. Model Risk Management report on model risk coordinated:
to senior management on a regular basis through use of the risk
• INA FRA, a general audit team based in France, in the main
map and top and emerging risks. It also reviews the effectiveness
historically auditing central functions, WPB, CMB, banking
of the model risk committee structure on a regular basis to ensure
operations, IT and strategically important projects. INA FRA
appropriate understanding and ownership of model risk is
budgeted headcount was 30 members in 2020, mainly split
embedded in the businesses and functions.
between business auditors and IT auditors; and
Periodic control • the global teams, specialised by business and/or function,
In accordance with French ministerial order of 3 November 2014 based principally in London and in Hong Kong.
concerning internal control within financial institutions, and Beyond the functional and regional organisation described above,
payment and investment service providers, the role of Internal GBL INA relies on local resources in numerous countries.
Audit is to provide Senior Management and HSBC Continental
Europe Audit and Risk Committees objective assurance on risk CATs form one of the pillars of GBL INA’s strategy. Country teams
management and the internal control system implemented by the have the detailed knowledge of local regulations and environment
bank. Periodic controls of HSBC Continental Europe aim to enabling coverage to be adapted as appropriate, and functionally
ascertain the compliance of operations, the levels of risk actually reporting to the global audit function strengthens their
incurred by the institution, due observance of the procedures and independence and ensures consistency between teams, all of
the effectiveness and appropriateness of the control frameworks, whom are held to the high standards defined and regularly
by means of independent investigations conducted centrally by updated in the Audit Instruction Manual (‘AIM’). That all teams
staff qualified for this purpose. share a reporting line into a global function helps collaboration and
the sharing of best practices.
As part of HSBC Group’s risk management framework, Internal
Audit (‘INA’) constitutes the Third Line of Defence, coming Periodic controls on HSBC Continental Europe in 2020 have thus
successively behind the businesses and functions’ own First Line been assured jointly by GBL INA directly, by INA FRA or by both
of Defence (Risk Owners, Control Owners and Chief Control actors in concert in accordance with the agreement signed on
Officers) and the Second Line of Defence teams (Operational Risk, 25 March 2011 and updated on 2 August 2019 which structures
Assurance Teams and Risk Stewards). Whilst the First and Second the roles, responsibilities and coverage model.
Lines of Defence are taken into account, INA has unlimited scope There are five members of the global GBM audit team that are
to define its own programme of work. This freedom is based on based in Paris. In addition, other members of global teams are also
the fact that Internal Audit is responsible for providing Senior located in Paris: one person for Model Risk Audit and one person
Management and the Audit Committee and Risk Committee of the for Insurance Audit.
bank, independent assurance on the risk exposure and level of
control by management. The scopes of local audit and global audit converge and are
consolidated in the HSBC Continental Europe audit plan. In all
As such, Internal Audit pays attention, in the first instance, to the cases, as defined in the aforementioned French ministerial order of
evaluation of the respect of national legislation applicable to the 3 November 2014, all audits on HSBC Continental Europe are
audited area, secondly, to the correct application of rules and
procedures in force within HSBC Group and finally, that audited
activities remain within the defined appetite for exposure to the
associated risks.

managed in coordination with the Head of INA FRA (Inspector This committee also monitors outstanding action plans resulting
General), who oversees their consistency and efficiency. from very high or high risk audit issues.
The Head of INA FRA reports to the Head of Rest of the World Finally, the HSBC Continental Europe Internal Audit function is a
Audit and HSBC Continental Europe Audit Committee, and member of the Inter‑Audit Committee (Comité Inter-Inspections
administratively to the HSBC Continental Europe Chief Executive Générales – CIIG), which assembles eight French banks together to
Officer. Since 2017, in accordance with the Solvency II undertake concerted audits of vendors providing services to at
requirements, one independent Senior Audit Manager in charge of least four members, as required by title V, chapter II of the French
periodic control for the insurance subsidiary of HSBC Continental ministerial order of 3 November 2014. This approach to jointly
Europe has been appointed. audit common service providers is also mentioned in the European
Banking Authority (‘EBA’) guidelines on outsourcing arrangements
All Audit work is performed in accordance with HSBC Group’s
that have been issued in February 2019.
audit standards, as set out in AIM, which is updated on a regular
basis. The latest version (v.4.5) has been issued on 24 June 2020. Human resources
The Auditing, Reporting and Management Information System Risks relating to human resources management and
(‘ARaMIS’) has been implemented in 2017 and is used for all audit control system
activities:
At the end of 2020, the main HR risks with potentially significant
• Management of the Audit Universe; impacts on the operation of HSBC Continental Europe were as
• Risk Assessment of the Audit Entities; follows:
• Preparation of the Audit Plan; • psycho-social risks generated in particular by Covid-19 crisis, a
poor working environment, inadequate working conditions,
• End-to-end Audit Process; and
insufficient human resources or inadequate managerial
• Issue Tracking and Follow-Up. practices;
The main changes on internal methodology that have been made • people risk linked to lake of resources and/or skills of team;
in 2020 aim to streamline the audit process for internal auditors. In
• data security risks relating to the loss or unauthorised
addition, a library of service providers has been created in ARaMIS
distribution of sensitive data relating to staff;
in order to better monitor coverage of outsourced activities.
• legal risks relating to non-compliance with regulations;
In addition to regular discussions held with Global Audit, a number
of other elements contribute to maintaining an independent and • risks of non-payment of employer contributions and taxes on
up to date view of key risks within HSBC Continental Europe, in remuneration.
particular: HSBC Continental Europe’s Human Resources Department is
• the Inspector General participates in the HSBC Continental involved in the second line of defence of the Human Resources
Europe Executive Committee, Risk Management Meeting (‘HR’) risk of the HSBC Continental Europe group.
(‘RMM’), Operational Risk meeting, Financial Crime Risk For this purpose, it has mapped the transverse risks relating to HR
Management Committee (‘FC RMC’), Regulatory Compliance as well as the HR function risks. This mapping is updated at least
Committee and the HSBC Continental Europe Audit Committee once a year and is used in support of the annual control plan.
and those of its subsidiaries in France;
The internal control also relies on risk indicators (HR Operational
• the Senior Audit Managers participate in the risk committees of Risk and People Risk), which are commented monthly at the Risk
the different businesses and functions; Management Meeting.
• regular bilateral meetings, usually quarterly, are held between The HR Risk Forum was set up in 2009. It meets quarterly in order
the Inspector General, INA FRA senior management and the to review the permanent control system of the Human Resources
different heads of businesses and functions; and risk function. The members of this Committee are the main Heads
• regular meetings, usually quarterly, are held between the of HSBC in France’s Human Resources Department, the HR
Inspector General, INA FRA senior management and the Operational Risk Function correspondent, the representative of
external auditors. Legal in charge of Employment law, the representative of
Regulatory Compliance and the representative of Audit France.
In terms of management information, audit reports are sent to the
management or person in charge of the audited entity or process, The Forum especially presents the governance topics managed by
who is ultimately responsible for ensuring that Internal Audit’s HR and action plans in progress. It reviews progress on
findings are remediated as well as any findings from the recommendations communicated to HR by Audit, or other
supervisory authorities or external auditors. The Chief Executive Functions or internal control and progress on risk identified by HR
Officer, the Chief Risk Officer, the Chief Operating Officer, the departments. It performs analysis on operational loss and HR
Head of Compliance and the Head of Operational Risk receive a incidents.
copy of all audit reports. It ensures that service providers are listed and that the risks
Audit reports relating to HSBC Continental Europe subject to an relating to the services provided have been assessed. It reports on
adverse rating are routinely presented and commented on to its work to the ‘Operational Risk Meeting’.
HSBC Continental Europe Audit Committee by the Inspector The committees
General.
Role of the HSBC Continental Europe People Committee
The People Committee supports the Head of HR and CEO with
respect to strategies, policies and any initiatives in term of staff
management according to the Group HR policy approved by the

Risk
Group People Committee (‘GPC’), while taking into account local Individual awards
practices and regulatory constraints. After approval of the list, it reviews and approves the consistency
The main missions of the People Committee are: of remuneration of the ‘Material Risk Takers’ (except for the
members of the People Committee in its limited perimeter) before
• Follow up, on a transversal way at local level and within every
submitting them to the appropriate HSBC Continental Europe and
Global Business and Global Function, of the implementation of
HSBC Group decision-making bodies.
Group strategies in term of staff management, for instance
regarding diversity, international mobility, employees It reviews the businesses’ 20 highest earners (except the members
engagement score, recruitment, personal development; of the People Committee in its limited perimeter) in conjunction
with the HSBC Continental Europe and HSBC Group’s decision-
• Review of possible dispensations obtained towards GPC on
making bodies and the global businesses lines.
approaches adopted with regard to strategies implementation
and/or Group main policies in term of staff management; It reviews the list of individual breaches with respect to internal
rules in term of credit risk, compliance and reputation, information
• Follow up of main risks in term of staff management at local
security, and for specific employees, to mandates provided by
level (especially cases of breaches identified through
Volker and SRAB rules.
incentivizing compliance process, statistics on turnover, results
of Global People Survey (‘GPS’) and corresponding action The Human Resources department undertakes to submit a
plans); summary of the major focus and main changes of the
remuneration policy to the first Remuneration Committee of the
• Identification of local talented employee, in the context of the
Board of Directors following the People Committee in its limited
Inspire programme (leadership development in France), the
perimeter.
Group Program 'Explore' and the management of the annual
succession plan for the critical roles (Enterprise Critical Roles Role of the Remuneration Committee
and Business Critical Roles);
On the basis of the remuneration policy papers prepared by the
• Follow up of the appropriate application of the Group Strategy People Committee in its limited perimeter, the Remuneration
in term of performance management and assessment of Committee, chaired by an independent Director, gives his view on
talented employee; the bank’s remuneration policies and, practices ensuring they are
• Analysis of the evolution of organisational structures if any and consistent with the HSBC Group policy and that they comply with
corresponding decisions at local level (for example major applicable local standards. It also ensures that risk management
changes to Job Catalogue, to managers scope of and compliance issues are taken into account.
responsibilities); Its scope of responsibility covers all remuneration policies and
• Review of GCB 0-3 career movements; practices in place within the company, with a more in-depth
review of market professionals and Executive Directors.
• Approval of minutes and review of previous People Committee
actions plans. Role of the Risk and Compliance functions as regards
remuneration policies
In term of remuneration, the People Committee in its limited
perimeter performs different roles both in its global and individual The Risk and Compliance functions are, in accordance with the
aspects. HSBC Group rules – Functional Instruction Manual (‘FIM’) and
Global Standards Manual (‘GSM’) referred to for advice on laying
Remuneration policy down remuneration policies on introducing new variable
It examines the main thrust of the remuneration policy put forward remuneration systems and finally during the pay review process
by the Human Resources Department for France and approves it. when allocating individual discretionary variable.
It ensures that this policy fits in with the general principles of the To strengthen the Risk and Compliance functions, certain changes
remuneration policy set out by the HSBC Group for all of its were made in 2010 and significantly reinforced in 2015.
subsidiaries, in accordance with the specific directives set by the On a practical level, these functions are responsible, in their
global businesses lines. respective fields of operation, for:
It gives its opinion on whether this policy complies with local • identifying and listing, throughout the year, all instances of
industry standards and the recommendations of the French bank non-adherence to compliance rules and/or rules of internal
supervisory authorities (Autorité de Contrôle Prudentiel et de procedure and/or rules concerning risk or security information;
Résolution, European Central Bank, Autorité des Marchés
Financiers, Fédération Bancaire Française). • instructing cases of individual breach in coordination with
employee’s manager and, if appropriate, with Employee
Variable remuneration arrangements Relation team;
It checks that all variable remuneration arrangements in place in • presenting cases to the Operational Risk Committee of the
the bank’s various businesses are in line with the general business concerned in order to assess the gravity of the risk
principles set out in the remuneration policy for France, Group and and the level of severity of the individual breach taking into
the global businesses lines and comply with the requirements of account aggravating and mitigating factors. Finally, the
the supervisory authorities. Committee decides the disciplinary and/or managerial actions
It reviews the variable remuneration packages awarded by global to be implemented, any adjustment on performance rating and
businesses lines to local teams (in France or outside of France) on as a result on variable remuneration and last whether,
the basis of the overall performance of each business and of the regarding the severity of the breach, the ‘malus’ rule needs to
relative performance of teams, while taking risk and compliance be applied, cancelling some or all previously awarded and
into account. unvested shares;
It approves the structure of these packages, i.e. the split between • if necessary, providing feedback to management for possibly
cash and shares, between immediate remuneration and deferred making possible changes to internal procedures and to the
remuneration in application of the HSBC Group rules, and local ‘balanced scorecard’ of the employees involved in the
industry standards on the subject. breaches.
The Human Resources Department notifies the People Committee
and the Remuneration Committee of the list of decisions giving a

summary of the individual and/or group behaviour that breached the risk that the ability of a customer/counterparty to meet its
internal rules in terms of risk or compliance and a summary of financial obligations deteriorates as a consequence of the
exceptional positive contributions and behaviours aligned to our transition from a high-carbon to a low-carbon economy.
‘Global Standards’. For more detailed information, refer to ‘Managing the
Insurable Risk Coverage environmental risks related to banking activities’ in the Non–
financial performance statement, page 56.
HSBC Continental Europe is covered through Global insurance
programs placed by HSBC Holdings plc for major insurable Risk management of Insurance operations
operational risks, to protect people, infrastructures and assets. The risk governance framework of HSBC Assurances Vie (France)
Cover limits for assets protection are set on an ‘extreme’ loss focuses on several committees, whose responsibility is to manage
assumption, aiming to mitigate major impacts on Group activities. the exposure of the business to risks according to the limits of the
Cover limits for infrastructure risks (notably property damage), are risk appetite. The main committees involved in the risk governance
based on reinstatement value and vary among locations. On site are the following:
insurers risks engineer visits are processed regularly. • the Actuarial Control Committee validates the changes in
Local policies are issued for most of Group insurance programs. assumptions, methodology and processes that result in a
HSBC Continental Europe also places regulatory required local material impact on profit before tax or solvency position;
insurance policies, such as, civil liability for licensed activities, • the Local Insurance Model Oversight Committee validates,
construction works, or third party liability motor insurance. controls and monitors the models used by the business;
As a principle, levels of coverage and retentions are in line with: • the Asset and Liabilities Committee manages the asset-liability
• insurance market conditions, business practices and risk and monitors the economic and regulatory capital levels;
regulations; • the Investment Committee manages the investment risks
• assets values and potential impact on HSBC Continental Europe (market, credit and liquidity risks);
and HSBC Holdings plc balance sheets, and risk appetite. • the Compliance Committee covers the topics related to the
The total amount of insurance premiums paid in 2020 represents fight against financial crime and money laundering and to the
0.39 per cent of HSBC Continental Europe’s net operating income. regulatory compliance;
Major programs involve the HSBC Group reinsurance captive’s • the Insurance Risk Committee monitors the insurance risks,
participation. including the lapse rate (redemption, mortality and morbidity),
Brokers and partners are chosen in accordance to their expertise the reinsurance strategy and the non-economic assumptions
and international network. Insurers are selected with a strict used in the models.
control of their solvency policy. The Risk Management Meeting’s responsibilities extend to all risks
Sustainability and climate change risk to which the Insurance business is exposed. The RMM uses the
risk reports from the above committees and exercises governance
HSBC Continental Europe manages the risk that the financial on those committees, overseeing their structure and their running.
services which it provides to customers may have unacceptable The RMM reports to the Audit and Risk Committee of HSBC
impacts on people or the environment. Sustainability risk can also Assurances Vie (France) the significant issues and the actions
lead to commercial risk for customers, credit risk and significant being taken to manage them.
reputational risk for the bank.
This section provides disclosures on the risks arising from
HSBC’s sustainability risk framework is based on robust policies insurance manufacturing operations including financial risks such
and formal processes. as market risk, credit risk and liquidity risk, and insurance risk.
Assessment of HSBC Continental Europe's exposure to Risks in these operations are managed within the insurance entity
physical and transition risks related to climate change. using methodologies and processes appropriate to the insurance
Under article 173 of French act no. 2015-992 of 17 August 2015 activities, but remain subject to oversight at HSBC Group
on energy transition, HSBC Continental Europe has been assessing Insurance level.
since 2016, how aligned its financing portfolio is with the HSBC Continental Europe’s bancassurance model
International Energy Agency’s 2°C scenario and the Low Carbon
National Strategy, on a sector basis. HSBC Continental Europe is HSBC Continental Europe operates an integrated bancassurance
now assessing transition risk as a top and emerging risk, it being model which provides wealth and protection insurance products
principally for customers with whom the Group has a banking
relationship. Insurance products are sold predominantly by Global
Businesses Wealth and Personal Banking and Commercial
Banking through their branches and direct channels.
The insurance contracts HSBC Continental Europe sells relate to
the underlying needs of the HSBC Group’s banking customers,
which it can identify from its point-of-sale contacts and customer
knowledge. The majority of sales are of savings and investment
products and term and credit life contracts. Where HSBC
Continental Europe does not have the risk appetite or operational
scale to be an effective manufacturer, a handful of leading external
insurance companies are engaged in order to provide insurance
products to the HSBC Group’s customers through its banking
network and direct channels.

Risk
The local subsidiary sets its own control procedures in addition to • credit risk: risk of financial loss following the default of third
complying with guidelines issued by the HSBC Group Insurance. parties to meet their obligations; and
Country level oversight is exercised by the subsidiary’s local Risk • liquidity risk: risk of not being able to make payments to
Management Meeting. policyholders as they fall due as a result of insufficient assets
In addition, local subsidiary’s ALCO monitors and reviews the that can be realised as cash.
matching over time of the expected cash flows of insurance assets Regulatory requirements prescribe the type, quality and
and liabilities. concentration of assets that HSBC Assurances Vie (France) must
All insurance products, whether manufactured internally or by a maintain to meet insurance liabilities. These requirements
third party, are subjected to a product approval process prior to complement the HSBC Group-wide policies.
introduction. The following table analyses the assets held in HSBC Continental
Financial risks of insurance operations Europe’s insurance manufacturing company by type of contract,
and provides a view of the exposure to financial risk.
HSBC Continental Europe insurance businesses are exposed to a
range of financial risks which can be categorised into:
• market risk: risks arising from changes in the fair values of
financial assets or their future cash flows from fluctuations in
variables such as interest rates, foreign exchange rates and
equity prices;
Financial assets held by HSBC Assurances Vie (France)

31 Dec 2020
Linked Non-linked Other
contracts contracts assets Total
€m €m €m €m
Financial assets at fair value through profit and loss
– debt instruments — 2,287 1,496 3,783
– equity instruments 45 5,644 240 5,929
Total 45 7,931 1,736 9,712
Financial assets at fair value through OCI
– debt instruments — 9,718 2,063 11,781
– equity instruments — — — —
Total — 9,718 2,063 11,781
– Derivatives — 49 2 51
– Other financial assets — 3,377 352 3,729
Total 45 21,075 4,153 25,273
Approximately 62 per cent of financial assets were invested in the subsidiary is exposed to market risk. In particular, when
debt securities at 31 December 2020, and 23 per cent invested in customers seek to surrender their policies when asset values are
equity securities. falling, assets may have to be sold at a loss to fund redemptions.
In life-linked insurance, the net premium is invested in a portfolio For unit-linked contracts, market risk is substantially borne by the
of assets. HSBC Assurances Vie (France) manages the financial policyholder, but market risk exposure typically remains as fees
risks of this product on behalf of the policyholders by holding earned for management are related to the market value of the
appropriate assets according to the type of contracts subscribed. linked assets.
Market risk of insurance operations Each insurance manufacturing subsidiary of the HSBC Group
manages market risk by using some or all of the following
Market risk arises when mismatches occur between product
techniques:
liabilities and the investment assets which back them. For
example, mismatches between asset and liability yields and • for products with DPF, adjusting bonus rates to manage the
maturities give rise to interest rate risk. liabilities to policyholders. The effect is that a significant portion
of the market risk is borne by the policyholder;
The main features of products manufactured by the Group’s
insurance manufacturing company which generate market risk, • structuring asset portfolios to support liability cash flows;
and the market risk to which these features expose the company, • using derivatives, to a limited extent, to protect against adverse
are discussed below. market movements or better match liability cash flows;
Long-term insurance or investment products may incorporate • periodically reviewing products identified as higher risk, which
benefits that are guaranteed. Interest rate risk arises to the extent contain investment guarantees and embedded optionality
that yields on the assets supporting guaranteed investment features linked to savings and investment products;
returns could be lower than the investment returns implied by the
guarantees payable to policyholders. • including features designed to mitigate market risk in new
products; and
The income from the insurance and investment contracts with
Discretionary Participation Features (‘DPF’) is primarily invested in • selling, to the extent possible, the investments whose risk is
bonds; a fraction is allocated to other asset classes in order to considered unacceptable.
provide customers with an enhanced potential yield. The The French insurance manufacturing company monitors market
subsidiaries holding such type of product portfolio are at risk of risks exposures against mandated limits regularly and reports
falling market prices when discretionary bonuses cannot be fully these quarterly to HSBC Group Insurance. Exposures are
taken into account. aggregated and reported on a quarterly basis to risk management
An increase in market volatility may also result in an increase in forums in HSBC Group Insurance.
the value of the guarantee granted to the insured.
Long-term insurance and investment products typically permit the
policyholder to surrender the policy at any time or to let it lapse.
When the surrender value is not linked to the value realised from
the sale of the associated supporting assets,

Standard measures for quantifying market risks are as follows: rates curve can't be estimated on the sole basis of the impact of a
small movement of the curve. Additional calculations will be
• for interest rate risk, the sensitivities of the net present values
necessary.
of asset and expected liability cash flows, in total and by
currency, to a one basis point parallel upward or downward The group recognises these limitations and augments its standard
shift in the discount curves used to calculate the net present measures with stress tests which examine the effect of a range of
values, and to a steepening of a flattening of these curves; market rate scenarios on the aggregate annual profits and total
equity of the insurance manufacturing companies after taking into
• for equity price risk, the total market value of equity holdings
consideration tax and accounting treatments where material and
and the market value of equity holdings by region and country.
relevant. The results of these stress tests are reported to the HSBC
The standard measures are relatively straightforward to calculate Group Insurance risk committees every quarter.
and aggregate, but they have limitations. The most significant one
The following table illustrates the effect of selected interest rates,
is that a parallel shift in yield curves of one basis point does not
equity price and credit spread scenarios on the profits for the year
capture the non-linear relationships between the values of certain
and total equity of HSBC Assurances Vie (France). Where
assets and liabilities and interest rates. Non-linearity arises, for
appropriate, the impact of the stress on the present value of the
example, from investment guarantees and product features which
in-force long-term insurance business asset (‘PVIF’) is included in
enable policyholders to surrender their policies. HSBC Assurances
the results of the sensitivity tests. The relationship between the
Vie (France) bears the shortfall if the yields on investments held to
profit and total equity and the risk factors is non-linear and,
support contracts with guaranteed benefits are less than the
therefore, the results disclosed should not be extrapolated to
returns implied by the guaranteed benefits.
measure sensitivities to different levels of stress. The sensitivities
On another hand, the sensitivity of some assets to the movement are stated before allowance for the effect of management actions
of the interest rates curve may vary itself according to the level of which may mitigate the effect of changes in market rates, and for
this curve. So the impact of an important movement of the interest any factors such as policyholder behaviour that may change in
response to changes in market risk.
Sensitivity of risk factors related to the Insurance Company of the Group

At
31 Dec 2020 31 Dec 2019
€m €m
+ 100 basis points parallel shift in yield curves 78 75
- 100 basis points parallel shift in yield curves (175) (189)
10 per cent increase in equity price 30 24
10 per cent decrease in equity price (32) (26)
50 basis points increase in credit spread1 32 30
50 basis points decrease in credit spread1 (35) (35)
1 PVIF sensitivity after tax.
The variation of the PVIF sensitivity is mainly explained by the to the individual Country Chief Risk Officers to identity
evolution of the economic environment in 2020, namely the investments which may be at greater risk of future impairment.
decrease of the interest rates. The increase of the PVIF sensitivity
Credit quality
to Equity level is mainly due to the model evolutions, notably the
increase of the Equity risk premium. The following table presents an analysis of treasury bills, other
eligible bills and debt securities within the French insurance
Credit risk of insurance operations business by measures of credit quality. The five credit quality
Credit risk can give rise to losses through default and can lead to classifications are defined on page 108.
volatility in income statement and balance sheet figures through Only assets supporting liabilities under non-linked insurance,
movements in credit spreads. investment contracts and shareholders’ funds are included in the
Management of the French insurance manufacturing company is table, as financial risk on assets supporting linked liabilities is
responsible for the credit risk, quality and performance of their predominantly borne by the policyholder. 91 per cent of the assets
investment portfolios. The assessment of creditworthiness of included in the table are invested in investments rated as ‘Strong’
issuers and counterparties is based primarily upon the opinion of Treasury bills, other eligible bills and debt securities in the French
internationally recognised rating agencies and other publicly insurance manufacturing company.
available information.
Investment credit exposures are monitored against limits by the
local insurance manufacturing subsidiaries, and are aggregated
and reported to HSBC Group Insurance Credit Risk and HSBC
Group Credit Risk. Stress testing is performed by HSBC Group
Insurance on the investment credit exposures using credit spread
sensitivities and default probabilities.
A number of tools are used to manage and monitor credit risk.
These include a Credit Watch Report which contains a watch list
of investments with current credit concerns and is circulated
fortnightly to Senior Management in HSBC Group Insurance and

Risk
Treasury bills, other eligible bills and debt securities in the French insurance manufacturing company
31 Dec 2020
Strong Good/Satisfactory Total
€m €m €m
Financial assets designated at fair value 3,692 91 3,783
– treasury and other eligible bills — — —
– debt securities 3,692 91 3,783
Financial investments 10,398 1,333 11,731
– treasury and other eligible bills — — —
– debt securities 10,398 1,333 11,731
Total 14,090 1,424 15,514
Liquidity risk of insurance operations This is achieved, for example, by assuming new business or
renewals are lower, and surrenders or lapses are greater, than
Every quarter, HSBC Assurances Vie is required to complete and
expected.
submit liquidity risk reports to the HSBC Group Insurance for
collation and review. Liquidity risk is assessed in these reports by The following tables show the expected undiscounted cash flows
measuring changes in expected cumulative net cash flows under a for insurance contract liabilities. The remaining contractual
series of stress scenarios designed to determine the effect of maturity of investment contract liabilities is all undated as in most
reducing expected available liquidity and accelerating cash cases, policyholders have the option to terminate their contracts at
outflows. any time.
Expected maturity of insurance contract liabilities

Expected cash flow (undiscounted)
< 1 year 1-5 years 5-15 years > 15 years Total
31 Dec 2020 €m €m €m €m €m
Non-linked insurance1 1,700 6,300 8,418 6,652 23,070
Linked life insurance1 2 8 11 9 31
Total 1,702 6,308 8,429 6,661 23,101
1 Non-linked insurance includes remaining non-life business.
Insurance risk A principal risk faced by the HSBC French Insurance business is
that, over time, the costs of acquiring and administering a
Insurance risk is the risk, other than financial risk, of loss
contract, of claims and of benefits may exceed the aggregate
transferred from the holder of the insurance contract to the
amount of premiums received and investment income. The cost of
insurer. Insurance risk is principally measured in terms of liabilities
claims and benefits can be influenced by many factors, including
under the contracts.
mortality and morbidity experience, lapse and surrender rates.
The insurance risk profile of the HSBC French life insurance
manufacturing business has not changed materially during 2020
despite the increase in liabilities to policyholders on these
contracts to EUR 23.10 billion (2019: EUR 23.13 billion).
The following tables analyse the HSBC French insurance risk exposures by type of business.
Analysis of life insurance risk – liabilities to policyholders

At
31 Dec 2020 31 Dec 2019
€m €m
Insurance contracts with DPF1 — —
Credit Life 35 36
Annuities 79 79
Term assurance and other long-term contracts 12 11
Non-Life insurance — —
Total non-linked insurance2 126 126
Life linked 31 48
Investments contracts with DPF1,3 23,069 23,132
Liabilities under insurance contracts 23,226 23,306
1 Insurance contracts and investments contracts with discretionary participation features (‘DPF’) give policyholders the contractual right to receive,
as a supplement to their guaranteed benefits, additional benefits that are likely to be a significant portion of the total contractual benefits, but
whose amount or timing is contractually at the discretion of the Group. These additional benefits are contractually based on the performance of a
specific pool of contracts or assets, of the profit of the company issuing the contracts.
2 Non-linked insurance includes remaining non-life business.
3 Although investment contracts with DPF are financial investments, the Group continues to account for them as insurance contracts as permitted
by IFRS.

Sensitivities to non-economic assumptions
The Group’s life insurance business is accounted for using the
embedded value approach which, inter alia, provides a risk and
valuation framework. The sensitivity of the present value of the in-
force (‘PVIF’) long-term asset to changes in economic and non-
economic assumptions is described in Note 20.
Please note that the value approach simulation used has been
reviewed by several external auditors which have confirmed that
this one is compliant with market standards.
Reputational risk management
There were no material changes to the policies and practices for
the management of reputational risk within HSBC Continental
Europe in 2020.
Overview
Reputational risk relates to stakeholders’ perceptions, whether
fact-based or otherwise. Stakeholders’ expectations change
constantly and so reputational risk is dynamic and varies between
geographical regions, groups and individuals. We have an
unwavering commitment to operating at the high standards we
set for ourselves in every jurisdiction. Any lapse in standards of
integrity, compliance, customer service or operating efficiency
represents a potential reputational risk.
Governance and structure
The development of policies, management and mitigation of
reputational risk are co-ordinated through the Reputational Risk
Client Selection Committees held by business line. These
committees keep the RMM apprised of areas and activities
presenting significant reputational risk and, where appropriate,
make recommendations to the RMM to mitigate such risks.
Significant issues posing reputational risk are also reported to the
Board through the Risk Committee where appropriate.
Key risk management processes
Each business has established a governance process that
empowers its Reputational Risk Client Selection Committee to
address reputational risk issues at the right level, escalating
decisions where appropriate. The functions manage and escalate
reputational risks within established operational risk frameworks.
Our policies set out our risk appetite and operational procedures
for all areas of reputational risk, including financial crime
prevention, regulatory compliance, conduct-related concerns,
environmental impacts, human rights matters and employee
relations.

Consolidated financial statements
Consolidated financial
statements
Page
Consolidated income statement 165
Consolidated statement of comprehensive income 166
Consolidated balance sheet 167
Consolidated statement of cash flows 168
Consolidated statement of changes in equity 169
Notes on the consolidated

financial statements
1 Basis of preparation and significant accounting policies 171
2 Net Fee income 183
3 Net income/(expense) from financial instruments measured at
fair value through profit or loss 184
4 Insurance business 184
5 Employee compensation and benefits 186
6 Auditors’ remuneration 190
7 Tax 190
8 Dividends 192
9 Earnings per share 192
10 Trading assets 193
11 Fair values of financial instruments carried at fair value 193
12 Fair values of financial instruments not carried at fair value 201
13 Financial assets designated and otherwise mandatorily
measured at fair value through profit or loss 202
14 Derivatives 202
15 Financial investments 206
16 Assets pledged, collateral received and assets transferred 207
17 Interests in associates and partnerships 208
18 Related information on foreign subsidiaries country by country 208
19 Structured entities 209
20 Goodwill and intangible assets 210
21 Prepayments, accrued income and other assets 214
22 Trading liabilities 215
23 Financial liabilities designated at fair value 216
24 Accruals, deferred income and other liabilities 216
25 Provisions 216
26 Subordinated liabilities 217
27 Maturity analysis of assets, liabilities and off-balance sheet
commitments 217
28 Offsetting of financial assets and financial liabilities 221
29 Called up share capital and other equity instruments 222
30 Contingent liabilities, contractual commitments and guarantees 222
31 Finance lease receivables 223
32 Legal proceedings and regulatory matters relating to HSBC
group entities generally 224
33 Related party transactions 225
34 Events after the balance sheet date 226
35 HSBC Continental Europe subsidiaries, joint ventures and
associates 227
Statutory Auditor’s report on the consolidated financial statements 231

Consolidated income statement
for the year ended 31 December
2020 2019
Notes €m €m
– interest income 1,861 1,951
– interest expense (808) (856)
Net fee income 2 858 778
– fee income 2 1,104 1,093
– fee expense 2 (246) (315)
Net income/(expense) from financial instruments held for trading or managed on a fair value basis 3 72 30
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair
value through profit or loss 3 161 1,277
Changes in fair value of designated debt and related derivatives 3 (4) (1)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss 3 87 153
Gains less losses from financial investments 14 12
Net insurance premium income 4 1,367 2,076
Other operating income 84 187
Total operating income 3,692 5,607
Net insurance claims and benefits paid and movement in liabilities to policyholders 4 (1,571) (3,380)
Net operating income before change in expected credit losses and other credit impairment charges 2,121 2,227
Change in expected credit losses and other credit impairment charges (289) (128)
Net operating income 1,832 2,099
– employee compensation and benefits 5 (1,245) (1,031)
– general and administrative expenses (883) (783)
– depreciation and impairment of property, plant and equipment and right of use assets (329) (105)
– amortisation and impairment of intangible assets and goodwill impairment 20 (320) (202)
Total operating expenses (2,777) (2,121)
Operating profit/(loss) (945) (22)
Share of profit/(loss) in associates and joint ventures 17 — —
Tax expense 7 (80) (17)
Profit/(loss) for the year (1,025) (39)
Attributable to:
– shareholders of the parent company (1,022) (39)
Basic earnings per ordinary share 9 (10.43) (0.41)

Diluted earnings per ordinary share 9 (10.43) (0.41)
Dividends per ordinary share 8 — —

Consolidated statement of comprehensive income

2020 2019
Notes €m €m
Profit/(loss) for the period (1,025) (39)
Other comprehensive income/(expense)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
Debt instruments at fair value though other comprehensive income: 32 18
– fair value gains/(losses) 47 34
– fair value gains/(losses) transferred to the income statement on disposal (6) (9)
– expected credit losses recognised in income statement 2 —
– income taxes (11) (7)
Cash flow hedges: 35 57
– fair value gains/(losses) 14 30 56
– fair value gains/(losses) reclassified to the income statement 14 17 29
– income taxes 14 (12) (28)
Exchange differences and other (20) —
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit asset/liability: (6) (16)
– before income taxes 5 (4) (21)
– income taxes (2) 5
Changes in fair value of financial liabilities designated at fair value upon initial recognition arising from changes in own
credit risk: (5) (113)
– before income taxes 23 (4) (167)
– income taxes (1) 54
Equity instruments designated at fair value through other comprehensive income: (1) —
– fair value gains/(losses) (1) —
– income taxes — —
Other comprehensive income/(expense) for the period, net of tax 35 (54)
Total comprehensive income/(expense) for the period (990) (93)
Attributable to:
– shareholders of the parent company (987) (93)
Total comprehensive income/(expense) for the period (990) (93)

Consolidated balance sheet
at 31 December
2020 2019
Notes €m €m
Assets
Cash and balances at central banks 29,508 19,463
Items in the course of collection from other banks 224 775
Trading assets 10 12,954 14,837
Financial assets designated and otherwise mandatorily measured at fair value through profit and loss 13 11,648 11,957
Derivatives 14 56,475 45,724
Reverse repurchase agreements – non-trading 21,522 45,973
Financial investments 15 19,167 16,987
Asset held for sale 3 3
Prepayments, accrued income and other assets 21 21,735 16,820
Current tax assets 146 164
Interests in associates and joint ventures 17 1 1
Goodwill and intangible assets 20 579 993
Deferred tax assets 7 131 229
Total assets 237,099 237,680
Liabilities
Deposits by banks 17,204 12,113
Customer accounts 61,393 57,550
Repurchase agreements – non-trading 10,984 20,213
Items in the course of transmission to other banks 198 396
Trading liabilities 22 17,828 23,262
Financial liabilities designated at fair value 23 16,892 18,953
Derivatives 14 55,714 45,115
Accruals, deferred income and other liabilities 24 20,117 16,756
Current tax liabilities 73 66
Liabilities under insurance contracts 4 23,228 23,292
Provisions 25 397 160
Deferred tax liabilities 7 131 175
Subordinated liabilities 26 1,876 1,376
Equity
Called up share capital 29 491 491
Share premium account 29 2,137 2,137
Other equity instruments 8 750 750
Other reserves 1,688 1,641
Retained earnings 2,368 3,424
Total shareholders’ equity 7,434 8,443
Non-controlling interests 25 28
Total liabilities and equity 237,099 237,680

Consolidated statement of cash flows

2020 2019
Notes €m €m
Adjustments for non-cash items: 1,699 365
– depreciation, amortisation and impairment of property plant and equipment, right of use and intangibles1 649 307
– net gain from investing activities (15) (33)
– change in expected credit losses gross of recoveries and other credit impairment charges 287 132
– provisions including pensions 254 79
– share-based payment expense 5 13 15
– other non-cash items included in profit before tax 128 (138)
– elimination of exchange differences 383 3
Changes in operating assets and liabilities (1,423) 18,260
– change in net trading securities and derivatives (3,676) 2,166
– change in loans and advances to banks and customers 1,112 2,869
– change in reverse repurchase agreements – non-trading 13,299 (7,886)
– change in financial assets designated at fair value and otherwise mandatorily measured at fair value 309 (1,733)
– change in other assets (7,279) (3,447)
– change in deposits by banks and customer accounts 8,934 4,036
– change in repurchase agreements – non-trading (9,229) 1,292
– change in debt securities in issue (6,177) 7,310
– change in financial liabilities designated at fair value (2,065) 4,201
– change in other liabilities 3,420 9,513
– tax paid (71) (61)
Net cash from operating activities (669) 18,603
Purchase of financial investments (5,786) (6,425)
Proceeds from the sale and maturity of financial investments 4,202 4,103
Net cash flows from the purchase and sale of property plant and equipment (47) (58)
Net investment in intangible assets (38) (141)
Net cash flow on disposal/acquisition of subsidiaries, business, associates and joint ventures — (10)
Net cash from investing activities (1,669) (2,531)
Issue of ordinary share capital and other equity instruments 29 — 2,037
Subordinated loan capital issued 26 500 500
Dividends paid to shareholders of the parent company 8 (30) (21)
Dividends paid to non-controlling interests — (1)
Net cash from financing activities 470 2,515
Net increase/(decrease) in cash and cash equivalents (1,868) 18,587
Cash and cash equivalents at beginning of the period 49,616 31,031
Exchange differences in respect of cash and cash equivalents (181) (2)
Cash and cash equivalents at 31 Dec 47,567 49,616
Cash and cash equivalents comprise of:2
– cash and balances at central banks 29,508 19,463
– items in the course of collection from other banks 224 775
– loans and advances to banks of one month or less 3,711 3,085
– reverse repurchase agreement with banks of one month or less 9,238 20,390
– treasury bills, other bills and certificates of deposit less than three months 299 335
– net settlement accounts and cash collateral 4,785 5,964
– less: items in the course of transmission to other banks (198) (396)
Cash and cash equivalents at 31 Dec 47,567 49,616
1 Included are the impact of EUR 500 million Non-Financial Assets impairment and EUR 4 million Goodwill impairment in 2020 (2019 : EUR 9
million Non-Financial Assets impairment and EUR 169 million Goodwill impairment).
2 At 31 December 2020 EUR 5.5 billion (2019: EUR 5.4 billion) was not available for use by HSBC Continental Europe and is related to mandatory
deposits at central banks.
Interest received was EUR 2,117 million (2019: EUR 2,281 million), interest paid was EUR 1,354 million (2019: EUR 1,347 million) and
dividends received EUR 2 million (2019: EUR 9 million).
Operating activities are representative of HSBC Continental Europe's product-generating activities.
Investment activities represent cash flows for the acquisition and disposal of interests in consolidated and non-consolidated businesses,
and property, plant and equipment and intangible assets.
Financing activities result from changes in financial structure transactions relating to equity and long-term borrowings.

Consolidated statement of changes in equity
Other reserves
Financial
assets at Merger
Called up Fair Value Cash reserve Total
share capital through flow Foreign and share- Non-
and share Other equity Retained OCI hedging exchange other holders’ controlling Total
premium instruments earnings reserve reserve reserve reserves equity interests equity
€m €m €m €m €m €m €m €m €m €m
At 1 Jan 2020 2,628 750 3,424 47 34 (27) 1,587 8,443 28 8,471
Profit/(loss) for the period — — (1,022) — — — — (1,022) (3) (1,025)
Other comprehensive income/(expense) (net
of tax) — — (11) 31 35 (20) — 35 — 35
– debt instruments at fair value through
other comprehensive income — — — 32 — — — 32 — 32
– equity instruments designated at fair
value through other comprehensive
income — — — (1) — — — (1) — (1)
– cash flow hedges — — — — 35 — — 35 — 35
– re-measurement of defined benefit asset/
liability — — (6) — — — — (6) — (6)
– changes in fair value of financial liabilities
designated at fair value due to movement
in own credit risk1 — — (5) — — — — (5) — (5)
– exchange differences — — — — — (20) — (20) — (20)
Total comprehensive income/(expense)
for the period — — (1,033) 31 35 (20) — (987) (3) (990)
– capital securities issued during the period — — — — — — — — — —
– dividends to shareholders2 — — (30) — — — — (30) — (30)
– net impact of equity-settled share-based
payments — — — — — — — — — —
– change in business combinations and
other movements — — 7 — — — 1 8 — 8
Total Other — — (23) — — — 1 (22) — (22)
At 31 Dec 2020 2,628 750 2,368 78 69 (47) 1,588 7,434 25 7,459
1 At 31 December 2020, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at
fair value was a loss of EUR (62) million.
2 Dividends corresponds to coupon payment on other equity instrument (AT1 capital) amounting to EUR 30 million.

Consolidated statement of changes in equity (continued)

Other reserves
Financial
assets at Merger
Called up Fair Value Cash reserve Total
share capital through flow Foreign and share- Non-
and share Other equity Retained OCI hedging exchange other holders’ controlling Total
premium instruments earnings reserve reserve reserve reserves equity interests equity
€m €m €m €m €m €m €m €m €m €m
At 1 Jan 2019 842 500 3,647 29 (23) (27) 1,587 6,555 29 6,584
Profit/(loss) for the period (39) (39) — (39)
Other comprehensive income/(expense)
(net of tax) — — (129) 18 57 — — (54) — (54)
– debt instruments at fair value through
other comprehensive income — — — 18 — — — 18 — 18
– equity instruments designated at fair value
through other comprehensive income — — — — — — — —
– cash flow hedges — — — — 57 — — 57 — 57
– re-measurement of defined benefit asset/
liability — — (16) — — — — (16) — (16)
– changes in fair value of financial liabilities
designated at fair value due to movement
in own credit risk1 — — (113) — — — — (113) — (113)
– exchange differences and other — — — — — — — — — —
Total comprehensive income for the year — — (168) 18 57 — — (93) — (93)
– capital securities issued 1,786 250 — — — — — 2,036 — 2,036
– dividends to shareholders2 — — (21) — — — — (21) (1) (22)
– net impact of equity-settled share-based
payments — — 6 — — — — 6 — 6
– change in business combination and other
movements — — (40) — — — — (40) — (40)
Total Other 1,786 250 (55) — — — — 1,981 (1) 1,980
At 31 Dec 2019 2,628 750 3,424 47 34 (27) 1,587 8,443 28 8,471
1 At 31 December 2019, the cumulative amount of change in fair value attributable to changes in own credit risk of financial liabilities designated at
fair value was a loss of EUR (57) million.
2 Dividends corresponds to coupon payment on other equity instrument (AT1 capital) amounting to EUR 21 million.

1 Basis of preparation and significant accounting policies
The consolidated financial statements of HSBC Continental Europe are available upon request from the HSBC Continental Europe
registered office at 38 Avenue Kléber – 75116 Paris or on the websites www.hsbc.com and www.hsbc.fr.
These consolidated financial statements were approved by the Board of Directors on 23 February 2021.
1.1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC Continental Europe have been prepared in accordance with International Financial
Reporting Standards ('IFRSs') as issued by the International Accounting Standards Board (‘IASB’), including interpretations issued by the
IFRS Interpretations Committee, and as endorsed by the European Union (‘EU’).
Standards adopted during the year ended 31 December 2020
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 issued in August 2020 represents
the second phase of the IASB’s project on the effects of interest rate benchmark reform, addressing issues affecting financial statements
when changes are made to contractual cash flows and hedging relationships as a result of the reform.
Under these amendments, changes made to a financial instrument that are economically equivalent and required by interest rate
benchmark reform do not result in the derecognition or a change in the carrying amount of the financial instrument, but instead require
the effective interest rate to be updated to reflect the change in the interest rate benchmark. In addition, hedge accounting will not be
discontinued solely because of the replacement of the interest rate benchmark if the hedge meets other hedge accounting criteria.
These amendments apply from 1 January 2021 with early adoption permitted. HSBC has adopted the amendments from 1 January 2020
and has made the additional disclosures as required by the amendments. Further information is included in Note 14.
Other changes
In addition, HSBC has adopted a number of interpretations and amendments to standards, which have had an insignificant effect on the
consolidated financial statements of HSBC Continental Europe.
(b) Future accounting developments
Minor amendments to IFRSs
The IASB has not published any minor amendments effective from 1 January 2021 that are applicable to HSBC CE . However, the IASB
has published a number of minor amendments to IFRSs that are effective from 1 January 2022 and 1 January 2023. HSBC Continental
Europe expects they will have an insignificant effect, when adopted, on the consolidated financial statements.
New IFRS
IFRS 17 ‘Insurance Contracts’
IFRS 17 ‘Insurance Contracts’ was issued in May 2017, with amendments to the standard issued in June 2020. The standard sets out the
requirements that an entity should apply in accounting for insurance contracts it issues and reinsurance contracts it holds. Following the
amendments, IFRS 17 is effective from 1 January 2023. The Group is in the process of implementing IFRS 17. Industry practice and
interpretation of the standard are still developing. Therefore, the likely numerical impact of its implementation remains uncertain.
However, we have the following expectations as to the impact compared with the group’s current accounting policy for insurance
contracts, which is set out in policy 1.2(j) below:
• Under IFRS 17, there will be no PVIF asset recognised; rather the estimated future profit will be included in the measurement of the
Insurance contract liability as the contractual service margin (‘CSM’) and gradually recognised in revenue as services are provided
over the duration of the insurance contract. The PVIF asset will be eliminated to equity on transition, together with other adjustments
to assets and liabilities to reflect IFRS 17 measurement requirements and any consequential amendments to financial assets in the
scope of IFRS 9;
• IFRS 17 requires increased use of current market values in the measurement of insurance liabilities. Depending on the measurement
model, changes in market conditions for certain products (measured under the General Measurement Approach) are immediately
recognised in profit or loss, whilst for other products (measured under the Variable Fee Approach) they will be included in the
measurement of CSM;
• In accordance with IFRS 17, directly attributable costs will be included in the results of insurance services as profit is recognised over
the duration of insurance contracts and costs that are not directly attributable remain in operating expenses. This will result in a
reduction in operating expenses compared to the current accounting policy.
(c) Foreign currencies
The functional currency of HSBC Continental Europe is euros which is also the presentational currency of HSBC Continental Europe's
consolidated financial statements and, the presentational currency of the consolidated financial statements of the bank and the Group is
sterling.
Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction. Assets and liabilities denominated
in foreign currencies are translated at the rate of exchange at the balance sheet date except non-monetary assets and liabilities measured
at historical cost, which are translated using the rate of exchange at the initial transaction date. Exchange differences are included in
other comprehensive income or in the income statement depending on where the gain or loss on the underlying item is recognised.
In the consolidated financial statements, the assets and liabilities of branches, subsidiaries, joint ventures and associates whose
functional currency is not € are translated into the HSBC Continental Europe’s presentation currency at the rate of exchange at the
balance sheet date, while their results are translated into € at the average rates of exchange for the reporting period. Exchange

Notes on the financial statements
differences arising are recognised in other comprehensive income. On disposal of a foreign operation, exchange differences previously
recognised in other comprehensive income are reclassified to the income statement.
(d) Presentation of information
Certain disclosures required by IFRSs have been included in the audited sections of this Annual Report and Accounts 2020 as follows:
• disclosures concerning the nature and extent of risks relating to financial instruments and insurance contracts are included in the
‘Risk’ section on pages 80 to 163;
• the 'Own funds' disclosure included in the ‘Capital and leverage management’ section on page 131.
(e) Critical accounting estimates and judgements
The preparation of financial information requires the use of estimates and judgements about future conditions. In view of the inherent
uncertainties and the high level of subjectivity involved in the recognition or measurement of items highlighted, as the 'critical accounting
estimates and judgements' in section 1.2 below, it is possible that the outcomes in the next financial year could differ from those on
which management’s estimates are based. This could result in materially different estimates and judgements from those reached by
management for the purposes of these financial statements. Management’s selection of the group’s accounting policies that contain
critical estimates and judgements reflects the materiality of the items to which the policies are applied and the high degree of judgement
and estimation uncertainty involved.
(f) Segmental analysis
HSBC Continental Europe chief operating decision maker is the Chief Executive, supported by the Chief Executive deputies and the
Executive Committee. Operating segments are reported in a manner consistent with the internal reporting.
Measurement of segmental assets, liabilities, income and expenses is in accordance with HSBC Continental Europe’s accounting policies.
Segmental income and expenses include transfers between segments and these transfers are conducted on arm’s length. Shared costs
are included in segments on the basis of the actual recharges made.
(g) Going concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that HSBC Continental Europe and parent
company have the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered
a wide range of information relating to present and future conditions, including future projections of profitability, cash flows, capital
requirements and capital resources. These considerations include stressed scenarios that reflect the increasing uncertainty that the global
Covid-19 pandemic has had on HSBC Continental Europe’s operations, as well as considering potential impacts from other top and
emerging risks, and the related impact on profitability, capital and liquidity.
1.2 Summary of significant accounting policies

(a) Consolidation and related policies
Investments in subsidiaries
Where an entity is governed by voting rights, the group would consolidate when it holds, directly or indirectly, the necessary voting rights
to pass resolutions by the governing body. In all other cases, the assessment of control is more complex and requires judgement of other
factors, including having exposure to variability of returns, power to direct relevant activities and whether power is held as agent or
principal.
Business combinations are accounted for using the acquisition method. The amount of non-controlling interest is measured either at fair
value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
The bank's investments in subsidiaries are stated at cost less impairment losses.
Critical accounting estimates and judgements
Investments in subsidiaries are tested for impairment when there is an indication that the investment may be impaired, which involves
estimations of value in use reflecting management’s best estimate of the future cash flows of the investment and the rates used to
discount these cash flows, both of which are subject to uncertain factors as follows:
Judgements Estimates
• The accuracy of forecast cash flows is subject to a • The future cash flows of each investment are sensitive to the cash flows projected for the
high degree of uncertainty in volatile market periods for which detailed forecasts are available and to assumptions regarding the long-term
conditions. Where such circumstances are pattern of sustainable cash flows thereafter. Forecasts are compared with actual performance
determined to exist, management re-tests for and verifiable economic data, but they reflect management’s view of future business prospects
impairment more frequently than once a year when at the time of the assessment.
indicators of impairment exist. This ensures that the • The rates used to discount future expected cash flows can have a significant effect on their
assumptions on which the cash flow forecasts are valuation, and are based on the costs of capital assigned to the investment. The cost of capital
based continue to reflect current market conditions percentage is generally derived from a capital asset pricing model, which incorporates inputs
and management's best estimate of future business reflecting a number of financial and economic variables, including the risk-free interest rate in
prospects. the country concerned and a premium for the risk of the business being evaluated. These
variables are subject to fluctuations in external market rates and economic conditions beyond
management’s control.
Goodwill
Goodwill is allocated to cash-generating units (‘CGUs’) for the purpose of impairment testing, which is undertaken at the lowest level at
which goodwill is monitored for internal management purposes. HSBC Continental Europe's CGUs are the global businesses within
principal operating entities. Impairment testing is performed once a year, or whenever there is an indication of impairment, by comparing
the recoverable amount of a CGU with its carrying amount.
Goodwill is included in a disposal group if the disposal group is a CGU to which goodwill has been allocated or it is an operation within
such a CGU.

The amount of goodwill included in a disposal group is measured on the basis of the relative values of the operation disposed of and the
portion of the CGU retained.
The review of goodwill and non-financial assets (see Note 1.2(n)) for impairment reflects management’s best estimate of the future cash flows of the CGUs
and the rates used to discount these cash flows, both of which are subject to uncertain factors as follows:
• The accuracy of forecast cash flows is subject to a • The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for
high degree of uncertainty in volatile market which detailed forecasts are available and to assumptions regarding the long-term pattern of
conditions. Where such circumstances are sustainable cash flows thereafter. Forecasts are compared with actual performance and
determined to exist, management re-tests goodwill verifiable economic data, but they reflect management’s view of future business prospects at
for impairment more frequently than once a year the time of the assessment.
when indicators of impairment exist. This ensures • The rates used to discount future expected cash flows can have a significant effect on their
that the assumptions on which the cash flow valuation, and are based on the costs of capital assigned to individual CGUs. The cost of
forecasts are based continue to reflect current market capital percentage is generally derived from a capital asset pricing model, which incorporates
conditions and management's best estimate of future inputs reflecting a number of financial and economic variables, including the risk-free interest
business prospects. rate in the country concerned and a premium for the risk of the business being evaluated.
These variables are subject to fluctuations in external market rates and economic conditions
beyond management’s control.
• Key assumptions used in estimating goodwill impairment and non-financial assets are
described in Note 20.
HSBC Continental Europe sponsored structured entities

HSBC Continental Europe is considered to sponsor another entity if, in addition to ongoing involvement with the entity, it had a key role
in establishing that entity or in bringing together relevant counterparties so the transaction that is the purpose of the entity could occur.
HSBC Continental Europe is generally not considered a sponsor if the only involvement with the entity is merely administrative.
Interests in associates and joint arrangements
Joint arrangements are investments in which HSBC Continental Europe, together with one or more parties, has joint control. Depending
on HSBC Continental Europe’s rights and obligations, the joint arrangement is classified as either a joint operation or a joint venture.
HSBC Continental Europe classifies investments in entities over which it has significant influence, and that are neither subsidiaries nor
joint arrangements, as associates.
HSBC Continental Europe recognises its share of the assets, liabilities and results in a joint operation. Investments in associates and
interests in joint ventures are recognised using the equity method. The attributable share of the results and reserves of joint ventures and
associates are included in the consolidated financial statements of HSBC Continental Europe based on either financial statements made
up to 31 December or pro-rated amounts adjusted for any material transactions or events occurring between the date the financial
statements are available and 31 December.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication
that the investment may be impaired. Goodwill on acquisitions of interests in joint ventures and associates is not tested separately for
impairment, but is assessed as part of the carrying amount of the investment.
(b) Income and expense
Operating income
Interest income and expense
Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value are
recognised in ‘Interest income’ and ‘Interest expense’ in the income statement using the effective interest method. However, as an
exception to this, interest on debt instruments issued by HSBC Continental Europe for funding purposes that are designated under the
fair value option and derivatives managed in conjunction with those debt instruments are included in interest expense.
Interest on credit-impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose
of measuring the impairment loss.
Non-interest income and expense
HSBC Continental Europe generates fee income from services provided at a fixed price over time, such as account service and card fees,
or when HSBC Continental Europe delivers a specific transaction at the point in time such as broking services and import/export services.
With the exception of certain fund management and performance fees, all other fees are generated at a fixed price. Fund management
and performance fees can be variable depending on the size of the customer portfolio and HSBC Continental Europe performance as fund
manager. Variable fees are recognised when all uncertainties are resolved. Fee income is generally earned from short-term contracts with
payment terms that do not include a significant financing component.
HSBC Continental Europe acts as principal in the majority of contracts with customers, with the exception of broking services. For most
brokerage trades HSBC Continental Europe acts as agent in the transaction and recognises broking income net of fees payable to other
parties in the arrangement.
HSBC Continental Europe recognises fees earned on transaction-based arrangements at a point in time when we have fully provided the
service to the customer. Where the contract requires services to be provided over time, income is recognised on a systematic basis over
the life of the agreement.

Where HSBC Continental Europe offers a package of services that contains multiple non-distinct performance obligations, such as those
included in account service packages, the promised services are treated as a single performance obligation. If a package of services
contains distinct performance obligations, such as those including both account and insurance services, the corresponding transaction
price is allocated to each performance obligation based on the estimated stand-alone selling prices.
Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for listed equity securities,
and usually the date when shareholders approve the dividend for unlisted equity securities.
Net income/(expense) from financial instruments measured at fair value through profit or loss includes the following:
• ‘Net income from financial instruments held for trading or managed on a fair value basis’: This comprises net trading income, which
includes all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading and other
financial instruments managed on a fair value basis, together with the related interest income, expense and dividends, excluding the
effect of changes in the credit risk of liabilities managed on a fair value basis. It also includes all gains and losses from changes in the
fair value of derivatives that are managed in conjunction with financial assets and liabilities measured at fair value through profit or
loss.
• ‘Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at fair value through
profit or loss’. This includes interest income, interest expense and dividend income in respect of financial assets and liabilities
measured at fair value through profit or loss; and those derivatives managed in conjunction with the above which can be separately
identifiable from other trading derivatives.
• ‘Changes in fair value of designated debt instruments and related derivatives’: Interest paid on the debt instruments and interest cash
flows on related derivatives is presented in interest expense where doing so reduces an accounting mismatch.
• ‘Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss’. This includes interest
on instruments which fail the SPPI test. See (d) below.
The accounting policies for insurance premium income are disclosed in Note 4.
(c) Valuation of financial instruments
All financial instruments are initially recognised at fair value. Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of a financial instrument
on initial recognition is generally its transaction price (that is, the fair value of the consideration given or received). However, if there is a
difference between the transaction price and the fair value of financial instruments whose fair value is based on a quoted price in an
active market or a valuation technique that uses only data from observable markets, HSBC Continental Europe recognises the difference
as a trading gain or loss at inception (a ‘day 1 gain or loss’). In all other cases, the entire day 1 gain or loss is deferred and recognised in
the income statement over the life of the transaction either until the transaction matures or is closed out or the valuation inputs become
observable.
The fair value of financial instruments is generally measured on an individual basis. However, in cases where HSBC Continental Europe
manages a group of financial assets and liabilities according to its net market or credit risk exposure, the fair value of the group of
financial instruments is measured on a net basis but the underlying financial assets and liabilities are presented separately in the financial
statements, unless they satisfy the IFRS offsetting criteria. Financial instruments are classified into one of three fair value hierarchy levels,
described in Note 11, ‘Fair values of financial instruments carried at fair value'.
The majority of valuation techniques employ only observable market data. However, certain financial instruments are classified on the basis of valuation
techniques that feature one or more significant market inputs that are unobservable, and for them, the measurement of fair value is more judgemental:
• An instrument in its entirety is classified as valued using significant • Details on HSBC Continental Europe’s level 3 financial instruments and
unobservable inputs if, in the opinion of management, a significant the sensitivity of their valuation to the effect of applying reasonable
proportion of the instrument’s inception profit or greater than 5 per cent possible alternative assumptions in determining their fair value are set out
of the instrument’s valuation is driven by unobservable inputs. in Note 11.
• Unobservable’ in this context means that there is little or no current
market data available from which to determine the price at which an
arm’s length transaction would be likely to occur. It generally does not
mean that there is no data available at all upon which to base a
determination of fair value (consensus pricing data may, for example, be
used).
(d) Financial instruments measured at amortised cost

Financial assets that are held to collect the contractual cash flows and that contain contractual terms that give rise on specified dates to
cash flows that are solely payments of principal and interest, such as most loans and advances to banks and customers and some debt
securities, are measured at amortised cost. In addition, most financial liabilities are measured at amortised cost. HSBC Continental
Europe accounts for regular way amortised cost financial instruments using trade date accounting. The carrying value of these financial
assets at initial recognition includes any directly attributable transactions costs.If the initial fair value is lower than the cash amount
advanced, such as in the case of some leveraged finance and syndicated lending activities, the difference is deferred and recognised over
the life of the loan through the recognition of interest income.
HSBC Continental Europe may commit to underwriting loans on fixed contractual terms for specified periods of time. When the loan
arising from the lending commitment is expected to be held for trading, the commitment to lend is recorded as a derivative. When HSBC
Continental Europe intends to hold the loan, the loan commitment is included in the impairment calculations set out below.

Non-trading reverse repurchase, repurchase and similar agreements
When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the
balance sheet and a liability is recorded in respect of the consideration received. Securities purchased under commitments to resell
(‘reverse repos’) are not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid. Non-trading
repos and reverse repos are measured at amortised cost. The difference between the sale and repurchase price or between the purchase
and resale price is treated as interest and recognised in net interest income over the life of the agreement.
Contracts that are economically equivalent to reverse repurchase or repurchase agreements (such as sales or purchases of debt securities
entered into together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with,
reverse repurchase or repurchase agreements.
(e) Financial assets measured at fair value through other comprehensive income (‘FVOCI’)
Financial assets held for a business model that is achieved by both collecting contractual cash flows and selling and that contain
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at FVOCI.
These comprise primarily debt securities. They are recognised on the trade date when HSBC enters into contractual arrangements to
purchase and are normally derecognised when they are either sold or redeemed. They are subsequently remeasured at fair value and
changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are
recognised in other comprehensive income until the assets are sold. Upon disposal, the cumulative gains or losses in other
comprehensive income are recognised in the income statement as ‘Gains less losses from financial instruments’. Financial assets
measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.
(f) Equity securities measured at fair value with fair value movements presented in other comprehensive income
(‘OCI’)
The equity securities for which fair value movements are shown in other comprehensive income are business facilitation and other similar
investments where HSBC holds the investments other than to generate a capital return. Gains or losses on the derecognition of these
equity securities are not transferred to profit or loss. Otherwise equity securities are measured at fair value through profit or loss (except
for dividend income which is recognised in profit or loss).
(g) Financial instruments designated at fair value through profit or loss
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out
below and are so designated irrevocably at inception:
• the use of the designation removes or significantly reduces an accounting mismatch;
• a group of financial assets and liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value
basis, in accordance with a documented risk management or investment strategy; and
• the financial liability contains one or more non-closely related embedded derivatives.
Designated financial assets are recognised when HSBC Continental Europe enters into contracts with counterparties, which is generally
on trade date, and are normally derecognised when the rights to the cash flows expire or are transferred. Designated financial liabilities
are recognised when HSBC Continental Europe enters into contracts with counterparties, which is generally on settlement date, and are
normally derecognised when extinguished. Subsequent changes in fair values are recognised in the income statement in ‘Net income
from financial instruments held for trading or managed on a fair value basis’ or ‘Net income/(expense) from assets and liabilities of
insurance businesses, including related derivatives, measured at fair value through profit or loss’ except for the effect of changes in the
liabilities' credit risk, which is presented in 'Other comprehensive income', unless that treatment would create or enlarge an accounting
mismatch in profit or loss.
Under the above criterion, the main classes of financial instruments designated by HSBC Continental Europe are:
• Debt instruments for funding purposes that are designated to reduce an accounting mismatch: The interest and/or foreign exchange
exposure on certain fixed-rate debt securities issued has been matched with the interest and/or foreign exchange exposure on certain
swaps as part of a documented risk management strategy.
• Financial assets and financial liabilities under unit-linked and non-linked investment contracts: A contract under which HSBC does not
accept significant insurance risk from another party is not classified as an insurance contract, other than investment contracts with
discretionary participation features (‘DPF’), but is accounted for as a financial liability. Customer liabilities under linked and certain
non-linked investment contracts issued by insurance subsidiaries are determined based on the fair value of the assets held in the
linked funds. If no fair value designation was made for the related assets, at least some of the assets would otherwise be measured at
either fair value through other comprehensive income or amortised cost. The related financial assets and liabilities are managed and
reported to management on a fair value basis. Designation at fair value of the financial assets and related liabilities allows changes in
fair values to be recorded in the income statement and presented in the same line.
• Financial liabilities that contain both deposit and derivative components: These financial liabilities are managed and their performance
evaluated on a fair value basis.
(h) Derivatives
Derivatives are financial instruments that derive their value from the price of underlying items such as equities, interest rates or other
indices. Derivatives are recognised initially and are subsequently measured at fair value through profit or loss, with changes in fair value
generally recorded in the income statement. Derivatives are classified as assets when their fair value is positive or as liabilities when their
fair value is negative. This includes embedded derivatives in financial liabilities which are bifurcated from the host contract when they
meet the definition of a derivative on a stand-alone basis. Where the derivatives are managed with debt securities issued by HSBC
Continental Europe that are designated at fair value, the contractual interest is shown in ‘Interest expense’ together with the interest
payable on the issued debt.

Hedge accounting
When derivatives are not part of fair value designated relationships, if held for risk management purposes they are designated in hedge
accounting relationships where the required criteria for documentation and hedge effectiveness are met. HSBC Continental Europe uses
these derivatives or, where allowed, other non-derivative hedging instruments in fair value hedges, cash flow hedges or hedges of net
investments in foreign operations as appropriate to the risk being hedged.
Fair value hedge
Fair value hedge accounting does not change the recording of gains and losses on derivatives and other hedging instruments, but results
in recognising changes in the fair value of the hedged assets or liabilities attributable to the hedged risk that would not otherwise be
recognised in the income statement. If a hedge relationship no longer meets the criteria for hedge accounting, hedge accounting is
discontinued; the cumulative adjustment to the carrying amount of the hedged item is amortised to the income statement on a
recalculated effective interest rate, unless the hedged item has been derecognised, in which case it is recognised in the income
statement immediately.
Cash flow hedge
The effective portion of gains and losses on hedging instruments is recognised in other comprehensive income; the ineffective portion of
the change in fair value of derivative hedging instruments that are part of a cash flow hedge relationship is recognised immediately in the
income statement within ‘Net trading income’. The accumulated gains and losses recognised in other comprehensive income are
reclassified to the income statement in the same periods in which the hedged item affects profit or loss. When a hedge relationship is
discontinued, or partially discontinued, any cumulative gain or loss recognised in other comprehensive income remains in equity until the
forecast transaction is recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss previously recognised in other comprehensive income is immediately reclassified to the income statement.
Derivatives that do not qualify for hedge accounting
Non-qualifying hedges are derivatives entered into as economic hedges of assets and liabilities for which hedge accounting was not
applied.
(i) Impairment of amortised cost and FVOCI financial assets
Expected credit losses are recognised for loans and advances to banks and customers, non-trading reverse repurchase agreements, other
financial assets held at amortised cost, debt instruments measured at fair value through other comprehensive income, and certain loan
commitments and financial guarantee contracts. At initial recognition, allowance (or provision in the case of some loan commitments and
financial guarantees) is required for ECL resulting from default events that are possible within the next 12 months (or less, where the
remaining life is less than 12 months) (’12-month ECL’). In the event of a significant increase in credit risk, allowance (or provision) is
required for ECL resulting from all possible default events over the expected life of the financial instrument (‘lifetime ECL’). Financial
assets where 12-month ECL is recognised are considered to be ‘stage 1’; financial assets which are considered to have experienced a
significant increase in credit risk are in ‘stage 2’; and financial assets for which there is objective evidence of impairment so are
considered to be in default or otherwise credit-impaired are in ‘stage 3’. Purchased or originated credit-impaired financial assets ('POCI')
are treated differently as set out below.
Credit-impaired (stage 3)
HSBC Continental Europe determines that a financial instrument is credit-impaired and in stage 3 by considering relevant objective
evidence, primarily whether:
• contractual payments of either principal or interest are past due for more than 90 days;
• there are other indications that the borrower is unlikely to pay such as when a concession has been granted to the borrower for
economic or legal reasons relating to the borrower’s financial condition; and
• the loan is otherwise considered to be in default.
If such unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due, even where
regulatory rules permit default to be defined based on 180 days past due. Therefore the definitions of credit-impaired and default are
aligned as far as possible so that stage 3 represents all loans which are considered defaulted or otherwise credit-impaired.
For doubtful exposures, interest income is recognised by applying the effective interest rate to the amortised cost amount, i.e. gross
carrying amount less ECL allowance.
Write-off
Financial assets (and the related impairment allowances) are normally written off, either partially or in full, when there is no realistic
prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security. In
circumstances where the net realisable value of any collateral has been determined and there is no reasonable expectation of further
recovery, write-off may be earlier.
Renegotiation
Loans are identified as renegotiated and classified as credit-impaired when we modify the contractual payment terms due to significant
credit distress of the borrower. Renegotiated loans remain classified as credit-impaired until there is sufficient evidence to demonstrate a
significant reduction in the risk of non-payment of future cash flows and retain the designation of renegotiated until maturity or
derecognition.
A loan that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different
terms or if the terms of an existing agreement are modified such that the renegotiated loan is a substantially different financial
instrument. Any new loans that arise following derecognition events in these

circumstances are considered to be purchased or originated credit-impaired (‘POCI’) and will continue to be disclosed as renegotiated
loans.
Other than originated credit-impaired loans, all other modified loans could be transferred out of stage 3 if they no longer exhibit any
evidence of being credit-impaired and, in the case of renegotiated loans, there is sufficient evidence to demonstrate a significant
reduction in the risk of non-payment of future cash flows, over the minimum observation period, and there are no other indicators of
impairment. These loans could be transferred to stage 1 or 2 based on the mechanism as described below by comparing the risk of a
default occurring at the reporting date (based on the modified contractual terms) and the risk of a default occurring at initial recognition
(based on the original, unmodified contractual terms). Any amount written off as a result of the modification of contractual terms would
not be reversed.
Loan modifications that are not credit-impaired
In most circumstances, loan modifications that are not identified as renegotiated are considered to be commercial restructuring. Where a
commercial restructuring results in a modification (whether legalised through an amendment to the existing terms or the issuance of a
new loan contract) such that HSBC’s rights to the cash flows under the original contract have expired, the old loan is derecognised and
the new loan is recognised at fair value. The rights to cash flows are generally considered to have expired if the commercial restructure is
at market rates and no payment-related concession has been provided. In certain circumstances, modifications to loans are made that
are not considered to be renegotiation or commercial restructuring. Such loans are not derecognised and will continue to be subject to
the impairment policy.
Significant increase in credit risk (stage 2)
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by
considering the change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or
implicitly compares the risk of default occurring at the reporting date compared to that at initial recognition, taking into account
reasonable and supportable information, including information about past events, current conditions and future economic conditions. The
assessment is unbiased, probability-weighted, and to the extent relevant, uses forward-looking information consistent with that used in
the measurement of ECL. The analysis of credit risk is multifactor. The determination of whether a specific factor is relevant and its
weight compared with other factors depends on the type of product, the characteristics of the financial instrument and the borrower, and
the geographical region. Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a
significant increase in credit risk and these criteria will differ for different types of lending, particularly between retail and wholesale.
However, unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when
30 days past due. In addition, wholesale loans that are individually assessed, typically corporate and commercial customers, and included
on a watch or worry list are included in stage 2.
For wholesale portfolios, the quantitative comparison assesses default risk using a lifetime probability of default which encompasses a
wide range of information including the obligor’s customer risk rating (‘CRR’), macroeconomic condition forecasts and credit transition
probabilities. The quantitative measure of significance varies depending on the credit quality at origination as follows:
Origination CRR Significance trigger – PD to increase by

0.1–1.2 15bps
2.1–3.3 30 bps
Greater than 3.3 and not impaired 2x
For CRRs greater than 3.3 which are not impaired, a significant increase in credit risk is considered to have occurred when the origination
PD has doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit
migrations and to relative changes in external market rates.
For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of
future macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD
must be approximated assuming through-the-cycle (‘TTC’) PDs and TTC migration probabilities, consistent with the instrument’s
underlying modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional
CRR deterioration based thresholds as set out in the table below:
Additional significance criteria – Number of CRR grade notches deterioration

Origination CRR required to identify as significant credit deterioration (stage 2) (> or equal to)
0.1 5 notches
1.1–4.2 4 notches
4.3–5.1 3 notches
5.2–7.1 2 notches
7.2–8.2 1 notch
Further information about the 23-grade scale used for CRR can be found on page 108.
For certain portfolios of debt securities where external market ratings are available and credit ratings are not used in credit risk
management, the debt securities will be in stage 2 if their credit risk increases to the extent they are no longer considered investment
grade. Investment grade is where the financial instrument has a low risk of incurring losses, the structure has a strong capacity to meet
its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may,
but will not necessarily, reduce the ability of the borrower to fulfil their contractual cash flow obligations.
For retail portfolios, default risk is assessed using a reporting date 12-month PD derived from credit scores which incorporate all available
information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is
considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogeneous
portfolios, generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as

accounts with an adjusted 12-month PD greater than the average 12-month PD of loans in that portfolio 12 months before they become
30 days past due. The expert credit risk judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold
identifies loans with a PD higher than would be expected from loans that are performing as originally expected and higher than that
which would have been acceptable at origination. It therefore approximates a comparison of origination to reporting date PDs.
Unimpaired and without significant increase in credit risk – (stage 1)
ECL resulting from default events that are possible within the next 12 months (’12-month ECL’) are recognised for financial instruments
that remain in stage 1.
Purchased or originated credit-impaired
Financial assets that are purchased or originated at a deep discount that reflects the incurred credit losses are considered to be POCI.
This population includes the recognition of a new financial instrument following a renegotiation where concessions have been granted
for economic or contractual reasons relating to the borrower’s financial difficulty that otherwise would not have been considered. The
amount of change-in-lifetime ECL is recognised in profit or loss until the POCI is derecognised, even if the lifetime ECL are less than the
amount of ECL included in the estimated cash flows on initial recognition.
Movement between stages
Financial assets can be transferred between the different categories (other than POCI) depending on their relative increase in credit risk
since initial recognition. Financial instruments are transferred out of stage 2 if their credit risk is no longer considered to be significantly
increased since initial recognition based on the assessments described above. Except for renegotiated loans, financial instruments are
transferred out of stage 3 when they no longer exhibit any evidence of credit impairment as described above. Renegotiated loans that are
not POCI will continue to be in stage 3 until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment
of future cash flows, observed over a minimum one-year period and there are no other indicators of impairment. For loans that are
assessed for impairment on a portfolio basis, the evidence typically comprises a history of payment performance against the original or
revised terms, as appropriate to the circumstances. For loans that are assessed for impairment on an individual basis, all available
evidence is assessed on a case-by-case basis.
Measurement of ECL
The assessment of credit risk, and the estimation of ECL, are unbiased and probability-weighted, and incorporate all available information
which is relevant to the assessment including information about past events, current conditions and reasonable and supportable
forecasts of future events and economic conditions at the reporting date. In addition, the estimation of ECL should take into account the
time value of money.
In general, HSBC Continental Europe calculates ECL using three main components, a probability of default, a loss given default ('LGD")
and the exposure at default (‘EAD’).
The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated using the lifetime PD instead.
The 12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the
instrument respectively.
The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet
date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD
given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected
to be realised and the time value of money.
HSBC Continental Europe leverages the Basel II IRB framework where possible, with recalibration to meet the differing IFRS 9
requirements as follows.
Model Regulatory capital IFRS 9
PD • Through the cycle (represents long-run average PD throughout a • Point in time (based on current conditions, adjusted to take into
full economic cycle) account estimates of future conditions that will impact PD)
• The definition of default includes a backstop of 90+ days past • Default backstop of 90+ days past due for all portfolios
due, although this has been modified to 180+ days past due for
some portfolios, particularly UK and US mortgages
EAD • Cannot be lower than current balance • Amortisation captured for term products
LGD • Downturn LGD (consistent losses expected to be suffered during • Expected LGD (based on estimate of loss given default including
a severe but plausible economic downturn) the expected impact of future economic conditions such as
• Regulatory floors may apply to mitigate risk of underestimating changes in value of collateral)
downturn LGD due to lack of historical data • No floors
• Discounted using cost of capital • Discounted using the original effective interest rate of the loan
• All collection costs included • Only costs associated with obtaining/selling collateral included
Other • Discounted back from point of default to balance sheet date
While 12-month PDs are recalibrated from Basel models where possible, the lifetime PDs are determined by projecting the 12-month PD
using a term structure. For the wholesale methodology, the lifetime PD also takes into account credit migration, i.e. a customer migrating
through the CRR bands over its life.
The ECL for wholesale stage 3 is determined on an individual basis using a discounted cash flow (‘DCF’) methodology. The expected
future cash flows are based on the credit risk officer’s estimates as at the reporting date, reflecting reasonable and supportable
assumptions and projections of future recoveries and expected future receipts of interest. Collateral is taken into account if it is likely that
the recovery of the outstanding amount will include realisation of collateral based on its estimated fair value of collateral at the time of
expected realisation, less costs for obtaining and selling the collateral. The cash flows are discounted at a reasonable approximation of
the original effective interest rate. For significant cases, cash flows under four different scenarios are probability-weighted by reference to
the three economic scenarios applied more generally by the Group and the judgement of the credit risk officer in relation to the likelihood
of the workout strategy succeeding or receivership being required. For less significant cases, the effect of different economic scenarios
and work-out strategies is approximated and applied as an adjustment to the most likely outcome.

Period over which ECL is measured
Expected credit loss is measured from the initial recognition of the financial asset. The maximum period considered when measuring ECL
(be it 12-month or lifetime ECL) is the maximum contractual period over which HSBC Continental Europe is exposed to credit risk. For
wholesale overdrafts, credit risk management actions are taken no less frequently than on an annual basis and therefore this period is to
the expected date of the next substantive credit review. The date of the substantive credit review also represents the initial recognition of
the new facility. However, where the financial instrument includes both a drawn and undrawn commitment and the contractual ability to
demand repayment and cancel the undrawn commitment does not serve to limit HSBC Continental Europe exposure to credit risk to the
contractual notice period, the contractual period does not determine the maximum period considered. Instead, ECL is measured over the
period HSBC Continental Europe remains exposed to credit risk that is not mitigated by credit risk management actions. This applies to
retail overdrafts and credit cards, where the period is the average time taken for stage 2 exposures to default or close as performing
accounts, determined on a portfolio basis and ranging from between two and six years. In addition, for these facilities it is not possible to
identify the ECL on the loan commitment component separately from the financial asset component. As a result, the total ECL is
recognised in the loss allowance for the financial asset unless the total ECL exceeds the gross carrying amount of the financial asset, in
which case the ECL is recognised as a provision.
Forward-looking economic inputs
HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions
representative of our view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected loss in
most economic environments. In certain economic environments, additional analysis may be necessary and may result in additional
scenarios or adjustments, to reflect a range of possible economic outcomes sufficient for an unbiased estimate. The detailed
methodology is disclosed in 'Measurement uncertainty and sensitivity analysis of ECL estimates' on page 116.
The calculation of the group’s ECL under IFRS 9 requires the group to make a number of judgements, assumptions and estimates. The
most significant are set out below:
JUDGEMENTS
• Definition of what is considered to be a significant increase in credit risk.
• Selecting and calibrating the PD, LGD and EAD models, which support the calculations, including making reasonable and supportable judgements about
how models react to current and future economic conditions.
• Selecting model inputs and economic forecasts, including determining whether sufficient and appropriately weighted economic forecasts are
incorporated to calculate unbiased expected loss.
ESTIMATES
• The section ‘Measurement uncertainty and sensitivity analysis of ECL estimates’ on pages 116 to 118 set out the assumptions used in determining ECL.
An indication of the sensitivity is available in the HSBC Bank plc Annual Report and account to the application of different weightings being applied to
different economic assumptions
(j) Insurance contracts

A contract is classified as an insurance contract where the entity accepts significant insurance risk from another party by agreeing to
compensate that party on the occurrence of a specified uncertain future event. An insurance contract may also transfer financial risk, but
is accounted for as an insurance contract if the insurance risk is significant. In addition, the group issues investment contracts with
discretionary participation features ('DPF') which are also accounted for as insurance contracts as required by IFRS 4 ‘Insurance
Contracts’.
Insurance contracts are accounted for as follows:
Net insurance premiums
Premiums for life insurance contracts are accounted for when receivable, except in unit-linked insurance contracts where premiums are
accounted for when liabilities are established.
Reinsurance premiums are accounted for in the same accounting period as the premiums for the direct insurance contracts to which they
relate.
Net insurance claims and reinsurance recoveries
Gross insurance claims for life insurance contracts reflect the total cost of claims arising during the year, including claim handling costs
and any policyholder bonuses allocated in anticipation of a bonus declaration. Claims arising during the year include maturities,
surrenders and death claims.
Maturity claims are recognised when due for payment. Surrenders are recognised when paid or at an earlier date on which, following
notification, the policy ceases to be included within the calculation of the related insurance liabilities. Death claims are recognised when
notified.
Reinsurance recoveries are accounted for in the same period as the related claim.
Liabilities under insurance contracts
Liabilities under non-linked life insurance contracts are calculated by each life insurance operation based on local actuarial principles.
Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, which is calculated by
reference to the value of the relevant underlying funds or indices.
Future profit participation on insurance contracts with discretionary participation features
Where contracts provide discretionary profit participation benefits to policyholders, liabilities for these contracts include provisions for the
future discretionary benefits to policyholders. These provisions reflect the actual performance of the investment portfolio to date and
management’s expectation of the future performance of the assets backing the contracts, as well as other experience factors such as
mortality, lapses and operational efficiency, where appropriate. The benefits to policyholders may be determined by the contractual
terms, regulation or past distribution policy.

Investment contracts with DPF

While investment contracts with DPF are financial instruments, they continue to be treated as insurance contracts as required by IFRS 4.
The group therefore recognises the premiums for these contracts as revenue and recognises as an expense the resulting increase in the
carrying amount of the liability.
In the case of net unrealised investment gains on these contracts, whose discretionary benefits principally reflect the actual performance
of the investment portfolio, the corresponding increase in the liabilities is recognised in either the income statement or other
comprehensive income, following the treatment of the unrealised gains on the relevant assets. In the case of net unrealised losses, a
deferred participating asset is recognised only to the extent that its recoverability is highly probable. Movements in the liabilities arising
from realised gains and losses on relevant assets are recognised in the income statement.
Present value of in-force long-term insurance business
The group recognises the value placed on insurance contracts, and investment contracts with DPF, that are classified as long-term and
in-force at the balance sheet date, as an asset. The asset represents the present value of the equity holders' interest in the issuing
insurance companies' profits expected to emerge from these contracts written at the balance sheet date. The present value of in-force
long-term insurance business ('PVIF') is determined by discounting those expected future profits using appropriate assumptions in
assessing factors such as future mortality, lapse rates and levels of expenses, and a risk discount rate that reflects the risk premium
attributable to the respective contracts. The PVIF incorporates allowances for both non-market risk and the value of financial options and
guarantees. The PVIF asset is presented gross of attributable tax in the balance sheet and movements in the PVIF asset are included in
'Other operating income' on a gross of tax basis.
(k) Employee compensation and benefits
Share-based payments
Share-based payments are payments based on shares issued by HSBC Holdings plc.
HSBC Continental Europe grants bonus share plans to some employees for services rendered.
The vesting period for these schemes may commence before the legal grant date if the employees have started to render services in
respect of the award before the legal grant date, where there is a shared understanding of the terms and conditions of the arrangement.
Expenses are recognised when the employee starts to render service to which the award relates.
Cancellations result from the failure to meet a non-vesting condition during the vesting period, and are treated as an acceleration of
vesting recognised immediately in the income statement. Failure to meet a vesting condition by the employee is not treated as a
cancellation, and the amount of expense recognised for the award is adjusted to reflect the number of awards expected to vest.
Main Post-employment benefit plans
HSBC Continental Europe operates a number of pension schemes including defined benefit and post-employment benefit schemes.
Payments to defined contribution schemes are charged as an expense as the employees render service.
Employee share ownership plan
When a capital increase is opened to employees in the framework of the Employee share ownership plan, the advantage granted through
the discount on the market value of the security is a staff expense for the period.
(l) Tax
Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates
to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement in
which the related item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and on any adjustment to tax payable in respect of
previous years. The group provides for potential current tax liabilities that may arise on the basis of the amounts expected to be paid to
the tax authorities. Payments associated with any incremental base erosion and anti-abuse tax are reflected in tax expense in the period
incurred.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the
amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the
periods as the assets will be realised or the liabilities settled.
Current and deferred tax are calculated based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
JUDGEMENTS
• Assessing the probability and sufficiency of future taxable profits, taking into account the future reversal of existing taxable temporary differences and
tax planning strategies including corporate reorganisations.
(m) Provisions, contingent liabilities and guarantees

Provisions
Provisions are recognised when it is probable that an outflow of economic benefits will be required to settle a present legal or
constructive obligation that has arisen as a result of past events and for which a reliable estimate can be made.
The recognition and measurement of provisions requires the Group to make a number of judgements, assumptions and estimates. The
most significant are set out below:

JUDGEMENTS
• Determining whether a present obligation exists. Professional advice is taken on the assessment of litigation and similar obligations.
• Provisions for legal proceedings and regulatory matters typically require a higher degree of judgement than other types of provisions. When matters are
at an early stage, accounting judgements can be difficult because of the high degree of uncertainty associated with determining whether a present
obligation exists, and estimating the probability and amount of any outflows that may arise. As matters progress, management and legal advisers
evaluate on an ongoing basis whether provisions should be recognised, revising previous estimates as appropriate. At more advanced stages, it is
typically easier to make estimates around a better defined set of possible outcomes.
ESTIMATES
• Provisions for legal proceedings and regulatory matters remain very sensitive to the assumptions used in the estimate. There could be a wider range of
possible outcomes for any pending legal proceedings, investigations or inquiries. As a result it is often not practicable to quantify a range of possible
outcomes for individual matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in aggregate for these types of
provisions because of the diverse nature and circumstances of such matters and the wide range of uncertainties involved.
Contingent liabilities, contractual commitments and guarantees

Contingent liabilities
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, and contingent liabilities related
to legal proceedings or regulatory matters, are not recognised in the financial statements but are disclosed unless the probability of
settlement is remote.
Financial guarantee contracts
Liabilities under financial guarantee contracts which are not classified as insurance contracts are recorded initially at their fair value,
which is generally the fee received or present value of the fee receivable.
The bank has issued financial guarantees and similar contracts to other group entities. The Group elects to account for certain guarantees
as insurance contracts in the bank’s financial statements, in which case they are measured and recognised as insurance liabilities. This
election is made on a contract by contract basis, and is irrevocable.
(n) Impairment of non-financial assets
Software under development is tested for impairment at least annually. Other non-financial assets such as property, plant and equipment,
intangible assets (excluding goodwill) and right-of-use (‘ROU’) assets are tested for impairment at the individual asset level when there is
indication of impairment at that level, or at the CGU level for assets that do not have a recoverable amount at the individual asset level. In
addition, impairment is also tested at the CGU level when there is indication of impairment at that level. For this purpose, CGUs are
considered to be the global business within the principal operating entities. Indicators of impairment can be based on external and/or
internal sources of information, for example significant changes with an adverse effect on the entity during the period, or in the near
future, in the technological, market, economic or legal environment in which the entity operates or in the market to which an asset is
dedicated.
Impairment testing compares the carrying amount of the non-financial asset or CGU with its recoverable amount, which is the higher of
the fair value less costs of disposal (‘FVLCOD’) or the value in use (‘VIU’). The carrying amount of a CGU is its assets and liabilities,
including non-financial assets that are directly attributable to it and non-financial assets that can be allocated to it on a reasonable and
consistent basis. Non-financial assets that cannot be allocated to an individual CGU are tested for impairment at an appropriate grouping
of CGUs.
The recoverable amount of the CGU is the higher of the fair value less costs of disposal of the CGU, which is determined by independent
and qualified valuers where relevant, and the value in use, which is calculated based on appropriate inputs (see Note 20). When the
recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognised in the income statement to the extent
that the impairment can be allocated on a pro-rata basis to the non-financial assets by reducing their carrying amounts to the higher of
their respective individual recoverable amount or nil. Impairment is not recognised with respect to the financial assets in a CGU.
Impairment loss recognised in prior periods for non-financial assets is reversed when there has been a reversal in the indicators of
impairment and/or there has been a change in the recoverable amount assessed. The impairment loss is reversed to the extent that the
carrying amount of the non-financial assets would not exceed the amount that would have been determined (net of amortisation or
depreciation) had no impairment loss been recognised in prior periods..
The review of goodwill and other non-financial assets for impairment reflects management’s best estimate of the future cash flows of the
CGUs and the rates used to discount these cash flows, both of which are subject to uncertain factors as described in the Critical
accounting estimates and judgements in Note 1.2(a).
Recoverable amounts for individual assets
Recoverable amount is the higher of fair value less cost of disposal (‘FVLCOD’) or value in use (‘VIU’). Some non-financial assets have
their own recoverable amount in the form of FVLCOD, for example external valuation of market price for property. ROU assets that are
legally permissible to be sub-leased will have FVLCOD calculated as the present value of potential sub-leasing income, less any estimated
penalty/cost/new liability and ROU assets that can be novated or cancelled will have their FVLCOD calculated as the amount of lease
liability extinguished less any estimated penalty/cost/new liability, provided that the lease liability approximates the fair value.
It is not always necessary to determine both the FVLCOD and VIU for impairment purposes. If the FVLCOD is higher than the carrying
amount of the non-financial asset, no impairment is recognised. However, if the FVLCOD of the individual asset is not higher than the
respective carrying amount, it is necessary to consider the VIU in order to assess whether impairment should be recognised.

Non-financial assets are generally not used in isolation to generate cash flows that are independent from other assets. Therefore, the VIU
of the non-financial assets depends on the VIU of the CGUs in which they are recorded. In addition, some non-financial assets do not
have their own FVLCOD, such as software (including software under development). Therefore, they rely solely on the recoverable amount
of the CGU where they are recorded.
Capitalisation of new non-financial assets when the CGU is impaired
For tangible and intangible assets that do not have their own recoverable amount, the future economic benefits will flow to the entity
only through usage via the CGU. When the CGU is impaired, newly acquired tangible and intangible assets are recognised only if these
assets have a recoverable amount at the individual asset level. These assets will be recognised and impaired down to their respective
recoverable amount subsequent to initial recognition. When the CGU is no longer impaired on a future date, previously recognised
impairment could be reversed. When the CGU is impaired, new acquisition of tangible and intangible assets without recoverable amount
at the individual asset level will be expensed immediately.
(o) Government grants
Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance
with certain conditions relating to the operating activities of the entity. The benefit of a government loan at a below market rate of
interest is treated as a government grant. The benefit of the below-market rate of interest is measured as the difference between the
initial carrying value of the loan recognised and the proceeds received. When identifying the costs for which the benefit of the loan is
intended to compensate, the conditions and obligations that have been, or must be, met are considered. Government grants are
recognised when there is reasonable assurance that the conditions attached with them will be complied with and that the grants will be
received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognise as
expense the related costs for which the grants are intended to compensate.
JUDGEMENTS
• Determining whether there is reasonable assurance that the conditions attached with government grants will be complied with and that the grants will
be received.
1.3 Significant events during the year

Change of name and new headquarters
On 1st December 2020, HSBC France has changed its name to become HSBC Continental Europe. The new name better reflects the
purpose and nature of its activities, namely an integrated Continental European bank connecting our customers to HSBC’s global
network, and providing access to Continental Europe for HSBC’s customers around the world. The new headquarters for HSBC
Continental Europe is located at 38 avenue Kléber, 75116 Paris, France.
Change in reportable segments
Effective from second quarter of 2020, the HSBC Group made the following realignments within its internal reporting :
• Simplification of the matrix organisational structure by merging ‘Private Banking’ and ‘Retail Banking and Wealth Management’ global
business lines to form ‘Wealth and Personal Banking’.
• Reallocation of Balance Sheet Management from Corporate Centre to the global businesses.
Impairment and write-off of intangible and tangible assets
During 2020, the HSBC Group considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the
impact on forecast profitability, to be an indicator of impairment. As a result, an impairment test was performed which led to the
recognition of EUR 500 million in non-financial asset impairments, of which capitalised software impairments and write-offs of EUR 294
million and EUR 206 million in tangible asset impairments, primarily fixtures and fittings and right-of-use assets. This impairment
reflected recent losses and deterioration in the future forecasts, substantially relating to prior periods. Refer to 1.2 (n) for related
accounting policies and judgments, Note 20 Goodwill and intangible assets and Note 21 Prepayments, accrued income and other assets.
Recognition of restructuring costs
In line with the Group's Business Update announced in February 2020, HSBC Continental Europe has initiated its own transformation
programme during the year.
In July, a social plan (‘Plan de Sauvegarde pour l’Emploi’) was presented for the GBM business in France. Its objective is to preserve the
bank’s future competitiveness and to focus on our strategic positioning while reducing the size of the GBM business in France.
In October, a plan was presented to the European Work Council (EWC) focused on the European Economic Area (‘EEA’) branches of
HSBC Continental Europe. The plan foresees increasing client-focused activities within the branches and to deliver a more efficient
operating and booking model, better leveraging HSBC Continental Europe’s wider operating infrastructure and balance sheet.
Implementation of the plan is undertaken in accordance with the respective legal and social frameworks in each of the countries.
In December, a social plan for collective voluntary departure (’Rupture Conventionelle Collective’) was presented focused on the CMB
business and selected Global Functions and HSBC Operations, Services and Technology. This initiative will enable us to better serve
commercial banking clients while focusing on clients valuing our international network. It will also improve operational efficiency and
simplify processes.
During 2020, HSBC Continental Europe recognised EUR 258 million in restructuring costs relating to these plans, primarily termination
benefits.

Derecognition of Deferred Tax Assets (‘DTAs')
Considering the recent losses incurred and the wider context of uncertainty, it was judged that the net deferred tax asset (’DTA‘) should
be written off and no further net DTA should be recognised. Recognition will be reassessed at each balance sheet date. Refer to Note 7
Tax.
Funding through Targeted Long-Term Refinancing Operation (‘TLTROs’)
In June 2020, HSBC Continental Europe repaid EUR 2.6 billion in TLTRO II funding and issued EUR 10.6 billion in TLTRO III funding.
Borrowing rates for TLTRO III are at below-market rates as they are issued at, or below, the deposit facility rate. Borrowing rates in these
operations can be as low as 50 basis points below the average interest rate on the deposit facility rate over the period 24 June 2020 to
23 June 2022, capped at -1 per cent, and as low as the interest rate on the deposit facility during the rest of the life of the respective
TLTRO III, if the entity’s benchmark lending is maintained at a prescribed level over specific periods. During 2020, HSBC Continental
Europe judged there to be reasonable assurance that the conditions attached to TLTRO III will be complied with and that the below-
market rate foreseen in the first twelve months will be received. As such, TLTRO funding has been accounted for as a government grant.
The below-market rate attached to lending to support the real economy is recognized in net interest income during the period. Refer to
Note 1.2 (c) and (o) for related accounting policies and judgments.
Granting of Pret Garanti par l’Etat (‘PGE’) loans
In March 2020, the French authorities introduced a state guarantee scheme (Pret Garanti par l’Etat) under which the French State will
guarantee up to EUR 300 billion of new loans granted to French businesses to help mitigate the economic impact of the Covid-19
pandemic. During 2020, loans granted under this government support scheme in France amounted to EUR 4.4 billion.
Repayments and new issuances
In May 2020, HSBC Continental Europe increased its Tier 2 capital for EUR 500 million by issuing a subordinated instrument with a
maturity of 10 years subscribed by HSBC Bank plc, recognised as subordinated liabilities. In December 2020, HSBC Continental Europe
repaid three unsecured loans granted by HSBC Bank plc for a total notional amount of EUR 2.3 billion, recognised as deposits by banks
and issued five series of senior non preferred notes with maturities ranging from 3 to 7 years for a total notional amount of EUR 2.3
billion subscribed by HSBC Bank plc, recognised as debt securities in issue.
2 Net fee income
Net fee income by global business

At 31 Dec 2020
€m €m €m €m €m
Account services 34 78 27 — 139
Funds under management 154 — 24 — 178
Cards 19 14 1 — 34
Credit facilities — 52 84 — 136
Broking income 9 — 1 — 10
Unit trusts 4 — — — 4
Imports/exports — 9 6 — 15
Remittances 6 17 23 — 46
Underwriting — — 88 — 88
Global custody 6 — 28 — 34
Insurance agency commission 18 1 — — 19
Other1 194 61 266 (120) 401
Fee income 444 232 548 (120) 1,104
Less: fee expense (185) (4) (177) 120 (246)
Net fee income 259 228 371 — 858
1 The line ‘Other’ includes primarily inter-company fees.

Net fee income by global business (continued)

At 31 Dec 20192
Wealth and Commercial Global Banking and Corporate
Personal Banking Banking Markets Centre Total
€m €m €m €m €m
Account services 36 82 18 — 136
Funds under management 165 — 19 — 184
Cards 21 19 5 — 45
Credit facilities — 62 89 — 151
Broking income 7 — — — 7
Unit trusts 6 — — — 6
Imports/exports — 9 7 — 16
Remittances 6 18 30 — 54
Underwriting — 1 97 — 98
Global custody 6 — 25 — 31
Insurance agency commission 21 1 — — 22
Other1 204 48 206 (115) 343
Fee income 472 240 496 (115) 1,093
Less: fee expense (196) (10) (218) 109 (315)
Net fee income 276 230 278 (6) 778
1 The line ‘Other’ includes mainly analytical reallocations amongst business lines, HSBC inter-company fees, some inter-bank fees and various other
fees.
Net fee income includes EUR 495 million of fees earned on financial assets that are not at fair value through profit or loss (other than
amounts included in determining the effective interest rate) (2019: EUR 533 million), EUR 121 million of fees payable on financial
liabilities that are not at fair value through profit of loss (other than amounts included in determining the effective interest rate)
(2019: EUR 168 million), EUR 215 million of fees earned on trust and other fiduciary activities (2019: EUR 215 million).
3 Net income/(expense) from financial instruments measured at fair value through profit or
loss
2020 2019
€m €m
Net income/(expense) arising on:
Net trading activities 283 554
Other instruments designated and mandatorily measured at fair value and related derivatives (211) (524)
Net income/(expense) from financial instruments held for trading or managed on a fair value basis 72 30
Financial assets held to meet liabilities under insurance and investment contracts 161 1,280
Liabilities to customers under investment contracts — (3)
Net income/(expense) from assets and liabilities of insurance businesses, including related derivatives, measured at
fair value through profit or loss 161 1,277
Derivatives managed in conjunction with HSBC Continental Europe’s issued debt securities 59 47
Other changes in fair value (63) (48)
Changes in fair value of designated debt and related derivatives (4) (1)
Changes in fair value of other financial instruments mandatorily measured at fair value through profit or loss 87 153
Year ended 31 Dec 316 1,459
4 Insurance business
Through its insurance subsidiary, HSBC Continental Europe issues contracts to customers that contain insurance risk, financial risk or a
combination thereof. A contract under which HSBC Continental Europe accepts significant insurance risk from another party by agreeing
to compensate that party on the occurrence of a specified uncertain future event is classified as an insurance contract. An insurance
contract may also transfer financial risk, but is accounted for as an insurance contract if the insurance risk is significant.
While investment contracts with discretionary participation features are financial instruments, they continue to be treated as insurance
contracts as permitted by IFRS 4.
Insurance contracts are accounted for as follows:
Insurance premiums
Premiums for life insurance contracts are accounted for when receivable, except in unit-linked insurance contracts where premiums are
accounted for when liabilities are established.
Reinsurance premiums are accounted for in the same accounting period as the premiums for the direct insurance contracts to which they
relate.

Net insurance premium income
Non-linked Linked-life Investment
insurance insurance contracts with DPF Total
€m €m €m €m
Gross insurance premium income 58 — 1,312 1,370
Reinsurers’ share of gross insurance premium income (3) — — (3)
Year ended 31 Dec 2020 55 — 1,312 1,367
Gross insurance premium income 59 — 2,020 2,079

Reinsurers’ share of gross insurance premium income (3) — — (3)
Year ended 31 Dec 2019 56 — 2,020 2,076
Insurance claims and reinsurance recoveries

Gross insurance claims for life insurance contracts reflect the total cost of claims arising during the year, including claim handling costs
and any policyholder bonuses allocated in anticipation of a bonus declaration. Claims arising during the year include maturities,
surrenders and death claims.
Reinsurance recoveries are accounted for in the same period as the related claim.
Future profit participation on insurance contracts with discretionary participation features
In accordance with the Code of assurances, a discretionary participation is allocated to non-linked investments contract based on actual
net financial income.
Assets backing non-linked investments contracts are valuated at their fair value. The fair value variation generated during the year is
allocated in deferred discretionary participation. At least 85 per cent is allocated to policyholders; the remaining amount is accounted for
as deferred participation and should be distributed to customers within eight years.
Net insurance claims and benefits paid and movement in liabilities to policyholders
€m €m €m €m
Gross claims and benefits paid incurred and movement in liabilities 15 1 1,555 1,571
– claims, benefits and surrenders paid 15 2 1,748 1,766
– movement in liabilities — (1) (193) (194)
Reinsurers’ share of claims incurred and benefits paid and movement in liabilities — — — —
– claims, benefits and surrenders paid — — — —
– movement in liabilities — — — —
Year ended 31 Dec 2020 15 1 1,555 1,571
Gross claims and benefits paid incurred and movement in liabilities 25 — 3,356 3,381
– claims, benefits and surrenders paid 19 2 1,698 1,719
– movement in liabilities 6 (2) 1,658 1,662
Reinsurers’ share of claims incurred and benefits paid and movement in liabilities (1) — — (1)
– claims, benefits and surrenders paid — — — —
– movement in liabilities (1) — — (1)
Year ended 31 Dec 2019 24 — 3,356 3,380
Liabilities under insurance contracts

€m €m €m €m
Gross liabilities under insurance contracts at 1 Jan 2020 126 34 23,132 23,292
Claims and benefits paid (15) (2) (1,748) (1,765)
Increase in liabilities to policyholders 15 1 1,555 1,571
Exchange differences and other movements1 — (1) 131 130
Gross liabilities under insurance contracts at 31 Dec 2020 126 32 23,070 23,228
Reinsurers’ share of liabilities under insurance contracts (2) — — (2)
Net liabilities under insurance contracts at 31 Dec 2020 124 32 23,070 23,226
Gross liabilities under insurance contracts at 1 Jan 2019 121 33 21,181 21,335
Claims and benefits paid (19) (2) (1,698) (1,719)
Increase in liabilities to policyholders 25 — 3,356 3,381
Exchange differences and other movements1 (1) 3 293 295
Gross liabilities under insurance contracts at 31 Dec 2019 126 34 23,132 23,292
Reinsurers’ share of liabilities under insurance contracts (2) — — (2)
Net liabilities under insurance contracts at 31 Dec 2019 124 34 23,132 23,290
1 ‘Exchange differences and other movements’ includes movements in liabilities arising from net unrealised investment gains recognised in other
comprehensive income.

The key factors contributing to the movement in liabilities to policyholders included 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.
5 Employee compensation and benefits

Employee compensation and average number of employees
2020 2019
€m €m
Wages and salaries1 961 718
Social security costs 286 290
Post-employment benefits2, 3 (2) 23
Year ended 31 Dec 1,245 1,031
1 Includes restructuring provision of EUR 278 million in 2020 (refer Note 1.3).
2 Includes reversal of pension indemnity provision of EUR 21 million in 2020 related to restructuring plans.
3 This amount includes re-invoicing of the staff costs to and from the HSBC Group.
Average number of persons employed by HSBC Continental Europe during the year by global business
2020 2019
Wealth and Personal Banking1 4,155 4,195
Commercial Banking 1,652 1,704
Global Banking and Markets 1,145 1,020
Corporate Centre 14 14
Support functions and others2 2,651 2,919
Year ended 31 Dec 3 9,617 9,852
2 Including pre-retirement (CFCS) and expatriates.
3 Permanent contracts (CDI) and fixed terms contracts (CDD) within HSBC Continental Europe (including the European branches) and its
subsidiaries HSBC Global Asset Management (France) and HSBC Assurances Vie (France).
Share-based payments
Share Group policy
In 2005, the HSBC Group significantly revised its employee share option and share policy.
The rules of share option and share plans were approved by its Annual General Meeting held in May 2005. These rules include a French
sub-plan (Schedule 3 of the general rule), which complies with the legal and tax regulations applicable in France. This regulation was
revised in 2011 firstly to take into account the regulatory changes impacting the plan and, secondly, to formalise the rules of the ‘Group
Performance Share Plan’, for the HSBC Group’s Senior Executives. In this context, the French sub-plan (Schedule 5 of the new rules) has
also been subjected to a review, to comply with local social and tax rules. Since 2006, the general policy of the HSBC Group is to award
shares instead of share options (except in the case of a country specific legal and tax regulation).
The shares can be:
• ‘Group Performance Shares’ subject to performance conditions;
• ‘Restricted Shares’ without performance conditions.
•
Movement on 'Group Performance Shares'
Movement on 'Group Performance Shares'

Number
(000s)
Outstanding at 1 Jan 2020 30
Granted during the year —
Exercised during the year (13)
Expired during the year —
Forfeited during the year —
Outstanding at 31 Dec 2020 17
– of which: exercisable —
Weighted average remaining contractual life (years) 0.04

Granted during the year —
Exercised during the year (45)
Expired during the year —
Forfeited during the year —
Outstanding at 31 Dec 2019 30
– of which: exercisable —
Weighted average remaining contractual life (years) 0.3
This category of shares is available, after a vesting period of five years, at the retirement date.

From 2016, these Group Performance Shares are not available anymore.
‘Restricted Shares’
For French employees, shares awarded are ‘French qualified shares’.
These shares vest definitively after a two-year or three-year period according to the rules of the Plan. Shares granted from 2011 will vest
66 per cent after two years and 34 per cent after three years.
Shares granted before 2016 cannot be sold before a tax lock-up period of two-years after their vesting. Since 1 January 2016, this
category does not require any tax lock-up period and can be sold immediately.
Impatriates are awarded non-qualified ‘Restricted shares’ that vest 33 per cent after one year, 33 per cent after two years and 34 per cent
after three years.
Some ‘Material Risk Taker’ employees are awarded ‘Restricted shares’ that vest immediately and ‘French qualified shares’ that vest
under a period of three or five years. But all the shares granted to ‘Material Risk Taker’ are restricted to a period of tax unavailability
about six months or 12 months.
Movement on 'Restricted Shares'

Number
(000s)
Outstanding at 1 Jan 2020 2,802
Movements of staff during the year 2020 and previously3 783
Granted during the year1 2,927
Exercised during the year2 (2,563)
Expired during the year (17)
Outstanding at 31 Dec 2020 3,932
– of which exercisable —
Weighted average remaining contractual life (years) 1

Movements of staff during the year 2019 and previously3 1,544
Change of consolidation perimeter (integration of branches excluding Greece) 348
Granted during the year1 2,372
Exercised during the year2 (2,115)
Expired during the year (45)
Outstanding at 31 Dec 2019 2,802
– of which exercisable —
Weighted average remaining contractual life (years) 1
1 The weighted average fair value of shares granted during the year was EUR 6.73 (2019: EUR 7.15).
2 The weighted average share price at the date the shares were exercised was EUR 6.05 (2019: EUR 7.29).
3 Corresponds to the shares granted to Group employees who joined HSBC Continental Europe during previous years net of shares granted to
HSBC Continental Europe employees who joined other Group entities.
In 2020, EUR (9) million was charged to the income statement in respect of amortisation of the existing plans for HSBC in France (in
2019: EUR (11) million).
The vesting period for deferred share awards expected to be granted in 2020, in respect of the 2019 performance year, was determined
to have started on 1 January 2019.
Employee share offering
In 2020, HSBC Continental Europe did not proceed to any capital increase opened to current employees.
Income statement charge

2020 2019
€m €m
Restricted share awards 13 15
Savings related and other share option plans — —
Pension and other post-retirement benefits

Policy
HSBC Continental Europe operates a number of pension and other post-retirement benefit plans. These plans include both defined
benefit and defined contribution plans and various other retirement benefits such as post-retirement benefits.
HSBC Continental Europe pays each retiree a retiring indemnity. The amount is determined by the final earnings, the length of service in
the company at this date and the guarantees under collective and internal agreements. Those plans represent 71 per cent of all
commitments in France.
HSBC Continental Europe grants certain beneficiaries a scheme plan. Those scheme plan forecast the payment of benefits from the date
of retirement. Those plans represent roughly 20 per cent of all commitments in France.
The costs recognised for funding these post-employment plans are determined using the Projected Unit Credit Method, with annual
actuarial valuations performed on each plan.

HSBC Continental Europe recognises actuarial gains and losses directly in equity, without being recognised in income. Past service costs
are immediately recognised. The current service costs and any past service costs, together with the expected return on scheme assets
less the unwinding of the discount on the scheme liabilities, are charged to operating expenses.
The net defined benefit liability recognised in the balance sheet related to post-employment benefits recognised represents the present
value of the defined benefit obligations reduced by the fair value of plan assets.
Payments to defined contribution plans and state-managed retirement benefit plans, where HSBC Continental Europe obligations under
the plans are equivalent to a defined contribution plan, are charged as an expense as they fall due.
Post-employment defined benefit plans’ principal actuarial assumptions
The principal actuarial financial assumptions used to calculate the defined benefit pension plans at 31 December 2020, and the 2020
periodic costs, were:
Key actuarial assumptions for the principal plan

Rate of increase
for pensions and
Discount Inflation deferred Rate of pay
rate rate pensions1 increase
% % % %
At 31 Dec 2020 0.40 1.50 0.40 2.57
At 31 Dec 2019 0.65 1.50 1.50 2.61
1 The rate of increase for pensions and deferred pensions is 0.40 per cent in 2021 and back to 1.50 per cent after 2021.
HSBC Continental Europe determines discount rates, in consultation with its actuary based upon the current average yield of high quality
(AA rated or equivalent) debt instruments, with maturities consistent with that of the defined benefit obligations.
Mortality tables and average life expectancy at age 60 for the principal plan
Life expectancy at age Life expectancy at age

Mortality 60 for a male member 60 for a female member
table currently: currently:
Aged 60 Aged 60
At 31 Dec 2020 TV–TD 2014 2016 23.05 27.53
At 31 Dec 2019 TV 88-90 24.02 24.02
Recognition of defined benefit plans
Net assets/(liabilities) recognised on the balance sheet in respect of defined benefit plans
Present value of Effect of
Fair value of defined benefit limit on plan
plan assets obligations surpluses Total
€m €m €m €m
Defined benefit pension plans 6 181 — 175
Defined benefit healthcare plans — — — —
At 31 Dec 2020 6 181 — 175
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) 175
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) —
Defined benefit pension plans 7 195 — 188

Defined benefit healthcare plans — — — —
At 31 Dec 2019 7 195 — 188
Total employee benefit liabilities (within ‘Accruals, deferred income and other liabilities’) 188
Total employee benefit assets (within ‘Prepayments, accrued income and other assets’) —
Cumulative actuarial gains/(losses) recognised in other comprehensive income

2020 2019
€m €m
At 1 January 89 68
Total actuarial gains/(losses) recognised in other comprehensive income for the year 4 21
At 31 December 93 89
Actuarial gains and losses of the year are composed of EUR 5 millions due to actuarial assumptions' changes attributed to the decrease
of the discount rate from 0.65 per cent to 0.40 per cent, and to changes in life expectancy assumptions with an impact of EUR (1) million.

Actuarial assumption sensitivities
The following table shows the effect of changes in actuarial assumptions on the principal plan. The discount rate is sensitive to changes
in market conditions arising during the reporting period. The mortality rates used are sensitive to experience from the plan member
profile.
Defined benefits pension plan
Financial impact of increase Financial impact of decrease
2020 2019 2020 2019
€m €m €m €m
Discount rate – increase/decrease of 0.25% (6) (6) 6 6
Inflation rate – increase/decrease of 0.25% 1 1 (1) (1)
Pension payments and deferred pensions – increase/decrease of 0.25% 1 1 (1) (1)
Pay – increase/decrease of 0.25% 4 5 (4) (5)
Change in mortality – increase of 1 year 2 2 (2) (2)
Defined benefit pension plans

Net asset/(liability) under defined benefit pension plans
Fair value of plan Present value of defined Net defined benefit
assets benefit obligations asset/(liability)
Principal plan
€m €m €m
At 1 Jan 2020 7 195 188
Service cost — (12) (12)
– current service cost — 8 8
– past service cost and gains/(losses) from settlements — (20) (20)
Net interest income/(cost) on the net defined benefit asset/(liability) — 1 1
Re-measurement effects recognised in other comprehensive income — 4 4
– return on plan assets (excluding interest income) — — —
– actuarial gains/(losses) — 3 3
– other changes — 1 1
Transfers1 — 1 1
Exchange differences — — —
Benefits paid (1) (8) (7)
Other movements — — —
At 31 Dec 2020 6 181 175
At 1 Jan 2019 8 173 165

Service cost — 5 5
– current service cost — 6 6
– past service cost and gains/(losses) from settlements — (1) (1)
Net interest income/(cost) on the net defined benefit asset/(liability) — 2 2
Re-measurement effects recognised in other comprehensive income — 21 21
– return on plan assets (excluding interest income) — — —
– actuarial gains/(losses) — 21 21
– other changes — — —
Transfers2 — 3 3
Exchange differences — — —
Other movements — — —
At 31 Dec 2019 7 195 188
1 This amount corresponds to transfer of employees from HSBC Bank plc Paris Branch to HSBC Continental Europe.
2 This amount corresponds to changes in the perimeter during the year.
Benefits expected to be paid from the plans to retirees over each of the next five years, and in aggregate for the five years thereafter, are
as follows:
Benefits expected to be paid from plans

2021 2022 2023 2024 2025 2026–2030
€m €m €m €m €m €m
The principal plan 1 10 6 8 8 9 38
1 The duration of the defined benefit obligation is 13 years for the principal plan under the disclosure assumptions adopted (2019: 13 years) and
13 years for all other plans combined (2019: 13 years).

Fair value of plan assets by asset classes

31 Dec 2020 31 Dec 2019
Quoted No quoted Quoted No quoted

market price market price market price market price
Fair in active in active Thereof Fair in active in active Thereof
value market market HSBC value market market HSBC
€m €m €m €m €m €m €m €m
Fair value of plan assets 6 6 — — 7 7 — —
– equities — — — — — — — —
– bonds 6 6 — — 7 7 — —
– derivatives — — — — — — — —
– other — — — — — — — —
6 Auditors’ remuneration
PricewaterhouseCoopers BDO Paris

Audit France1 Audit & Advisory1
Amount Amount
(excluding (excluding
VAT) VAT)
€k % €k %
Fees for account certifications 3,543 88 494 94
Fees for other services provided to HSBC Continental Europe 499 12 31 6
Year ended 31 Dec 2020 4,042 100 525 100
Fees for account certifications 3,377 87 516 92

Fees for other services provided to HSBC Continental Europe 517 13 43 8
Year ended 31 Dec 2019 3,894 100 559 100
1 This Note is prepared in compliance with ANC regulation 2016-08, 2016-09, 2016-10 and 2016-11 and includes only the fees paid to
PricewaterhouseCoopers Audit France and BDO Paris Audit & Advisory (2019 figures have been re-presented accordingly).
Services other than the account certification at 31 December 2020 for PricewaterhouseCoopers Audit France and BDO Paris Audit &
Advisory mainly concern comfort letters related to the programmes of issuances and interim dividends, legal or regulatory services and
also services related to internal control procedures (i.e. report ISAE 3402).
7 Tax
Tax expense
2020 2019
€m €m
Current tax 52 45
Deferred tax 28 (28)
HSBC Continental Europe's profits are taxed at different rates depending on the country in which the profits arise. The key applicable
corporate tax rates concerns France.
The 2020 Finances Law (‘Loi de Finances’) has reviewed the gradual decrease of the corporate tax rate from 33 1/3 in 2019 to 25 per cent
in 2022.
The social contribution on profit (CSB at 3.3 per cent of the income tax) is maintained and is added to the income tax.
As a consequence, at French Tax group level, in 2020, France’s tax rate is 32.02 per cent (2019: 34.43 per cent).
Other overseas subsidiaries and branches provide for taxation at the appropriate rates in the countries in which they operate.
In application of the standard IAS 12, at each deferred tax basis, assumptions of date of recovery were taken to determine these deferred
tax rate to apply to take into account the French tax rate decrease from 33 1/3 to 25 per cent.
be written off and no further net DTA should be recognised. Recognition will be reassessed at each balance sheet date.
The increase of the tax expense between 2019 and 2020 is mainly due to the write-off in 2020 of net deferred tax asset recognised in
December 2019.
Tax risks
In 2018, HSBC Leasing (France) incurred a tax audit for the years 2015 and 2016, the tax audit has continued in 2019 and 2020 for years
2017 and 2018. In the frame of these tax audits, the French tax authorities have reassessed the tax treatment of provisions related to
some aircraft leasing transactions.
HSBC Leasing (France) disputed the reassessments with the French tax authorities.
A provision corresponding to the best estimate of the risk has been recorded at 31 December 2018 and is periodically reassessed at each
balance sheet date.

Analysis of overall tax charge
Tax reconciliation
2020 2019
Overall tax charges Overall tax charges
€m % €m %
Tax expense
Taxation at French corporate tax rate (303) 32.02 (7) 34.43
Impact of differently taxed overseas profits in overseas locations (10) 1.1 (23) 107.9
Items impacting tax charge:
– Permanent disallowables 39 (4.2) 41 (193.1)
– Local taxes and overseas withholding taxes 10 (1.1) 15 (68.6)
– Changes in tax rates 20 (2.1) (14) 63.9
– Non-taxable income and gains subject to tax at a lower rate (1) 0.1 (2) 8.4
– Adjustment in respect of prior years 11 (1.2) 7 (30.9)
– Deferred tax on tax losses or temporary differences not provided 326 (34.5) — —
– Other items (12) 1.3 — 1.3
Year ended 31 Dec 80 (8.4) 17 (77.1)
The effective tax rate for 2020 of (8.4) per cent whereas French current tax rate is 32.02 per cent is explained mainly by non-recognition
of net deferred tax asset as of 31 December 2020 and permanent disallowables (of which the impact of the non-deductible Single
Resolution Fund contribution).
Movement of deferred tax assets and liabilities

Loans Financial
Retirement impairment assets at Goodwill and
benefits allowances FVOCI intangibles Other1 Total
€m €m €m €m €m €m
Assets 37 22 (6) 11 165 229
Liabilities 1 — (19) — (157) (175)
At 1 Jan 2020 38 22 (25) 11 8 54
Income statement (34) 26 — (11) (9) (28)
Other comprehensive income (2) — (11) — (13) (26)
Equity — — — — — —
Foreign exchange and other adjustments — — — — — —
At 31 Dec 2020 2 48 (36) — (14) —
Assets2 1 48 (15) — 97 131
Liabilities2 1 — (21) — (111) (131)
Assets 33 22 (3) (4) 108 156

Liabilities 1 — (15) — (141) (155)
At 1 Jan 2019 34 22 (18) (4) (33) 1
Income statement (1) — — 15 14 28
Other comprehensive income 5 — (7) — 19 17
Equity — — — — — —
Foreign exchange and other adjustments — — — — 8 8
At 31 Dec 2019 38 22 (25) 11 8 54
Assets2 37 22 (6) 11 165 229
Liabilities2 1 — (19) — (157) (175)
1 Deferred tax in 'Other' includes essentially deferred tax assets from Mark-to-Market on issuances of Covered Bonds and Derivatives and deferred
tax liabilities on PVIF. Non-recognised Deferred Tax Assets has been apportioned to the categories ‘retirement benefits’, ‘goodwill and intangibles’
and ‘others’.
2 After netting off balances within entities, the balances as disclosed in the accounts are as follows: deferred tax assets EUR 131 million
(2019: EUR 229 million); and deferred tax liabilities EUR (131) million (2019: EUR (175) million).
CVAE
Since 2010, the French Tax ‘taxe professionnelle’ was replaced by a new tax 'contribution économique territoriale' (‘CET’) composed of
the 'cotisation foncière des entreprises' (‘CFE’) based on the rental value of taxable property, and the ‘cotisation sur la valeur ajoutée des
entreprises' (‘CVAE’) corresponding to 1.54 per cent of added-value of the year.
HSBC Continental Europe has treated the CVAE as income tax, in application of IAS 12. Deferred CVAE contributions are accounted for
on the basis of temporary differences between the book value of assets and liabilities and their tax value from a CVAE standpoint.
Since 2014, the CVAE contribution is included in ‘Income Tax’. In 2020, the impact of this accounting position was a classification of a
charge of EUR 12.3 million (2019: EUR 16.7 million) on the ‘Income Tax’ and the recognition of a deferred tax charge of EUR 0.3 million
(2019: profit EUR 3 million).

8 Dividends
Dividends to shareholders of the parent company

2020 2019
Per share Total Per share Total
€ €m € €m
Dividends paid on ordinary shares
In respect of previous year:
– exceptional dividend — — — —
– dividend paid — — — —
In respect of current year:
– first interim dividend — — — —
Total dividend paid to shareholders — — — —
Total coupons on capital instruments classified as equity 30 21
Dividends related to 2020

The Board of Directors held on 23 February 2021 proposed to the Combined General Meeting, on 11 March 2021, not to distribute a
dividend in respect of the year 2020.
Dividends related to 2019
The Combined General Meeting held on 13 March 2020 approved the recommendation of the Board of Directors, on 18 February 2020,
not to distribute a dividend in respect of the year 2019.
Dividends per share for 2020 & 2019

2020 2019
€ €
Dividends per share1 — —
1 Coupons paid on other equity instruments are not included in the calculation of the dividends per share.
Other equity instruments

Total coupons on capital instruments classified as equity1
2020 2019
First call date €m €m
Perpetual subordinated capital instruments
– EUR 200 million issued at 4.56% May 2022 9 9
– EUR 300 million issued at 4% March 2023 12 12
– EUR 250 million issued at 3.46% December 2024 9 —
Total 30 21
1 Discretionary coupons are paid semi-annually on the perpetual subordinated capital instruments.
9 Earnings per share
Basic earnings per ordinary share were calculated by dividing the basic earnings of EUR (1,022) million by the weighted average number
of ordinary shares outstanding during the year, excluding own shares held, of 98,231,196 (full year 2019: earnings of EUR (39) million and
92,571,906 weighted average number of shares).
Diluted earnings per share were calculated by dividing the basic earnings, which require no adjustment for the dilutive of potential
ordinary shares (including share options outstanding not yet exercised), by the weighted average number of ordinary shares outstanding,
excluding own shares held, plus the weighted average number of ordinary shares that would be issued on ordinary conversion of all the
potential dilutive ordinary shares of 98,231,196 (full year 2019: 92,571,906 shares). At 31 December 2020, no potentially dilutive ordinary
share had been issued.
Basic and diluted earnings per share

2020 2019
Profit/ Number Per Profit/ Number Per
(loss) of shares share (loss) of shares share
€m (millions) € €m (millions) €
Basic earnings per share (1,022) 98 (10.43) (39) 93 (0.41)
Diluted earnings per share (1,022) 98 (10.43) (39) 93 (0.41)

10 Trading assets
2020 2019
€m €m
Treasury and other eligible bills 853 1,427
Debt securities 12,001 13,409
Equity securities — —
Trading securities 12,854 14,836
Loans and advances to banks 27 1
Loans and advances to customers 73 —
Year-ended 31 Dec 12,954 14,837
11 Fair values of financial instruments carried at fair value
Control framework
Fair values are subject to a control framework designed to ensure that they are either determined, or validated, by a function independent
of the risk taker.
For all financial instruments where fair values are determined by reference to externally quoted prices or observable pricing inputs to
models, independent price determination or validation is utilised. In inactive markets, we source alternative market information to
validate the financial instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable.
The factors that are considered in this regard are, inter alia:
• the extent to which prices may be expected to represent genuine traded or tradeable prices;
• the degree of similarity between financial instruments;
• the degree of consistency between different sources;
• the process followed by the pricing provider to derive the data;
• the elapsed time between the date to which the market data relates and the balance sheet date;
• the manner in which the data was sourced.
For fair values determined using valuation models, the control framework may include, as applicable, development or validation by
independent support function of: (i) the logic within valuation models; (ii) the inputs to these models; (iii) any adjustments required
outside the valuation models; and (iv) where possible, model outputs.
Valuation models are subject to a process of due diligence and calibration before becoming operational and are calibrated against
external market data on an ongoing basis.
Financial liabilities measured at fair value
In certain circumstances, HSBC Continental Europe records its own debt in issue at fair value, based on quoted prices in an active market
for the specific instrument. When quoted market prices are unavailable, the own debt in issue is valued using valuation techniques, the
inputs for which are based either on quoted prices in an inactive market for the instrument or are estimated by comparison with quoted
prices in an active market for similar instruments. In both cases, the fair value includes the effect of applying the credit spread that is
appropriate to the HSBC Continental Europe's liabilities.
Structured notes issued and certain other hybrid instruments are included within trading liabilities and are measured at fair value.The
spread applied to these instruments is derived from the spreads at which HSBC Continental Europe issues structured notes.
Fair value hierarchy
Fair values of financial assets and liabilities are determined according to the following hierarchy:
• Level 1 – Valuation technique using quoted market price: financial instruments with quoted prices for identical instruments in active
markets that HSBC Continental Europe can access at the measurement date.
• Level 2 – Valuation technique using observable inputs: financial instruments with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where
all significant inputs are observable.
• Level 3 – Valuation technique with significant unobservable inputs: financial instruments valued using valuation techniques where one
or more significant inputs are unobservable.

Breakdown of financial instruments recorded at fair value by level of fair value measurement
Financial instruments carried at fair value and bases of valuation
Valuation Amount with
techniques HSBC entities
Level 3 –
with
Level 1 – Level 2 – significant
quoted using non- Amounts
market observable observable Third-party with HSBC Of which
price inputs inputs Total entities Level 3 Total
At 31 Dec 2020 €m €m €m €m €m €m €m
Assets
Trading assets 11,449 1,468 29 12,946 8 — 12,954
Financial assets designated and otherwise mandatorily measured
at fair value through profit or loss 2,891 6,227 2,279 11,397 251 — 11,648
Derivatives 35 35,911 109 36,055 20,420 491 56,475
Financial investments 11,570 6,331 815 18,716 445 127 19,161
Liabilities
Trading liabilities 17,809 19 — 17,828 — — 17,828
Financial liabilities designated at fair value — 16,340 552 16,892 — — 16,892
Derivatives 17 37,706 239 37,962 17,752 138 55,714
At 31 Dec 20191
Assets
Trading assets 13,461 1,373 2 14,836 1 — 14,837
Financial assets designated and otherwise mandatorily measured
at fair value through profit or loss 2,697 6,678 2,325 11,700 257 — 11,957
Derivatives 27 28,197 442 28,666 17,058 328 45,724
Financial investments 7,571 7,957 1,006 16,534 447 75 16,981
Liabilities
Trading liabilities 23,249 13 — 23,262 — — 23,262
Financial liabilities designated at fair value 7,531 11,115 307 18,953 — — 18,953
Derivatives 20 27,955 130 28,105 17,010 469 45,115
1 2019 balances have been re-presented following a refinement in application of the levelling methodology primarily for private debt and equity and
real-estate investments during the period. The result of this is a total of EUR 16.0 billion moving from Level 1, and EUR 13.4 billion and EUR 2.6
billion into Levels 2 and 3 respectively. The change has impacted financial investments and financial assets designated and otherwise mandatorily
measured at fair value.
Transfers between Level 1 and Level 2 fair values

Assets Liabilities
Designated and
otherwise mandatorily
Financial Trading measured at fair value Trading Designated
Investments assets through profit or loss Derivatives Liabilities at fair value Derivatives
€m €m €m €m €m €m €m
At 31 Dec 2020
Transfers from Level 1 to Level 2 223 185 — — 18 6,609 —
Transfers from Level 2 to Level 1 1,766 188 80 — — — —
At 31 Dec 20191
Transfers from Level 1 to Level 2 2,411 1,046 — — — — —
Transfers from Level 2 to Level 1 615 35 — — — — —
1 2019 balances have been re-presented following a refinement in application of the levelling methodology. The result of this is an increase in
transfers from level 1 to level 2 and level 2 to level 1 of EUR 2.4 billion and EUR 0.6 billion respectively for financial investments and a decrease of
EUR 1.2 billion in transfers from Level 1 to Level 2 for Assets designated and otherwise mandatorily measured at fair value.
Transfers between levels of the fair value hierarchy are deemed to occur at the end of each quarterly reporting period. Transfers into and
out of levels of the fair value hierarchy are normally attributable to observability of valuation inputs and price transparency.
Fair value adjustments
Fair value adjustments are adopted when we determine there are additional factors considered by market participants that are not
incorporated within the valuation model.
Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the income
statement, such as when models are enhanced and fair value adjustments may no longer be required.
Bid-offer
IFRS 13 'Fair value measurement' requires use of the price within the bid-offer spread that is most representative of fair value. Valuation
models will typically generate mid-market values. The bid-offer adjustment reflects the extent to which bid-offer costs would be incurred
if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding the
position.

Uncertainty
Certain model inputs may be less readily determinable from market data, and/or the choice of model itself may be more subjective. In
these circumstances, an adjustment may be necessary to reflect the likelihood that market participants would adopt more conservative
values for uncertain parameters and/or model assumptions than those used in the valuation model.
Credit valuation adjustment (‘CVA’)
The CVA is an adjustment to the valuation of over-the-counter ('OTC') derivative contracts to reflect the possibility that the counterparty
may default and that HSBC Continental Europe may not receive the full market value of the transactions.
Debit valuation adjustment (‘DVA’)
The DVA is an adjustment to the valuation of OTC derivative contracts to reflect the possibility that HSBC Continental Europe may
default, and that it may not pay the full market value of the transactions.
Funding fair value adjustment ('FFVA')
The FFVA is calculated by applying future market funding spreads to the expected future funding exposure of any uncollateralised
component of the OTC derivative portfolio. The expected future funding exposure is calculated by a simulation methodology, where
available, and is adjusted for events that may terminate the exposure, such as the default of HSBC Continental Europe or the
counterparty. The FFVA and DVA are calculated independently.
Model limitation
Models used for portfolio valuation purposes may be based upon a simplifying set of assumptions that do not capture all current and
future material market characteristics. In these circumstances, model limitation adjustments are adopted.
Inception profit (Day 1 P&L reserves)
Inception profit adjustments are adopted by HSBC Continental Europe when the fair value estimated by a valuation model is based on
one or more significant unobservable inputs.
Fair value valuation bases
Financial instruments measured at fair value using a valuation technique with significant unobservable inputs – Level 3
Assets Liabilities
Designated and
Financial otherwise mandatorily Designated
Invest- Trading measured at fair value Total Trading at fair Total
ments assets through profit or loss Derivatives Assets liabilities value Derivatives liabilities
€m €m €m €m €m €m €m €m €m
Private equity including strategic investments 21 — 1,974 — 1,995 — — — —
Asset-backed securities — — — — — — — — —
Structured notes — — — — — — 552 — 552
Derivatives — — — 109 109 — — 239 239
Other portfolios 794 29 305 — 1,128 — — — —
HSBC Group subsidiaries 127 — — 491 618 — — 138 138
Year ended 31 Dec 2020 942 29 2,279 600 3,850 — 552 377 929
Private equity including strategic investments 13 — 1,841 — 1,854 — — — —

Asset-backed securities — — — — — — — — —
Structured notes — 2 — — 2 — 307 — 307
Derivatives — — — 442 442 — — 130 130
Other portfolios 993 — 484 — 1,477 — — — —
HSBC Group subsidiaries 75 — — 328 403 — — 469 469
Year ended 31 Dec 20191 1,081 2 2,325 770 4,178 — 307 599 906
1 2019 balances have been re-presented following a refinement in application of the levelling methodology. The result of this is an increase of EUR
2.6 billion of assets in Level 3; other portfolios increased by EUR 1.2 billion and private equity including strategic investments by EUR 1.4 billion.
The change has impacted financial investments and financial assets designated and otherwise mandatorily measured at fair value.
Private equity including strategic investments

HSBC Continental Europe’s private equity positions are generally classified as financial investments and are not traded on an active
market. In the absence of an active market for the investment, fair value is estimated based upon an analysis of the investee’s financial
position and results, risk profile, prospects and other factors as well as reference to market valuations for similar entities quoted on an
active market, or the price at which similar companies have changed ownership. Fair value investment estimation being subjected to
judgement and uncertainty subjective factors remain until the private equity investment is sold.
Derivatives
Over-the-counter (i.e. non-exchange traded) derivatives valuation models calculate the present value of expected future cash flows, based
upon ‘no-arbitrage’ principles. For many vanilla derivative products, such as interest rate swaps and European options, the modelling
approaches used are standard across the industry.

For more complex derivative products, there may be some divergence in market practice.
Inputs to valuation models are determined from observable market data wherever possible, including prices available from exchanges,
dealers, brokers or providers of consensus pricing. Certain inputs may not be observable in the market directly, but can be determined
from observable prices via model calibration procedures. Finally, some inputs are not observable, but can generally be estimated from
historic data or other sources.
Structured notes
For structured notes whose fair value is derived from a valuation technique, the fair value will be derived from the fair value of the
underlying debt security as described above, and the fair value of the embedded derivative will be determined as described in the section
above on derivatives. The notes are classified as Level 3 due to the unobservability of parameters such as long-dated equity volatilities
and correlations between equity prices, between equity prices and interest rates and between interest rates and foreign exchange rates.
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy
Movement in Level 3 financial instruments

Assets Liabilities
Designated
and
otherwise
mandatorily
measured at
fair value Designated
Financial Trading through Trading at fair
Investments assets profit or loss Derivatives liabilities value Derivatives
€m €m €m €m €m €m €m
At 1 Jan 2020 1,081 2 2,325 770 — 307 599
Total gains/(losses) recognised in profit or loss — (2) 75 (347) — 124 (357)
– net income/(expense) from financial instruments held for
trading or managed on a fair value basis — (2) — (347) — — (357)
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit or loss — — 75 — — 124 —
– gains less losses from financial investments at fair value
through other comprehensive income — — — — — — —
Total gains/(losses) recognised in other comprehensive income 60 — — — — — —
– financial investments: fair value gains/(losses) 60 — — — — — —
– exchange differences — — — — — — —
Purchases 386 46 288 — — — —
New issuances — — — — — 19 —
Sales (585) (46) (324) — — — —
Settlements — (21) (85) 105 — 14 93
Transfer out — — — (2) — (108) (1)
Transfer in — 50 — 74 — 196 43
At 31 Dec 2020 942 29 2,279 600 — 552 377
Unrealised gains/(losses) recognised in profit or loss relating to
assets and liabilities held at 31 Dec 2020 — — 148 81 — 71 109
– trading income/(expense) excluding net interest income — — — 81 — — 109
– net income/(expense) from other financial instruments
designated at fair value — — 148 — — 71 —
– expected credit loss charges and other credit risk charges — — — — — — —

Movement in Level 3 financial instruments (continued)
Assets Liabilities
Designated
and otherwise
mandatorily
measured at
fair value
Financial Trading through profit Trading Designated
Investments assets or loss Derivatives liabilities at fair value Derivatives
€m €m €m €m €m €m €m
At 1 Jan 20191 722 2 2,192 615 — 292 435
Total gains/(losses) recognised in profit or loss — (2) 21 179 — 5 132
– net income/(expense) from financial instruments held for
trading or managed on a fair value basis — (2) — 179 — — 132
– changes in fair value of other financial instruments
mandatorily measured at fair value through profit or loss — — 21 — — 5 —
– gains less losses from financial investments at fair value
through other comprehensive income — — — — — — —
Total gains/(losses) recognised in other comprehensive income 33 — — — — — —
– financial investments: fair value gains/(losses) 33 — — — — — —
– exchange differences — — — — — — —
Purchases 382 2 426 1 — 139 45
New issuances — — — — — 42 —
Sales (41) — (28) — — (170) —
Settlements — — (286) (11) — 23 (13)
Transfer out (15) — — (25) — (41) (6)
Transfer in — — — 11 — 17 6
At 31 Dec 2019 1,081 2 2,325 770 — 307 599
Unrealised gains/(losses) recognised in profit or loss relating to
assets and liabilities held at 31 Dec 2019 — — 37 183 — 18 127
– trading income/(expense) excluding net interest income — — — 183 — — 127
– net income/(expense) from other financial instruments
designated at fair value — — 37 — — 18 —
1 2019 balances have been re-presented following a refinement in application of the levelling methodology. The result of this is an increase of
EUR 2.6 billion of assets in Level 3; financial investments increased by EUR 1.1 billion and financial assets designated and otherwise mandatorily
measured at fair value by EUR 1.5 billion.
Effects of changes in significant unobservable assumptions to reasonably possible alternatives

The fair value of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions
that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable
market data.
Sensitivity of Level 3 fair values to reasonably possible alternative assumptions

At 31 December 2020 At 31 Dec 20192
Reflected in Reflected in other Reflected in Reflected in other
profit or loss comprehensive Income profit or loss comprehensive Income
Favourable Unfavourable Favourable Unfavourable Favourable Unfavourable Favourable Unfavourable
changes changes changes changes changes changes changes changes
€m €m €m €m €m €m €m €m
Derivatives/trading assets/trading
liabilities1 9 (9) — — 10 (10) — —
Financial assets and liabilities
designated and otherwise mandatorily
measured at fair value 121 (122) — — 127 (111) — —
Financial investments — — 43 (43) — — 54 (57)
HSBC Group subsidiaries 23 (23) 6 (6) 16 (16) — —
Total 153 (154) 49 (49) 153 (137) 54 (57)
1 Derivatives, trading assets and trading liabilities are presented as one category to reflect the manner in which these financial instruments are
risk-managed.
2 2019 balances have been re-presented following a refinement in application of the levelling methodology. The impact changes reflected through
OCI due to financial investments is EUR 53 million and EUR 77 million reflected in profit or loss due to financial assets designated and mandatorily
measured at fair value.

The following table shows the sensitivity of Level 3 fair values to reasonably possible alternative assumptions by instrument type.
Reflected in profit or loss Reflected in OCI
Favourable Unfavourable Favourable Unfavourable
changes changes changes changes
€m €m €m €m
2020
Private equity including strategic investments 102 (102) 1 (1)
Asset-backed securities — — — —
Structured notes 10 (10) — —
Derivatives 9 (9) — —
Other portfolios 9 (10) 42 (42)
HSBC Group subsidiaries 23 (23) 6 (6)
Year ended 31 Dec 153 (154) 49 (49)
20191
Private equity including strategic investments 116 (97) 1 (1)
Asset-backed securities — — — —
Structured notes 1 (1) — —
Derivatives 10 (10) — —
Other portfolios 10 (13) 53 (56)
HSBC Group subsidiaries 16 (16) — —
Year-ended 31 Dec 153 (137) 54 (57)
1 2019 balances have been re-presented following a refinement in application of the levelling methodology. The impact changes reflected through
OCI due to other portfolios is EUR 53 million and EUR 77 million reflected in profit or loss due to Private equity including strategic investments
(EUR 69 million) and other portfolios (EUR 8 million).
Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the
levels of the unobservable parameters using statistical techniques. When parameters are not amenable to statistical analysis,
quantification of uncertainty is judgemental.
When the fair value of a financial instrument is affected by more than one unobservable assumption, the above table reflects the most
favourable or most unfavourable change from varying the assumptions individually.
Key unobservable inputs to Level 3 financial instruments
The table above lists key unobservable inputs to Level 3 financial instruments, and provides the range of those inputs as at 31 December
2020. A further description of the categories of key unobservable inputs is given below.

Quantitative information about significant unobservable inputs in Level 3 valuations
Fair Full range Core range of
value1 of inputs inputs
Assets Liabilities Key unobservable Lower Higher Lower Higher
€m €m Valuation technique inputs % % % %
At 31 Dec 2020
Private equity including strategic
investments 1,995 — See notes below See notes below N/A N/A N/A N/A
Asset-backed securities
– CLO/CDO2 — — Market proxy Bid quotes — — — —
– other ABSs — —
Structured notes — 552
Model – Option
– equity-linked notes — 285 model Equity volatility — 51 — —
Model – Option
– fund-linked notes — — model Fund volatility — — — —
Model – Option
– FX-linked notes — — model FX volatility — — — —
– other — 267
Derivatives 600 377
Interest rate derivatives 435 219
– securitisation swaps 141 — Model – DCF3 Prepayment rate 50 50 — —
Model – Option
– long-dated swaptions 131 56 model IR volatility 16 28 — —
– other 163 163
Foreign exchange derivatives 3 3
Model – Option
– foreign exchange options 3 3 model FX volatility 7 16 — —
Equity derivatives 162 155
Model – Option
– long-dated single stock options — — model Equity volatility — — — —
– other 162 155
Credit derivatives
– other — —
Other portfolios 1,255 —
Total Level 3 3,850 929
At 31 Dec 20194
Private equity including strategic
investments 1,854 — See notes below See notes below N/A N/A N/A N/A
Asset-backed securities
– CLO/CDO 2 — — Market proxy Bid quotes — — — —
– other ABSs — —
Structured notes 2 307
– equity-linked notes — 224 Model – Option model Equity volatility — — — —
– fund-linked notes — — Model – Option model Fund volatility — — — —
– FX-linked notes — — Model – Option model FX volatility — — — —
– other 2 83
Derivatives 770 599
Interest rate derivatives 721 574
– securitisation swaps 139 1 Model – DCF 3 Prepayment rate 50 50 50 50
– long-dated swaptions 500 433 Model – Option model IR volatility 16 36 18 31
– other 82 140
Foreign exchange derivatives
– foreign exchange options — — Model – Option model FX volatility 9 11 9 11
Equity derivatives 49 25
– long-dated single stock options — — Model – Option model Equity volatility — — — —
– other 49 25
Credit derivatives
– other — —
Other portfolios 1,552 —
Total Level 3 4,178 906
1 Including Level 3 amounts with HSBC Group subsidiaries.

2 Collateralised Loan Obligation/Collateralised Debt Obligation.
3 Discounted cash flow.
4 2019 balances have been re-presented following a refinement in application of the levelling methodology. The result of this is an increase of
EUR 2.6 billion of assets in Level 3; other portfolios increased by EUR 1.2 billion and private equity including strategic investments by EUR 1.4
billion.
Private equity including strategic investments

Given the bespoke nature of the analysis in respect of each holding, it is not practical to quote a range of key unobservable inputs.

Prepayment rates
Prepayment rates are a measure of the anticipated future speed at which a loan portfolio will be repaid in advance of the due date. They
vary according to the nature of the loan portfolio and expectations of future market conditions, and may be estimated using a variety of
evidence, such as prepayment rates implied from proxy observable security prices, current or historical prepayment rates and
macroeconomic modelling.
Market proxy
Market proxy pricing may be used for an instrument for which specific market pricing is not available, but evidence is available in respect
of instruments that have some characteristics in common. In some cases it might be possible to identify a specific proxy, but more
generally evidence across a wider range of instruments will be used to understand the factors that influence current market pricing and
the manner of that influence.
Volatility
Volatility is a measure of the anticipated future variability of a market price. It varies by underlying reference market price, and by strike
and maturity of the option.
Certain volatilities, typically those of a longer-dated nature, are unobservable. The unobservable volatility is then estimated from
observable data. For example, longer-dated volatilities may be extrapolated from shorter-dated volatilities.
Correlation
Correlation is a measure of the inter-relationship between two market prices. Correlation is a number between minus one and one. A
positive correlation implies that the two market prices tend to move in the same direction, with a correlation of one implying that they
always move in the same direction. A negative correlation implies that the two market prices tend to move in opposite directions, with a
correlation of minus one implying that the two market prices always move in opposite directions.
Correlation may be unobservable. Unobservable correlations may be estimated based upon a range of evidence, including consensus
pricing services, HSBC Continental Europe trade prices, proxy correlations and examination of historical price relationships.
Credit spread
Credit spread is the premium over a benchmark interest rate required by the market to accept a lower credit quality. In a discounted cash
flow model, the credit spread increases the discount factors applied to future cash flows, thereby reducing the value of an asset. Credit
spreads may be implied from market prices. Credit spreads may not be observable in more illiquid markets.
Inter-relationships between key unobservable inputs
Key unobservable inputs to Level 3 financial instruments may not be independent of each other. As described above, market variables
may be correlated. This correlation typically reflects the manner in which different markets tend to react to macroeconomic or other
events.

12 Fair values of financial instruments not carried at fair value
Other financial instruments not carried at fair value are typically short-term in nature and reprice to current market rates frequently.
Accordingly, their carrying amount is a reasonable approximation of fair value. They include cash and balances at central banks and
items in the course of collection from and transmission to other banks, all of which are measured at amortised cost.
Fair value of financial instruments not carried at fair value and basis of valuation
Fair value
Level 1 – Level 2 – Using Level 3 – Significant
Carrying Quoted observable unobservable
amount market price inputs inputs Total
€m €m €m €m €m
At 31 Dec 2020
Assets
Loans and advances to banks 6,781 — 6,782 — 6,782
Loans and advances to customers 56,225 — — 56,334 56,334
Reverse repurchase agreements – non-trading 21,522 — 21,522 — 21,522
Financial investments: debt securities at amortised cost 6 — — 6 6
Liabilities
Deposits by banks 17,204 — 17,145 — 17,145
Customer accounts 61,393 — 61,387 — 61,387
Repurchase agreements – non-trading 10,984 — 10,984 — 10,984
Debt securities in issue 3,605 — 3,605 — 3,605
Subordinated liabilities1 1,876 — 1,958 — 1,958
At 31 Dec 2019
Assets
Loans and advances to banks 6,798 — 6,800 — 6,800
Loans and advances to customers 56,956 — — 57,037 57,037
Reverse repurchase agreements – non-trading 45,973 — 45,973 — 45,973
Financial investments: debt securities at amortised cost 6 — — 6 6
Liabilities
Deposits by banks 12,113 — 12,113 — 12,113
Customer accounts 57,550 — 57,545 — 57,545
Repurchase agreements – non-trading 20,213 — 20,213 — 20,213
Debt securities in issue 9,782 — 9,782 — 9,782
Subordinated liabilities 1,376 — 1,429 — 1,429
1 During 2020, HSBC Continental Europe has issued a New Tier 2 Capital (Tier 2 instrument) subscribed by HSBC Bank plc for EUR 500 million with
a maturity of 10 years.
Valuation
The fair value measurement is HSBC Continental Europe's estimate of the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. It does not reflect the economic benefits and
costs expected to flow from the instruments’ cash flows over their expected future lives. Other reporting entities may use different
valuation methodologies and assumptions in determining fair values for which no observable market prices are available.
Financial investments
The fair values of listed financial investments are determined using bid market prices. The fair values of unlisted financial investments are
determined using valuation techniques that incorporate the prices and future earnings streams of equivalent quoted securities.
Loans and advances to banks and customers
The fair value of loans and advances is based on observable market transactions, where available. In the absence of observable market
transactions, fair value is estimated using valuation models that incorporate a range of input assumptions. These assumptions may
include value estimates from third-party brokers which reflect over-the-counter trading activity; forward-looking discounted cash flow
models using assumptions which HSBC Continental Europe believes are consistent with those which would be used by market
participants in valuing such loans; and trading inputs from other market participants which includes observed primary and secondary
trades.
Loans are grouped, as far as possible, into homogeneous groups and stratified by loans with similar characteristics to improve the
accuracy of estimated valuation outputs. The stratification of a loan book considers all material factors, including vintage, origination
period, estimates of future interest rates, prepayment speeds, delinquency rates, loan-to-value ratios, the quality of collateral, default
probability, and internal credit risk ratings.
The fair value of a loan reflects both loan impairments at the balance sheet date and estimates of market participants’ expectations of
credit losses over the life of the loans, and the fair value impact of repricing between origination and the balance sheet date.
Deposits by banks and customer accounts
Fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining maturities. The fair
value of a deposit repayable on demand is approximated by its carrying value.

Debt securities in issue and subordinated liabilities

Fair values are determined using quoted market prices at the balance sheet date where available, or by reference to quoted market prices
for similar instruments.
Repurchase and reverse repurchase agreements – non-trading
Fair values approximate carrying amounts as their balances are generally short dated.
13 Financial assets designated and otherwise mandatorily measured at fair value through profit
or loss
2020 2019
Designated at fair value and Designated at fair value and
otherwise mandatorily measured at otherwise mandatorily measured at
fair value fair value
€m €m
Securities 11,507 11,639
– debt securities 2,796 2,896
– equity securities 8,711 8,743
Loans and advances to banks and customers 141 318
Other — —
Year ended 31 Dec 11,648 11,957
14 Derivatives
The table shows the fair value of derivatives by contract type:
Notional contract amounts and fair values of derivatives by product contract type held by HSBC Continental Europe
Notional contract amount Fair value – Assets Fair value – Liabilities
Trading Hedging Trading Hedging Total Trading Hedging Total
€m €m €m €m €m €m €m €m
Foreign exchange 555,346 261 9,138 18 9,156 8,723 — 8,723
Interest rate 3,758,436 15,277 53,856 — 53,856 53,571 55 53,626
Equities 23,562 — 528 — 528 400 — 400
Credit 6,065 — 58 — 58 87 — 87
Commodity and other 1,176 — 3 — 3 4 — 4
Gross total fair values 4,344,585 15,538 63,583 18 63,601 62,785 55 62,840
Offset (Note 28) (7,126) (7,126)
At 31 Dec 2020 4,344,585 15,538 63,583 18 56,475 62,785 55 55,714
Foreign exchange 449,934 8 6,251 1 6,252 5,963 — 5,963

Interest rate 3,692,489 17,299 44,047 3 44,050 43,767 63 43,830
Equities 26,896 — 309 — 309 187 — 187
Credit 11,622 — 165 — 165 187 — 187
Commodity and other 120 — 1 — 1 1 — 1
Gross total fair values 4,181,061 17,307 50,773 4 50,777 50,105 63 50,168
Offset (Note 28) (5,053) (5,053)
At 31 Dec 2019 4,181,061 17,307 50,773 4 45,724 50,105 63 45,115
The notional contract amounts of derivatives held for trading purposes and derivatives designated in hedge accounting relationships
indicate the nominal value of transactions outstanding at the balance sheet date; they do not represent amounts at risk.
Trading derivatives
Most of HSBC Continental Europe’s derivative transactions relate to sales and trading activities. Positions come from the activity with
clients, including as a result of reasonable expected short-term demand of clients and dynamic hedging of the positions.
Derivatives valued using models with unobservable inputs
The difference between the fair value at initial recognition (the transaction price) and the value that would have been derived had the
valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases, is in the following
table:

Unamortised balance of derivatives valued using models with significant unobservable inputs
2020 2019
€m €m
Unamortised balance at 1 Jan 3 3
Deferral on new transactions 3 —
Recognised in the income statement during the year: (1) —
– amortisation (1) —
– maturity, termination or offsetting derivative — —
Exchange differences and other — —
At 31 Dec 5 3
Hedge Accounting derivatives

HSBC Continental Europe uses derivatives (principally interest rate swaps) for hedging purposes in the management of its own asset and
liability portfolios and structural positions. This enables us to optimise the overall cost of accessing debt capital markets, and to mitigate
the market risk which would otherwise arise from structural imbalances in the maturity and other profiles of its assets and liabilities.
The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and the type of hedge
transactions. Derivatives may qualify as hedges for accounting purposes if they are fair value hedges, or cash flow hedges, or hedges in
net investment of foreign operations. These are described under the relevant headings below.
Fair value hedges
HSBC Continental Europe’s fair value hedges principally consist of interest rate swaps that are used to protect against changes due to
movements in market interest rates in the fair value of fixed-rate long-term financial instruments of portfolio and fixed rates loans. For
qualifying fair value hedges, all changes in the fair value of the derivative and in the fair value of the item in relation to the risk being
hedged are recognised in the income statement. If the hedge relationship is terminated, the fair value adjustment to the hedged item
continues to be reported as part of the basis of the item and is amortised to the income statement as a yield adjustment over the
remainder of the hedging period.
Hedging instrument by hedged risk

Hedging Instrument
Carrying amount
Notional Change in
amount1 Assets Liabilities Balance sheet fair value
Hedged Risk €m €m €m presentation €m
Interest rate2 8,469 — 55 Derivatives (87)
At 31 Dec 2020 8,469 — 55 (87)
Hedged Risk
Interest rate2 12,199 3 62 Derivatives (60)
At 31 Dec 2019 12,199 3 62 (60)
1 The notional contract amounts of derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions
outstanding at the balance sheet date; they do not represent amounts at risk.
2 The hedged risk ‘interest rate’ includes inflation risk.
Hedged item by hedged risk

Hedged Item Ineffectiveness
Accumulated fair value hedge
Carrying adjustments included in
amount carrying amount Change in Recognised in
Assets Liabilities Assets Liabilities Balance sheet fair value1 profit and loss Profit and loss
Hedged Risk €m €m €m €m presentation €m €m presentation
5,574 — 126 — Financial assets at fair 61
Net income
value through other
from financial
comprehensive income
instruments
5 — 3 — L&A to Banks 3 held for
Interest rate2 —
1,436 — 26 — L&A to Customers 18 trading or
— — — — Debt securities in issue — managed on
a fair value
Subordinated liabilities
basis
— — — — and deposits by Banks 5
At 31 Dec 2020 7,015 — 155 — 87 —

HSBC France Hedged item by hedged risk (continued)

Hedged Item Ineffectiveness
Accumulated fair value hedge
Carrying adjustments included in carrying
amount amount Change in fair Recognised in
Assets Liabilities Assets Liabilities Balance sheet value1 profit and loss Profit and loss
Hedged Risk €m €m €m €m presentation €m €m presentation
Financial assets at fair
value through other Net income
3,474 — 93 — comprehensive income 42 from financial
2 — 2 — L&A to Banks 2 instruments held
Interest rate2 1 for trading or
925 — 7 — L&A to Customers 17
managed on a
— 325 — — Debt securities in issue — fair value
Subordinated liabilities basis
— 2,605 — 34 and deposits by Banks —
At 31 Dec 2019 4,401 2,930 102 34 61 1
1 Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.
2 The hedged risk ‘interest rate’ includes inflation risk.
Cash flow hedges

HSBC Continental Europe is exposed to variability in future interest cash flows on non-trading assets and liabilities which bear interest at
variable rates or which are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows,
representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities on the basis of their
contractual terms and other relevant factors, including estimates of prepayments and defaults. The hedges are used to protect against
exposures to variability in future interest cash flows.
Hedging instrument by hedged risk

Hedging Instrument Hedged Item Ineffectiveness
Carrying amount Change in fair Change in fair Recognised in
Notional amount1 Assets Liabilities Balance sheet value2 value3 profit and loss Profit and loss
Hedged Risk €m €m €m presentation €m €m €m presentation
Net income from

Foreign currency 253 15 — — — — financial
Derivatives instruments held for
trading or managed
Interest rate 6,808 — — 31 30 1 on a fair value basis
At 31 Dec 2020 7,061 15 — 31 30 1
Net income from

Foreign currency — — — — — — financial instruments
Derivatives held for trading or
managed on a fair
Interest rate 5,100 — 1 57 56 1 value basis
At 31 Dec 2019 5,100 — 1 57 56 1
outstanding at the balance sheet date; they do not represent amounts at risk.
2 Used in effectiveness testing; comprising the full fair value change of the hedging instrument not excluding any component.
3 Used in effectiveness assessment; comprising amount attributable to the designated hedged risk that can be a risk component.

Analysis of other comprehensive income by risk type
Interest rate Foreign Currency
€m €m
Cash flow hedging reserve at 1 Jan 2020 34 —
Fair value gains/(losses) 30 —
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of hedged items that
has affected profit or loss 17 —
Income taxes (12) —
Others — —
Cash flow hedging reserve at 31 Dec 2020 69 —
Cash flow hedging reserve at 1 Jan 2019 (23) —

Fair value gains/(losses) 56 —
Fair value (gains)/losses reclassified from the cash flow hedge reserve to the income statement in respect of hedged items that
has affected profit or loss 29 —
Income taxes (28) —
Others — —
Cash flow hedging reserve at 31 Dec 2019 34 —
Embedded derivatives: home purchase savings

Home purchase savings accounts (‘CEL’) and plans (‘PEL’) are specific financial instruments established by law 65-554 of 10 July 1965.
Within these products, customers build up savings during a certain period and use them to obtain loans during a subsequent period. The
latter phase depends on, and cannot be separated from, the build-up phase.
To recognise derivatives embedded in PEL/CEL home purchase savings products at fair value, HSBC Continental Europe has developed a
model with the following main characteristics:
• the main accounting reference is IFRS 9, concerning the measurement of fair value with respect to derivative instruments;
• the derivatives under consideration are borrowing and savings options embedded in contracts in force at the accounts-closing date:
– the model calculates the fair value of exceptional payment and deferred payment options granted to customers (for home purchase
savings plans only);
– the model calculates the fair value of options to use acquired borrowing rights;
• the calculation is dependent on customer behaviour, and is carried out separately for each issue of PELs and on a combined basis for
CELs.
At 31 December 2020, derivatives embedded in home purchase savings products represented a liability of EUR 5.7 million
(at 31 December 2019: a liability of EUR 4.7 million).
Interest Rate Benchmark Reform: Amendments to IFRS 9 and IAS 39 'Financial instruments'
The first set of amendments (Phase 1) to IFRS 9 and IAS 39, which were published in September 2019 and endorsed in January 2020,
primarily allowed to assume that the interbank offered rates (‘Ibors’) are to continue unaltered for the purposes of forecasting hedged
cash flows until such time as the uncertainty of transitioning to nearly risk free rates (‘RFRs’) is resolved. The second set of amendments
(‘Phase 2’), issued in August 2020 and endorsed in January 2021, allows to modify hedge documentation to reflect the components of
hedge relationships which have transitioned to RFRs on an economically equivalent basis as a direct result of the Ibor transition.
While, the application of Phase 1 amendments is mandatory for accounting periods starting on or after 1 January 2021, HSBC
Continental Europe has chosen to early apply the Phase 2 amendments from the beginning of 2020. Significant judgement will be
required in determining when Ibor transition uncertainty is resolved and therefore decide when Phase 1 amendments cease to apply and
when some of the Phase 2 amendments can be applied.
The notional of the derivatives impacted by the Ibors reform but which are not used in designated hedge accounting relationship is
disclosed on page 82 in the section 'Financial Instruments impacted by the Ibors reform'.
HSBC Continental Europe has cash flow and fair value hedge accounting relationships that are exposed to different Ibors, predominantly
US Dollar Libor, Sterling Libor, and Euribor as well as overnight rates subject to the market-wide benchmarks reform, such as the
European overnight Index Average rate ('Eonia'). Many of the existing derivatives, loans, bonds and other financial instruments
designated in relationships referencing these benchmarks are expected to transition to new RFRs in different ways and at different times.
External progress on the transition to RFRs is being monitored within HSBC Continental Europe, with the objective of ensuring a smooth
transition for HSBC Continental Europe's hedge accounting relationships. The specific issues arising will vary with the details of each
hedging relationships, but may arise due to the transition of existing products included in the designation, a change in expected volumes
of products to be issued, a change in contractual terms of new products issued, or a combination of these factors. Some hedges may
need to be de-designated and new relationship entered into, while others may survive the market-wide benchmarks reforms.
The hedge accounting relationships that are affected by Phase 1 and Phase 2 amendments are presented in the Balance Sheet as
'Financial assets designated and otherwise mandatorily measured at fair value through other comprehensive income', 'Loans and
advances to banks', 'Loans and advances to customers'.
The notional amounts of Interest Rate derivatives designated in hedge accounting relationships represent the extent of the risk exposure
managed by HSBC Continental Europe that is expected to be directly affected by market-wide Ibor reform and in scope of Phase 1 and
Phase 2 amendments. HSBC Continental Europe cross-currency swaps designated in hedge accounting relationships and affected by Ibor
reform are not significant and have not been presented below.

Hedging instrument impacted by Ibor reform

Hedging instruments
Impacted by IBOR reform
Not impacted Notional
EUR GBP USD Other Total by IBOR reform Amount1
€m €m €m €m €m €m €m
Fair Value Hedges 6,105 25 365 — 6,495 1,974 8,469
Cash Flow Hedges 6,808 — — — 6,808 — 6,808
At 31 Dec 2020 12,913 25 365 — 13,303 1,974 15,277
Fair Value Hedges 11,301 29 473 — 11,803 396 12,199

Cash Flow Hedges 5,100 — — — 5,100 — 5,100
At 31 Dec 2019 16,401 29 473 — 16,903 396 17,299
outstanding at balance sheet date; they do not represent amounts at risk.
The main event occurred during 2019 and in scope of Ibor reform was the change to the calculation of the Eonia to be calculated as the
Euro Short Term rate (‘€STR’) plus a fixed spread of 8.5 basis points. This event had no material impact to the valuation of components of
designated hedge accounting relationships and there were no discontinuations of existing designated relationships. The main market
events in scope of Ibor reform during 2020 were the changes applied by central clearing counterparties to remunerating EURO and US
dollar collateral. While there was a minimal valuation impact to the derivatives in scope which are used for hedge accounting, these
changes had no discontinuation impact to any of the designated relationships affected.
15 Financial investments
Carrying amount of financial investments

2020 2019
€m €m
Financial investments measured at fair value through other comprehensive income 19,161 16,981
– treasury and other eligible bills 780 498
– debt securities 18,359 16,468
– equity securities 22 15
– other instruments — —
Debt instruments measured at amortised cost 6 6
– treasury and other eligible bills — —
– debt securities 6 6
At 31 Dec 19,167 16,987
Equity instruments measured at fair value through other comprehensive income

2020 2019
Fair Dividends Fair Dividends
value recognised value recognised
€m €m €m €m
Investments required by central institutions 21 — 14 —
Others 1 — 1 —
At 31 Dec 22 — 15 —

16 Assets pledged, collateral received and assets transferred
Assets pledged
Financial assets pledged as collateral are displayed as below:
Financial assets pledged as collateral

2020 2019
€m €m
Treasury bills and other eligible securities 787 1,007
Loans and advances to banks — —
Equity securities — —
Other 15,939 12,295
Assets pledged at 31 Dec 45,355 31,938
The table above shows encumbered assets including those linked to TLTRO III and Covered bonds debt. The amount of assets pledged to
secure liabilities may be greater than the book value of assets utilised as collateral. For example, in the case of securitisations and
covered bonds, the amount of liabilities issued, plus mandatory over-collateralisation, is less than the book value of the pool of assets
available for use as collateral. This is also the case where assets are placed with a custodian or a settlement agent that has a floating
charge over all the assets placed to secure any liabilities under settlement accounts.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where relevant,
standard securities lending and borrowing, repurchase agreements and derivative margining.
Financial assets pledged as collateral that the counterparty has the right to sell or repledge
2020 2019
€m €m
Trading assets 10,983 9,882
Financial investments 360 28
At 31 Dec 11,343 9,910
Collateral accepted as security for assets

The fair value of financial assets accepted as collateral that HSBC Continental Europe is permitted to sell or repledge in the absence of
default was EUR 52,980 million at 31 December 2020 (EUR 100,359 million at 31 December 2019).
The fair value of financial assets accepted as collateral that have been sold or repledged was EUR 47,999 million at 31 December 2020
(EUR 73,499 million at 31 December 2019). HSBC Continental Europe is obliged to return equivalent securities.
Those transactions are made in accordance with the conditions of standard securities lending and borrowing operations.
Assets transferred
The assets pledged include transfers to third parties that do not qualify for derecognition, notably secured borrowings such as debt
securities held by counterparties as collateral under repurchase agreements and equity securities lent under securities lending
agreements, as well as swaps of equity and debt securities. For secured borrowings, the transferred asset collateral continues to be
recognised in full and a related liability, reflecting HSBC Continental Europe’s obligation to repurchase the assets for a fixed price at a
future date is also recognised on the balance sheet. Where securities are swapped, the transferred asset continues to be recognised in
full. There is no associated liability as the non-cash collateral received is not recognised on the balance sheet. HSBC Continental Europe
is unable to use, sell or pledge the transferred assets for the duration of these transactions, and remains exposed to interest rate risk and
credit risk on these pledged assets. The counterparty’s recourse is not limited to the transferred assets.
The following table analyses the carrying amount of financial assets that did not qualify for derecognition during the year and their
associated financial liabilities:
Transferred financial assets not qualifying for full derecognition and associated financial liabilities
Carrying amount of:
Transferred Associated
assets liabilities
€m €m
Repurchase agreements 10,153 10,193
Securities lending agreements 1,190 —
At 31 Dec 2020 11,343 10,193

Securities lending agreements 544 —
At 31 Dec 2019 9,910 9,353

17 Interests in associates and partnerships
Associate
At 31 December 2020, HSBC Continental Europe consolidated under equity method three entities on which it exercises a joint control or
a significant influence. The impact on consolidated financial statements is not significant.
At 31 Dec 2020
Country of HSBC Continental
incorporation and Principal Europe’s interest
principal place of business activity %
HCM Holdings Ltd United Kingdom Asset Management 51
HSBC Global Asset Management (Switzerland) Switzerland Asset Management 50
Service Epargne Entreprise France Asset Management 14.2
Although HSBC Continental Europe owns more than 50 per cent of the equity capital of HCM Holdings Ltd, the agreement with the other
shareholder includes restrictions on the rights of HSBC Continental Europe as the majority shareholder and indicates joint control over
HCM Holdings Ltd by the two shareholders.
Regarding the entity Service Epargne Entreprise developed in partnership with other groups, HSBC Continental Europe participates in
strategic decisions of the associate through its representation in the executive bodies, influences operational management by providing
management systems or management staff or brings its technical cooperation to the company’s growth.
The share in the results of companies under equity method is not significant.
Partnerships
As of 31 December 2020, the contribution of HSBC Middle East Leasing Partnership (‘MELP’) to the consolidated total assets of HSBC
Continental Europe was EUR 480 million (2019: EUR 501 million) and EUR 10 million (2019: EUR 19 million) to the consolidated income
statement.
18 Related information on foreign subsidiaries country by country

Related information on foreign subsidiaries country by country required by the directive 2013/36/EU (‘CRD IV’) has been transposed in
article L. 511-45 of the French Monetary and Financial Code.
At 31 Dec 2020
Net Operating Profit/(loss) Current Deferred Public subsidies

Income Before Tax Tax Tax received Number of employees
€m €m €m €m €m (Full Time Equivalent)
HSBC Continental Europe 1,832 (945) (52) (28) — 8,517
– France 1,427 (1,013) (17) (31) — 7,238
– Belgium 11 2 — — — 25
– Czech Republic 32 16 (3) — — 79
– Greece 32 (23) — — — 334
– Ireland 56 22 (2) — — 117
– Italy 44 (3) (6) — — 115
– Luxembourg 66 (7) — 2 — 262
– Netherlands 62 43 (11) — — 59
– Spain 74 20 (9) — — 136
– Sweden 2 (2) — — — 10
– United Kingdom — — — — — —
– Poland 45 19 (4) — — 142
– Others (19) (19) — 1 — —
At 31 Dec 2019
HSBC Continental Europe 2,099 (22) (45) 28 — 9,472
– France 1,686 (154) (24) 26 — 8,085
– Belgium 9 1 — — — 26
– Czech Republic 41 27 (5) — — 94
– Greece 60 4 — — — 350
– Ireland 53 25 — — — 138
– Italy 44 10 (3) — — 120
– Luxembourg 60 8 (2) — — 271
– Netherlands 45 29 (7) — — 62
– Spain 70 36 — — — 151
– Sweden — (1) — — — 6
– United Kingdom — (4) — — — 2
– Poland 29 (4) (4) 2 — 167
– Others 2 1 — — — —
The list of subsidiaries by country detailing the names of entities, nature of activity and geographical location, is presented in the Note 35
on pages 227 to 230. The addresses of main locations abroad are presented on page 284.

19 Structured entities
Consolidated structured entities by HSBC Continental Europe

Total assets of HSBC Continental Europe’s consolidated structured entities, split by entity type
HSBC
Conduits Securitisations managed funds Other Total
€m €m €m €m €m
At 31 Dec 2020 — 82 3,923 1,171 5,176
At 31 Dec 2019 — 100 4,923 1,398 6,421
General policy
A structured entity is an entity designed so that voting or similar rights are not the dominant factor in deciding who controls the entity,
for example when any voting rights relate to administrative tasks only, and key activities are directed by contractual arrangements. Thus,
these entities have a limited scope of activities and a well-defined purpose.
Structured entities are assessed for consolidation in accordance with the accounting policy set out in Note 1.
HSBC Continental Europe is involved directly or indirectly with structured entities mainly through securitisation of financial assets,
conduits and investment funds.
Group arrangements that involve structured entities are authorised centrally when they are established to ensure appropriate purpose and
governance. The activities of structured entities administered by HSBC Continental Europe are closely monitored by senior management.
HSBC Continental Europe has involvement with both consolidated and unconsolidated structured entities, which may be established by
the group or by a third party, detailed below.
Securitisations
HSBC Continental Europe has interests in unconsolidated securitisation vehicles through holding notes issued by these entities.
HSBC Continental Europe managed funds
HSBC Continental Europe has established a number of money market and non-money market funds in order to offer its customer
investment opportunities. When HSBC Continental Europe is deemed to be acting as principal rather than agent in its role as investment
manager, HSBC Continental Europe will control and hence consolidate these funds.
HSBC Continental Europe, as fund manager, may be entitled to receive management and performance fees based on the assets under
management. HSBC Continental Europe may also retain units in these funds.
Non-HSBC Continental Europe managed funds
HSBC Continental Europe purchases and holds units of third party managed funds in order to facilitate both business and customer
needs.
HSBC Continental Europe sponsored structured entities
The amount of assets transferred to and income received from such sponsored entities during 2020 and 2019 was not significant.
Others
HSBC Continental Europe also enters into a number of transactions in the normal course of business, including asset and structured
finance transactions where it has control of the structured entity.
Unconsolidated structured entities by HSBC Continental Europe
The term ‘unconsolidated structured entities’ refers to all structured entities that are not controlled by the group. It includes interests in
structured entities that are not consolidated. The group enters into transactions with unconsolidated structured entities in the normal
course of business to facilitate customer transactions and for specific investment opportunities.
The table below shows the total assets of unconsolidated structured entities in which the group has an interest at the reporting date, as
well as the group’s maximum exposure to loss in relation to those interests.

Nature and risks associated with HSBC Continental Europe interests in unconsolidated structured entities
Group Non-group
Securitisations managed funds managed funds Other Total
Total asset values of the entities (€m)
0 – 500 — 100 117 11 228
500 – 2,000 — 32 68 — 100
2,000 – 5,000 — 1 27 — 28
5,000 – 25,000 — — 21 — 21
25,000+ — — — — —
Number of entities at 31 Dec 2020 — 133 233 11 377
Total asset values of the entities (€m)

0 – 500 — 113 110 20 243
500 – 2,000 — 30 73 — 103
2,000 – 5,000 — 5 38 — 43
5,000 – 25,000 — — 16 — 16
25,000+ — — — — —
Number of entities at 31 Dec 2019 — 148 237 20 405
€m €m €m €m €m
Total assets in relation to HSBC Continental Europe's interests in the
unconsolidated structured entities — 2,408 2,221 40 4,669
– trading assets — — — — —
– financial assets designated and otherwise mandatorily measured at fair
value — 2,408 2,021 — 4,429
– loans and advances to customers — — — — —
– financial investments — — 200 11 211
– derivatives — — — 29 29
Total liabilities in relation to HSBC Continental Europe’s interests in
the unconsolidated structured entities — — — — —
Other off balance sheet commitments — — — (37) (37)
HSBC Continental Europe's maximum exposure at 31 Dec 2020 — 2,408 2,221 3 4,632
€m €m €m €m €m
Total assets in relation to HSBC Continental Europe's interests in the
unconsolidated structured entities — 3,443 2,185 29 5,657
– trading assets — — — — —
– financial assets designated and otherwise mandatorily measured at fair
value — 3,443 1,899 — 5,342
– loans and advances to customers — — — — —
– financial investments — — 286 26 312
– derivatives — — — 3 3
Total liabilities in relation to HSBC Continental Europe’s interests in the
unconsolidated structured entities — — — — —
Other off balance sheet commitments — — — — —
HSBC Continental Europe's maximum exposure at 31 Dec 2019 — 3,443 2,185 29 5,657
The maximum exposure to loss from HSBC Continental Europe’s interests in unconsolidated structured entities represents the maximum
loss it could occur as a result of its involvement with unconsolidated structured entities regardless of the probability of the loss being
incurred.
• For commitments and guarantees, and written credit default swaps, the maximum exposure of HSBC Continental Europe to loss is the
notional amount of potential future losses.
• For retained and purchased investments in and loans to unconsolidated structured entities, the maximum exposure of HSBC
Continental Europe loss is the carrying value of these interests at the balance sheet reporting date.
The maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered into to mitigate HSBC
Continental Europe’s exposure to loss.
20 Goodwill and intangible assets
2020 2019
€m €m
Goodwill 66 66
Present value of in force long term insurance business ('PVIF') 490 613
Other intangible assets1 23 314
At 31 Dec 579 993
1 Other intangible assets is predominantly internally generated software in the EEA branches.

Goodwill
Movement analysis of goodwill

2020 2019
€m €m
Gross amount
At 1 Jan 382 382
Exchange differences — —
Other1 4 —
At 31 Dec 386 382
Accumulated impairment losses
At 1 Jan (316) (147)
Exchange differences — —
Other1 (4) (169)
At 31 Dec (320) (316)
Net carrying amount at 31 Dec 66 66
1 During the year 2019, the goodwill on Commercial Banking was impaired.
Impairment testing
During 2020, impairment testing was performed and no impairment was recognised to the Asset Management goodwill. Refer to '2020
Impairment Testing' section below for HSBC Continental Europe impairment testing in France and EEA branches.
Impairment results and key assumptions in VIU calculation

Growth rate Growth rate
beyond initial beyond initial
Goodwill at Discount cash flow Goodwill at Discount cash flow
31 Dec 2020 rate projections 31 Dec 2019 rate projections
€m % % €m % %
Asset Management 66 9.1 1.5 66 8.0 1.7
Total goodwill in the CGUs listed above 66 66
Other intangible assets

Other intangible assets include mortgage servicing rights, computer software, trade names, customer lists, core deposit relationships,
credit card customer relationships or other loan relationships. Computer software includes both purchased and internally generated
software. The cost of internally generated software comprises all directly attributable costs necessary to create, produce and prepare the
software to be capable of operating in the manner intended by management. Costs incurred in the ongoing maintenance of software are
expensed immediately as incurred.
Intangible assets are subject to impairment review if there are events or changes in circumstances that indicate that the carrying amount
may not be recoverable. Where:
• intangible assets have an indefinite useful life, or are not yet ready for use, they are tested for impairment annually. An intangible asset
recognised during the current period is tested before the end of the current year; and
• intangible assets have a finite useful life, except for the present value of in-force long-term insurance business, they are stated at cost
less amortisation and accumulated impairment losses and are amortised over their estimated useful lives. Estimated useful life is the
lower of legal duration and expected useful life. The amortisation of mortgage servicing rights is included within ‘Net fee income’.
Intangible assets with finite useful lives are amortised, generally on a straight-line basis, over their useful lives as follows:
• Trade names 10 years
• Internally generated software between 3 and 10 years
• Purchased software between 3 and 10 years
• Other generally 10 years.

The analysis of intangible assets movements at 31 December is as follows:

Internally
generated Purchased
software software Other Total
€m €m €m €m
Cost
At 1 Jan 2020 344 71 15 430
Additions 36 2 — 38
Disposals — — — —
Amount written off (162) — — (162)
Exchange differences — — — —
Other changes (2) (7) — (9)
At 31 Dec 2020 216 66 15 297
Accumulated amortisation and impairment
At 1 Jan 2020 (43) (59) (14) (116)
Amortisation charge for the year (20) (2) — (22)
Impairment charge for the year (287) (7) — (294)
Amount written off 162 — — 162
Other changes (6) 3 (1) (4)
At 31 Dec 2020 (194) (65) (15) (274)
Net carrying amount at 31 December 2020 22 1 — 23
Cost
At 1 Jan 2019 184 62 15 261
Additions 143 4 — 147
Disposals (2) — — (2)
Amount written off — — — —
Other changes 19 5 — 24
At 31 Dec 2019 344 71 15 430
Accumulated amortisation and impairment
At 1 Jan 2019 (8) (54) (14) (76)
Amortisation charge for the year (23) (3) — (26)
Impairment charge for the year (7) — — (7)
Amount written off — — — —
Other changes (5) (2) — (7)
At 31 Dec 2019 (43) (59) (14) (116)
Net carrying amount at 31 December 2019 301 12 1 314
2020 Impairment Testing

During 2020, we considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the impact on
forecast profitability, to be an indicator of impairment. Impairment testing was performed, identifying the value-in-use (recoverable
amount) of the CGUs to be below their net carrying value in France.
As a result, the remaining goodwill at HSBC Continental Europe level (excluding EEA branches and subsidiaries) was impaired,
EUR 294 million of capitalised software assets were impaired and written off and EUR 206 million of tangible assets were impaired ,
primarily right-of-use assets for leased offices, commercial and retail branches and fixtures and fittings. The impairments reflect recent
losses and deterioration in the future forecasts, substantially relating to prior periods.
Impairment testing for each of the EEA branches resulted in minimal intangible asset impairments and there were no impairments
recognised in relation to the subsidiaries of HSBC Continental Europe. Notably EUR 66 million in goodwill in the Asset Management
subsidiary was not impaired.
We used a number of assumptions in our VIU calculation, in accordance with the requirements of IAS 36:
• Management’s judgement in estimating future cash flows: we considered past business performance, the scale of the current impact
from Covid-19 outbreak on our operations, current market conditions, and our macroeconomic outlook to estimate future earnings. As
required by IFRSs, estimates of future cash flows exclude estimated cash inflows or outflows that are expected to arise from
restructuring initiatives before an entity has a constructive obligation to carry out the plan, and would therefore have recognised a
provision for restructuring costs. This means that the benefits of certain strategic actions are not included in this impairment
assessment.
• Long-term growth rates: The long-term growth rate is used to extrapolate cash flows in perpetuity because of the long-term
perspective within the group.
• Discount rate: Rates are based on a Capital asset pricing model (‘CAPM’) calculation.
Impairments were assessed as not sensitive to reasonable possible changes in assumptions.

Present value of in-force insurance business
HSBC Continental Europe’s life insurance business reported through its subsidiary HSBC Assurances Vie, is accounted for using the
embedded value approach which, inter alia, provides a comprehensive risk and valuation framework. The Present Value of In-Force
(‘PVIF’) business asset represents the present value of the shareholders’ interest in the profits expected to emerge from the book of
in-force policies.
The calculation of the PVIF is based upon assumptions that take into account risk and uncertainty. To project these cash flows, a variety
of assumptions regarding future experience is made by each insurance operation, which reflects local market conditions and
management’s judgment of local future trends.
Movements in PVIF
2020 2019
€m €m
At 1 January 613 500
Change in PVIF of long-term insurance business (123) 113
– moving forward (65) (61)
– value of new business 24 29
– assumption changes and others 36 178
– market impact (134) (55)
– experience variances 16 22
At 31 December 490 613
The PVIF moved from EUR 613 million as of 31 December 2019 to EUR 490 million as of 31 December 2020. The negative movement of
EUR (123) million is mainly due to following items:
• a positive impact of current year new business of EUR 24 million which partially offsets the negative impact of the Moving forward of
EUR (65) million;
• a positive effect of changes in assumptions and models evolutions of EUR 36 million mainly due to the update of the prospective
non-economic assumptions of EUR 12 million and to the increase of the actuarial reserve linked to guaranteed rate payments of
EUR 24 million;
• a negative impact of the economic environment of EUR (134) million mainly explained by the decrease of the interest rate in the year
2020;
• a positive impact of experience variances of EUR 16 million.
Key assumptions modification impacts over PVIF1

2020 2019
% %
Weighted average risk free rate 0.34 0.44
Weighted average risk discount rate 1.34 1.27
Expenses inflation 1.60 2.00
1 For 2020, market value future profits’ discounted rate used for the PVIF is 1.34 per cent , to which a risk margin of EUR 175.3 million is added. In
2019, the market value future profits’ discounted rate was 1.27 per cent, to which a risk margin of EUR 115.6 million was added.
Sensitivity to changes in economic assumptions

The following table shows the effects of the risk-free rate movements and the discount rate on the value of PVIF at 31 December in
millions of Euros for HSBC Assurances Vie.
20201 20191
€m €m
+ 100 basis points shift in risk-free rate 148 130
- 100 basis points shift in risk-free rate (288) (289)
+ 100 basis points shift in risk-discount rate 8 (7)
- 100 basis points shift in risk-discount rate (11) 8
1 Impacts on profits are shown before tax.
Due to certain characteristics of the contracts, the sensitivities may be non-linear and the results of the sensitivity-testing should not be
extrapolated to higher levels of stress. In calculating the scenario, the shift in the risk-free rate results in changes to investment returns,
risk discount rates and bonus rates which are incorporated. The sensitivities shown are at ultimate forward rate and before actions that
could be taken by management to mitigate impacts and before resultant changes in policyholder behavior.
The sensitivities on the ultimate forward (EIOPA) rate are presented below:
Impact on PVIF as at 31/12/20201 Impact on PVIF as at 31/12/20191
€m €m
+ 100 basis points of Ultimate Forward Rate (UFR) 27 44
- 100 basis points of Ultimate Forward Rate (UFR) (37) (30)
1 Impacts on profits are shown before tax.

Sensitivity of the PVIF to non-economic assumptions

Policyholder liabilities and PVIF for life manufacturers are determined by reference to non-economic assumptions including mortality and/
or morbidity, lapse rates and expense rates. The table below shows the sensitivity of total equity at 31 December 2020 to reasonably
possible changes in these non-economic assumptions at that date.
Mortality and morbidity risk is typically associated with life insurance contracts. The effect on profit of an increase in mortality or
morbidity depends on the type of business being written.
Sensitivity to lapse rates is dependent on the type of contracts being written. For insurance contracts, the cost of claims is funded by
premiums received and income earned on the investment portfolio supporting the liabilities. For a portfolio of term insurance, an increase
in lapse rates typically has a negative effect on profit due to the loss of future premium income on the lapsed policies.
Expense rate risk is the exposure to a change in expense rates. To the extent that increased expenses cannot be passed on to
policyholders, an increase in expense rates will have a negative impact on profits.
The following table presents the PVIF sensitivity:
Effect on total Effect on total

equity at equity at
31 Dec 20201 31 Dec 20191
€m €m
10% increase in mortality and/or morbidity rates (14) (14)
10% decrease in mortality and/or morbidity rates 14 15
10% increase in lapse rates (19) (21)
10% decrease in lapse rates 21 24
10% increase in expense rates (43) (41)
10% decrease in expense rates 43 41
1 Impacts on profits are shown after tax.
Increased expense is entirely borne by the insurer and so reduces profits.

The impact of redemption rates variations is mainly explained by savings activity. For example, an increase of redemptions generates a
decrease of the contract management, and therefore, a negative impact on the insurer’s profits.
Other information are available in the session Risk Factors on the page 159 and following.
21 Prepayments, accrued income and other assets
2020 2019
€m €m
Prepayments and accrued income 569 649
Settlement accounts 2,440 1,482
Cash collateral and margin receivables 15,948 12,304
Endorsements and acceptances 7 18
Reinsurers’ share of liabilities under insurance contracts (Note 4) 2 2
Employee benefit assets (Note 5) — —
Other accounts 1,607 1,190
Right-of-use-Assets1 270 200
Property, plant and equipment 892 975
At 31 Dec 21,735 16,820
1 The net value of the right of use breaks down into EUR 454 million as gross value and EUR (184) million as depreciation and provisions. ROU
assets amounting to EUR 72 million have been recognised where the contracts are enforceable beyond their contractual end date based on
management’s best estimate of lease duration.
Prepayments, accrued income and other assets include EUR 20,530 million (2019: EUR 15,608 million) of financial assets, the majority of
which are measured at amortised cost.
Property, plant and equipment
Land and buildings are stated at historical cost, or fair value at the date of transition to IFRS, less any impairment losses and depreciation
calculated as per below:
• freehold land is not depreciated;
• acquisition-related expenses on buildings are expensed in the year in which they occur, same as preliminary costs;
• depreciation of buildings is calculated over their estimated useful lives, which are generally between 25 to 75 years.
Equipment, fixtures and fittings (including equipment on operating leases where HSBC Continental Europe is the lessor) are stated at cost
less impairment losses and depreciation is calculated on a straight-line basis to write off the assets over their estimated useful lives,
which are generally between 5 to 25 years. HSBC Continental Europe holds certain properties as investments to earn rentals or for capital
appreciation, or both. Investment properties are included in the balance sheet at fair value with changes in fair value recognised in the
income statement in the period of change. Fair values are determined by independent professional valuers who apply recognised
valuation techniques. Property, plant and equipment is subject to review for impairment if there are events or changes in circumstances
that indicate that the carrying amount may not be recoverable.

Equipment,
Freehold land fixtures
and buildings1 and fittings Total
€m €m €m
Cost or fair value
At 1 Jan 2020 883 599 1,482
Additions at cost — 49 49
Fair value adjustments 20 — 20
Disposals (2) (65) (67)
Transfers — — —
Exchange and other differences — — —
Changes in scope of consolidation and other changes 1 — 1
At 31 Dec 2020 902 583 1,485
Accumulated depreciation
At 1 Jan 2020 (45) (462) (507)
Depreciation charge for the year (4) (48) (52)
Disposals 1 65 66
Transfers — — —
Impairment loss recognised (9) (92) (101)
Exchange translation differences — — —
Changes in scope of consolidation and other changes — 1 1
At 31 Dec 2020 (57) (536) (593)
Net book value at 31 Dec 2020 845 47 892
Cost or fair value

At 1 Jan 2019 793 567 1,360
Additions at cost 37 31 68
Fair value adjustments 43 — 43
Disposals (1) (9) (10)
Transfers 11 23 34
Exchange and other differences — — —
Changes in scope of consolidation and other changes — (13) (13)
At 31 Dec 2019 883 599 1,482
Accumulated depreciation
At 1 Jan 2019 (33) (417) (450)
Depreciation charge for the year (3) (38) (41)
Disposals — 7 7
Transfers (9) (17) (26)
Exchange translation differences — — —
Changes in scope of consolidation and other changes — 3 3
At 31 Dec 2019 (45) (462) (507)
Net book value at 31 Dec 2019 838 137 975
1 It includes EUR 15 million of leasehold land and building for which the rights of use are considered sufficient to constitute control and for which
there are insignificant lease liabilities. They are therefore presented as owned assets.
Impairment testing
During 2020, we considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the impact on
forecast profitability, to be an indicator of impairment. Impairment testing was performed, identifying the value-in-use (recoverable
amount) of the CGUs to be below their net carrying value in France.
As a result, EUR 206 million of tangible asset impairments were impaired, primarily right-of-use assets for leased office, commercial and
retail branches and fixtures and fittings. The impairments reflect recent losses and deterioration in the future forecasts, substantially
relating to prior periods. Refer to Note 20 Goodwill and intangible assets and Note 1.2(n) Summary of significant accounting policies –
Impairment of non-financial assets.
22 Trading liabilities
2020 2019
€m €m
Deposits by banks — —
Customer accounts — —
Other debt securities in issue — —
Other liabilities – net short positions in securities 17,828 23,262
At 31 Dec 17,828 23,262

23 Financial liabilities designated at fair value
2020 2019
€m €m
Deposits by banks and customer accounts 76 86
Liabilities to customers under investment contracts 14 15
Subordinated liabilities (Note 26) — —
Preferred securities — —
At 31 Dec 16,892 18,953
The difference between the carrying amount of financial liabilities designated at fair value and the contractual amount at maturity at
31 December 2020 was EUR 921 million for HSBC Continental Europe (at 31 December 2019: EUR 628 million).
At 31 December 2020, the accumulated amount of the change in fair value attributable to changes in credit risk for HSBC Continental
Europe was EUR 127 million (at 31 December 2019: EUR 136 million).
In 2020, HSBC Continental Europe recognised a negative variation of EUR (4) million in other comprehensive income in respect of HSBC
Continental Europe's own credit risk (at 31 December 2019 EUR (167) million).
24 Accruals, deferred income and other liabilities
2020 2019
€m €m
Accruals and deferred income 764 1,123
Settlement accounts 696 1,782
Cash collateral and margin payables 15,509 11,084
Endorsements and acceptances 7 18
Employee benefit liabilities (Note 5) 175 188
Lease liabilities 420 238
Other liabilities 2,546 2,323
At 31 Dec 20,117 16,756
25 Provisions
HSBC Continental Europe recognises a provision when the following three criteria are met:
• existence of a present obligation occurring from a past event;
• it is probable that an outflow of resources will be required to settle the obligation;
• a reliable estimate of the amount can be made.
Restructuring Legal proceedings Other

costs 1 and regulatory matters provisions Total
€m €m €m €m
Provisions (excluding contractual commitments)
At 31 Dec 2019 22 44 33 99
Additions 278 5 14 297
Amounts utilised (13) (5) (26) (44)
Unused amounts reversed (5) (2) (7) (14)
Exchange and other movements2 (14) (1) — (15)
At 31 Dec 2020 268 41 14 323
Contractual commitments
At 31 Dec 2019 61
Net change in expected credit loss provisions and other movements 13
At 31 Dec 2020 74
Total provisions
At 31 Dec 2019 160
At 31 Dec 2020 397
1 Includes restructuring provision of EUR 278 million in 2020 (refer Note 1.3).
2 Includes amount transferred to Other Liabilities.

Restructuring Legal proceedings and Other
costs regulatory matters provisions Total
€m €m €m €m
Provisions (excluding contractual commitments)
At 31 Dec 2018 24 15 12 51
Additions 9 36 35 80
Amounts utilised (13) (5) (9) (27)
Unused amounts reversed — (2) (7) (9)
Exchange and other movements 2 — 2 4
At 31 Dec 2019 22 44 33 99
Contractual commitments
At 31 Dec 2018 24
Net change in expected credit loss provisions and other movements 16
Transfer-in1 21
At 31 Dec 2019 61
Total provisions
At 31 Dec 2018 75
At 31 Dec 2019 160
1 This amount corresponds to the amount transferred due to the acquisition of certain assets and liabilities of European branches on 1 February
2019 and on 1 March 2019 from HSBC Bank plc.
Further details of ‘Legal proceedings and regulatory matters’ regarding the HSBC Group are set out in Note 32.
26 Subordinated liabilities
Subordinated liabilities are initially measured at fair value, which is the consideration received net of directly attributable transaction costs
incurred. Subsequent measurement is at amortised cost, using the effective interest rate method to amortise the difference between
proceeds net of directly attributable transaction costs and the redemption amount over the expected life of the debt, unless the
instruments are designated at fair value.
2020 2019
€m €m
At amortised cost 1,876 1,376
Designated at fair value (Note 23) — —
Total at 31 Dec 1,876 1,376
Book value
2020 2019
Tier 2 instruments issued by HSBC Continental Europe €m €m
EUR 16 million Undated subordinated variable rate notes 16 16
EUR 300 million Floating rate notes maturing 2027 300 300
EUR 500 million Floating rate notes maturing 2030 500 —
At 31 Dec 1,876 1,376
27 Maturity analysis of financial assets, liabilities and off-balance sheet commitments
Contractual maturity of financial liabilities

The balances in the table below do not agree directly with those in the consolidated balance sheet as the table incorporates, on an
undiscounted basis, all cash flows relating to principal and future coupon payments (except for trading liabilities and derivatives not
treated as hedging derivatives).
Undiscounted cash flows payable in relation to hedging derivative liabilities are classified according to their contractual maturities.
Trading liabilities and derivatives not treated as hedging derivatives are included in the 'On demand' time bucket and not by contractual
maturity.
In addition, loans and other credit-related commitments, financial guarantees and similar contracts are generally not recognised on the
balance sheet. The undiscounted cash flows potentially payable under financial guarantees and similar contracts are classified on the
basis of the earliest date they can be called.

Distribution of cash flows payable by maturity

2020
Due over
1 month but
Due not more not over Due between Due between Due after
than 1 month 3 months 3 and 12 months 1 and 5 years 5 years Total
€m €m €m €m €m €m
Deposits by banks 6,049 3 17 10,796 215 17,080
Customer accounts 58,540 1,411 1,266 131 81 61,429
Repurchase Agreements – non–trading 10,177 803 4 — — 10,984
Trading liabilities 17,828 — — — — 17,828
Financial liabilities designated at fair value 126 49 2,350 9,171 6,005 17,701
Derivatives 55,660 2 — 43 20 55,725
Debt securities in issue 0 0 1,141 2,118 346 3,605
Subordinated liabilities — — — 1,886 17 1,903
Other financial liabilities 17,780 89 374 310 1,260 19,813
Sub Total 166,160 2,357 5,152 24,455 7,944 206,068
Loan and other credit-related commitments 99,557 — — — — 99,557
Financial guarantees 1,050 — — — — 1,050
Total at 31 Dec 2020 266,767 2,357 5,152 24,455 7,944 306,675
Proportion of cash flows payable in period 87% 1% 2% 8% 2%
2019
Deposits by banks 5,895 257 2,199 3,485 502 12,338
Customer accounts 54,280 1,513 1,734 132 89 57,748
Repurchase Agreements – non–trading 19,349 861 3 — — 20,213
Trading liabilities 23,262 — — — — 23,262
Financial liabilities designated at fair value 1,035 14 2,209 9,636 7,597 20,491
Derivatives 45,075 — — 45 17 45,137
Debt securities in issue 368 430 9,003 — — 9,801
Subordinated liabilities — — — 1,116 277 1,393
Other financial liabilities 14,081 41 648 119 1,295 16,184
Sub Total 163,345 3,116 15,796 14,533 9,777 206,567
Loan and other credit-related commitments 89,693 — — — — 89,693
Financial guarantees 1,209 — — — — 1,209
Total at 31 Dec 2019 254,247 3,116 15,796 14,533 9,777 297,469
Proportion of cash flows payable in period 86% 1% 5% 5% 3%
Maturity analysis of financial assets and liabilities

The following tables provides an analysis of financial assets and liabilities by residual contractual maturity at the balance sheet date.
These balances are included in the maturity analysis as follows:
• financial assets and liabilities with no contractual maturity (such as equity securities) are included in the ‘Due over five years’ time
bucket. Undated or perpetual instruments are classified based on the contractual notice period which the counterparty of the
instrument is entitled to give. Where there is no contractual notice period, undated or perpetual contracts are included in the ‘Due over
five years’ time bucket;
• financial instruments are classified on the basis of the contractual maturity of the underlying instruments and not on the basis of the
disposal transaction;
• Liabilities under investment contracts are classified in the 'due less than 5 years' time buckets.

Maturity analysis of assets, liabilities and off-balance sheet commitments
Due over Due over Due over Due over Due over Due over
1 month 3 months 6 months 9 months 1 year 2 years
Due not but not but not but not but not but not but not
more than more than more than more than more than more than more than Due over
1 month 3 months 6 months 9 months 1 year 2 years 5 years 5 years Total
€m €m €m €m €m €m €m €m €m
Financial assets
Cash and balances at central banks 29,508 — — — — — — — 29,508
Items in the course of collection from other banks 224 — — — — — — — 224
Trading assets 12,954 — — — — — — — 12,954
Financial assets designated or otherwise
mandatorily measured at fair value — 6 15 124 134 530 204 10,635 11,648
Derivatives 56,457 — 3 — — 15 — — 56,475
Loans and advances to banks 3,711 39 230 313 27 2,015 421 25 6,781
Loans and advances to customers 4,922 1,093 5,468 3,538 2,283 6,941 14,972 17,008 56,225
– personal 819 374 529 515 509 1,889 5,208 12,849 22,692
– corporate and commercial 3,785 664 4,720 2,654 1,613 4,375 8,727 3,844 30,382
– financial 318 55 219 369 161 677 1,037 315 3,151
Reverse repurchase agreements – non-trading 12,463 4,396 3,412 391 350 10 500 — 21,522
Financial investments 844 345 797 422 596 1,372 6,432 8,359 19,167
Accrued income and other financial assets 20,017 39 115 7 70 33 70 180 20,531
Total financial assets at 31 Dec 2020 141,100 5,918 10,040 4,795 3,460 10,916 22,599 36,207 235,035
Non-financial assets 2,064 2,064
Total assets at 31 Dec 2020 141,100 5,918 10,040 4,795 3,460 10,916 22,599 38,271 237,099
Off-balance sheet commitments received
Loan and other credit-related commitments 49,675 — — — — — — — 49,675
Financial liabilities
Deposits by banks 6,044 2 9 — 9 18 10,907 215 17,204
Customer accounts 58,534 1,411 664 235 367 67 58 57 61,393
– personal 20,554 36 37 29 42 65 55 29 20,847
– corporate and commercial 33,149 1,332 571 206 325 2 3 28 35,616
– financial 4,831 43 56 — — — — — 4,930
Repurchase agreements – non-trading 10,176 804 2 2 — — — — 10,984
Items in the course of transmission to other banks 198 — — — — — — — 198
Trading liabilities 17,828 — — — — — — — 17,828
Financial liabilities designated at fair value 126 49 145 2,049 155 2,040 6,876 5,452 16,892
– debt securities in issue: covered bonds — — — — — 1,011 2,380 — 3,391
– debt securities in issue: unsecured 112 49 136 2,049 155 1,029 4,496 5,385 13,411
– other 14 — 9 — — — — 67 90
Derivatives 55,659 — — — — — 38 17 55,714
Debt securities in issue — — 470 380 291 510 1,608 346 3,605
– covered bonds — — — — — — — — —
– unsecured — — 470 380 291 510 1,608 346 3,605
Accruals and other financial liabilities 17,554 104 291 16 90 75 270 1,390 19,790
Subordinated liabilities — — — — — 300 1,560 16 1,876
Total financial liabilities at 31 Dec 2020 166,119 2,370 1,581 2,682 912 3,010 21,317 7,493 205,484
Non-financial liabilities 24,156 24,156
Total liabilities at 31 Dec 2020 166,119 2,370 1,581 2,682 912 3,010 21,317 31,649 229,640
Off-balance sheet commitments given
– personal 1,352 — — — — — — — 1,352
– corporate and commercial 42,767 — — — — — — — 42,767
– financial 55,438 — — — — — — — 55,438

Maturity analysis of assets, liabilities and off-balance sheet commitments (continued)

Due over Due over Due over Due over Due over Due over
1 month 3 months 6 months 9 months 1 year 2 years
Due not but not but not but not but not but not but not
more than more than more than more than more than more than more than Due over
1 month 3 months 6 months 9 months 1 year 2 years 5 years 5 years Total
€m €m €m €m €m €m €m €m €m
Financial assets
Cash and balances at central banks 19,463 — — — — — — — 19,463
Items in the course of collection from other banks 775 — — — — — — — 775
Trading assets 14,837 — — — — — — — 14,837
Financial assets designated at fair value 19 3 27 64 119 235 790 10,700 11,957
Derivatives 45,721 — — — — 1 1 1 45,724
Loans and advances to banks 3,085 458 465 2 386 2,263 89 50 6,798
Loans and advances to customers 5,619 4,871 2,218 1,461 2,005 6,236 16,924 17,622 56,956
– personal 849 420 524 490 557 1,903 5,176 12,251 22,170
– corporate and commercial 4,503 4,220 1,244 818 1,017 3,237 10,208 4,862 30,109
– financial 267 231 450 153 431 1,096 1,540 509 4,677
Reverse repurchase agreements – non-trading 31,762 5,705 3,415 1,357 3,224 — 510 — 45,973
Financial investments 293 142 943 255 431 2,241 3,538 9,144 16,987
Accrued income and other financial assets 15,004 41 190 5 74 38 71 182 15,605
Financial assets at 31 Dec 2019 136,578 11,220 7,258 3,144 6,239 11,014 21,923 37,699 235,075
Non-financial assets 2,605 2,605
Total assets at 31 Dec 2019 136,578 11,220 7,258 3,144 6,239 11,014 21,923 40,304 237,680
Off-balance sheet commitments received
Financial liabilities
Deposits by banks 5,834 257 1,532 2 543 611 2,832 502 12,113
Customer accounts 54,279 1,423 1,244 54 369 80 43 58 57,550
– personal 19,100 64 67 33 62 77 40 46 19,489
– corporate and commercial 30,314 1,151 1,125 21 307 3 3 12 32,936
– financial 4,865 208 52 — — — — — 5,125
Repurchase agreements – non-trading 19,349 861 1 — 2 — — — 20,213
Items in the course of transmission to other banks 396 — — — — — — — 396
Trading liabilities 23,262 — — — — — — — 23,262
Financial liabilities designated at fair value 1,025 14 346 250 1,609 2,283 7,084 6,342 18,953
– debt securities in issue: covered bonds — — — — 1,015 — 2,373 1,032 4,420
– debt securities in issue: unsecured 1,010 14 334 250 594 2,283 4,711 5,236 14,432
– subordinated liabilities and preferred securities — — — — — — — — —
– other 15 — 12 — — — — 74 101
Derivatives 45,053 — — — — — 45 17 45,115
Debt securities in issue 367 430 1,557 4,154 3,274 — — — 9,782
– covered bonds — — — — — — — — —
– unsecured 367 430 1,557 4,154 3,274 — — — 9,782
Accruals and other financial liabilities 14,015 30 545 5 98 49 62 1,295 16,099
Subordinated liabilities — — — — — — 1,100 276 1,376
Total financial liabilities at 31 Dec 2019 163,580 3,015 5,225 4,465 5,895 3,023 11,166 8,490 204,859
Non-financial liabilities 24,350 24,350
Total liabilities at 31 Dec 2019 163,580 3,015 5,225 4,465 5,895 3,023 11,166 32,840 229,209
Off-balance sheet commitments given
– personal 1,189 — — — — — — — 1,189
– corporate and commercial 38,218 — — — — — — — 38,218
– financial 50,286 — — — — — — — 50,286
Further information regarding HSBC Continental Europe’s liquidity and funding management is available in the Risk Management section
pages 132 and following.

28 Offsetting of financial assets and financial liabilities
The ‘Amounts not set off in the balance sheet’ include transactions where:
• The counterparty has an offsetting exposure with HSBC Continental Europe and a master netting or similar arrangement is in place
with a right of set off only in the event of default, insolvency or bankruptcy, or the offset criteria are not otherwise satisfied.
• In the case of derivatives, reverse repurchase/repurchase, stock borrowing/lending and similar agreements, cash and non-cash
collateral has been received/pledged.
For risk management purposes, the net amounts of loans and advances to customers are subject to limits, which are monitored, and the
relevant customer agreements are subject to review and updated, as necessary, to ensure that the legal right to offset remains
appropriate.
Offsetting of financial assets and financial liabilities

Amounts subject to enforceable netting arrangements
Net Amounts not offset in the Amounts not

amounts balance sheet subject to
in the enforceable
Gross Amounts balance Financial Non-Cash Cash Net netting
amounts offset sheet Instruments collateral collateral amount arrangements Total
Footnotes €m €m €m €m €m €m €m €m €m
Financial assets
Derivatives (Note 14) 1 63,518 (7,126) 56,392 (40,873) (360) (14,969) 190 83 56,475
Reverse repos, stock borrowing and similar
agreements classified as: 53,855 (32,306) 21,549 (2,638) (18,868) (42) 1 20 21,569
– trading assets 27 — 27 — (26) — 1 — 27
– non-trading assets 53,828 (32,306) 21,522 (2,638) (18,842) (42) — 20 21,542
Loans and advances to customers 2 — — — — — — — — —
At 31 Dec 2020 117,373 (39,432) 77,941 (43,511) (19,228) (15,011) 191 103 78,044
Derivatives (Note 14) 1 50,683 (5,053) 45,630 (35,172) (350) (10,065) 43 94 45,724
Reverse repos, stock borrowing and similar
agreements classified as: 100,547 (54,573) 45,974 (9,327) (36,472) (174) 1 20 45,994
– trading assets 1 — 1 — — — 1 — 1
– non-trading assets 100,546 (54,573) 45,973 (9,327) (36,472) (174) — 20 45,993
Loans and advances to customers 2 55 — 55 — — — 55 — 55
At 31 Dec 2019 151,285 (59,626) 91,659 (44,499) (36,822) (10,239) 99 114 91,773
Financial Liabilities
Derivatives (Note 14) 1 62,742 (7,126) 55,616 (40,873) (1,137) (13,557) 49 98 55,714
Repos, stock borrowing and similar
agreements classified as: 43,290 (32,306) 10,984 (2,638) (8,113) (232) 1 — 10,984
– trading liabilities — — — — — — — — —
– non-trading liabilities 43,290 (32,306) 10,984 (2,638) (8,113) (232) 1 — 10,984
Customer accounts excluding repos 3 — — — — — — — — —
At 31 Dec 2020 106,032 (39,432) 66,600 (43,511) (9,250) (13,789) 50 98 66,698
Derivatives (Note 14) 1 50,082 (5,053) 45,029 (35,172) (1,385) (8,436) 36 86 45,115
Repos, stock borrowing and similar
agreements classified as: 74,786 (54,573) 20,213 (9,327) (10,430) (455) 1 — 20,213
– trading liabilities — — — — — — — — —
– non-trading liabilities 74,786 (54,573) 20,213 (9,327) (10,430) (455) 1 — 20,213
Customer accounts excluding repos 3 — — — — — — — — —
At 31 Dec 2019 124,868 (59,626) 65,242 (44,499) (11,815) (8,891) 37 86 65,328
1 At 31 December 2020, the amount of cash margin received that had been offset against the gross derivatives assets was EUR 779 million
(2019: EUR 198 million). The amount of cash margin paid that had been offset against the gross derivatives liabilities was EUR 1,994 million
(2019: EUR 1,750 million).
2 At 31 December 2020, the total amount of ‘Loans and advances to customers’ was EUR 56,225 million (2019: EUR 56,956 million) of which
EUR 0 million (2019: EUR 55 million) was subject to offsetting.
3 At 31 December 2020, the total amount of ‘Customer accounts’ was EUR 61,393 million (2019: EUR 57,550 million).

29 Called up share capital and other equity instruments
Called up share capital and share premium

At 31 December 2020, HSBC Continental Europe's capital amounted to EUR 491 million divided into 98,231,196 ordinary shares with a
nominal value of EUR 5, fully paid up.
HSBC Continental Europe ordinary shares of EUR 5 each, issued and fully paid
2020 2019
Number €m Number €m
At 1 Jan 98,231,196 491 73,316,988 367
Shares issued — — 24,914,208 124
At 31 Dec 98,231,196 491 98,231,196 491
HSBC Continental Europe share premium

2020 2019
€m €m
At 31 Dec 2,137 2,137
Total called up share capital and share premium

2020 2019
€m €m
At 31 Dec 2,628 2,628
Other equity instruments

Additional tier 1 capital instruments
HSBC Continental Europe’s additional tier 1 capital instruments in issue which are accounted for as equity
2020 2019
First call date €m €m
EUR 200 million Perpetural Subordinated additional Tier 1 instruments issued in 2017 26/05/2022 200 200
At 31 Dec 750 750
30 Contingent liabilities, contractual commitments and guarantees
Contingent liabilities
(a) Contingent liabilities and commitments
2020 2019
Footnote €m €m
Guarantees and other contingent liabilities:
– financial guarantees 1,051 1,209
– performance and other guarantees 8,313 9,256
– other contingent liabilities 89 95
At 31 Dec 9,453 10,560
Commitments: 1
– documentary credits and short-term trade-related transactions 669 1,020

– forward asset purchases and forward deposits placed 46,975 44,105
– standby facilities, credit lines and other commitments to lend 51,912 44,568
At 31 Dec 99,556 89,693
1 Includes EUR 97,892 million of commitments at 31 December 2020 (2019: EUR 88,422 million), to which the impairment requirements in IFRS 9
are applied where HSBC Continental Europe has become party to an irrevocable commitment.
The amounts disclosed in the above table reflect HSBC Continental Europe’s maximum exposure under a large number of individual
guarantee undertakings. The risks and exposures arising from guarantees are captured and managed in accordance with HSBC
Continental Europe’s overall credit risk management policies and procedures. Guarantees with terms of more than one year are subject
to HSBC Continental Europe’s annual credit review process. The total of the nominal principal amounts is not representative of future
liquidity needs.

(b) Guarantees
HSBC Continental Europe provides guarantees and similar undertakings on behalf of both third-party customers and other entities within
the Group. These guarantees are generally provided in the normal course of HSBC Continental Europe's banking business. The principal
types of guarantees provided, and the maximum potential amount of future payments which HSBC Continental Europe could be required
to make at 31 December were as follows:
2020 2019
In In
favour of other favour of other
HSBC HSBC
In favour of third Group In favour of third Group
parties entities parties entities
€m €m €m €m
Guarantee type
Financial guarantees contracts 744 307 822 387
Performance and other guarantees 7,475 838 8,437 914
At 31 Dec 8,219 1,145 9,259 1,301
Financial guarantees include undertakings to fulfil the obligations of customers or group entities, should the obligated party fail to do so.
The inter-company financial guarantees include a specific guarantee related to debt issued by the Group for the benefit of other entities of
the group and with respect to regulatory requirements. Financial guarantees also include stand-by letters of credit, which are financial
guarantees given irrevocable obligations on the part of HSBC Continental Europe to pay a third party when a customer fails to meet a
commitment.
Performance guarantees include performance bonds, direct credit substitutes ,stand-by letters of credit related to particular transactions
which are undertakings by which the requirement to make payment under the guarantee depends on the outcome of a future event
which is unconnected to the creditworthiness of the customer. Other guarantees includes bid bonds and another transaction-related
guarantees which are undertakings by which the requirement to make payment under the guarantee depends on the outcome of a future
event which is unconnected to the creditworthiness of the customer.
The amounts disclosed in the above table reflect HSBC Continental Europe’s maximum exposure under a large number of individual
guarantee undertakings. The risks and exposures arising from guarantees are captured and managed in accordance with our overall
credit risk management policies and procedures. Guarantees with terms of more than one year are subject to the annual credit review
process.
HSBC Continental Europe has no contingent liabilities or commitments in relation to joint ventures or associates, incurred jointly or
otherwise.
The majority of the above guarantees have a term of more than one year. Those guarantees are subject to HSBC Continental Europe’s
annual credit review process.
When HSBC Continental Europe gives a guarantee on behalf of a customer, it retains the right to recover from that customer amounts
paid under the guarantee.
31 Finance lease receivables
HSBC Continental Europe leases a variety of assets to third parties under finance leases, including transport assets (such as aircraft),
property and general plant and machinery. At the end of lease terms, assets may be sold to third parties or leased for further terms.
Rentals are calculated to recover the cost of assets less their residual value, and earn finance income.
2020 2019
Total future Unearned Total future Unearned
minimum finance Present minimum finance Present
payments income Value payments income Value
€m €m €m €m €m €m
Lease receivables
– No later than one year 270 (18) 252 432 (21) 411
– Later than one year and no later than five years 876 (63) 813 918 (76) 842
– One to two years 205 (19) 186 209 (23) 186
– Two to three years 204 (17) 187 237 (20) 217
– Three to four years 340 (16) 324 328 (18) 310
– Four to five years 127 (11) 116 144 (15) 129
– Later than five years 670 (34) 636 789 (38) 751
Total at 31 Dec 1,816 (115) 1,701 2,139 (135) 2,004

32 Legal proceedings and regulatory matters relating to HSBC group entities generally
HSBC group entities, including HSBC Continental Europe entities, are party to various significant legal proceedings and regulatory
matters arising out of their normal business operations. Apart from the matters described below and in the section 2.19a Legal Risks and
Litigation management of the 2020 Registration Document, HSBC Continental Europe considers that none of these matters is significant.
HSBC Continental Europe recognises a provision for a liability in relation to these matters when it is probable that an outflow of economic
benefits will be required to settle an obligation which has arisen as a result of past events, and for which a reliable estimate can be made
of the amount of the obligation. Any provision recognised does not constitute an admission of wrongdoing or legal liability. While the
outcome of these matters is inherently uncertain, management believes that, based on the information available to it, appropriate
provisions, as necessary, have been made in respect of such legal proceedings as at 31 December 2020.
Anti-money laundering and sanctions-related matters
In December 2012, among other agreements, HSBC Holdings agreed to an undertaking with the UK Financial Services Authority which
was replaced by a Direction issued by the UK Financial Conduct Authority ('FCA') in 2013, and again in July 2020, and consented to a
cease-and-desist order with the Federal Reserve Board (‘FRB’), both of which contained certain forward-looking anti-money laundering
(‘AML’) and sanctions-related obligations. HSBC also agreed to retain an independent compliance monitor (who is, for FCA purposes, a
‘Skilled Person’ under section 166 of the Financial Services and Markets Act, and for FRB purposes, an ‘Independent Consultant’) to
produce periodic assessments of the Group’s AML and sanctions compliance programme (the ‘Skilled Person/Independent Consultant’).
In December 2012, HSBC Holdings, entered into an agreement with the office of Foreign Assets Control ('OFAC') regarding historical
transactions involving parties subject to OFAC sanctions.
HSBC’s engagement with the Skilled Person appointed pursuant to the 2013 Direction was terminated in February 2020 and a new
Skilled Person with a narrower mandate has been appointed to assess the remaining areas that require further work in order for HSBC to
transition fully to business-as-usual financial crime risk management. A new Independent Consultant is also being appointed to continue
to carry out an annual OFAC compliance review at the FRB’s discretion.
Bernard L. Madoff Investment Securities LLC
Bernard L. Madoff (‘Madoff’) was arrested in December 2008 in the United States and later pleaded guilty to running a Ponzi scheme. His
firm, Bernard L. Madoff Investment Securities LLC (‘Madoff Securities’), is being liquidated in the US by a trustee (the ‘Trustee’).
Various non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the
US whose assets were invested with Madoff Securities.
Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud, amongst which are HSBC
Institutional Trust Services (Ireland) DAC ('HTIE') and/or its subsidiary Somers Dublin DAC.
On 1 August 2018 HSBC Continental Europe acquired from HSBC Bank plc 100 per cent of the shares of HTIE. Pursuant to the terms of
the Sale and Purchase Agreement, HSBC Continental Europe and/or its subsidiaries will be indemnified by HSBC Bank plc in respect of
certain liabilities relating to the activities of HTIE and/or Somers Dublin DAC prior to the acquisition by HSBC Continental Europe of HTIE,
which has been integrated within HSBC Continental Europe in Ireland.
The Madoff-related proceedings that HTIE and/or Somers Dublin DAC are involved in are described below:
Defender case:
In November 2013, Defender Limited brought an action against HTIE and others, based on allegations of breach of contract and claiming
damages and indemnification for fund losses. The trial commenced in October 2018. In December 2018, the Irish Court issued a
judgement in HTIE’s favour on a preliminary issue, holding that Defender Limited had no effective claim against HTIE. This judgement
concluded the trial without further issues in dispute being heard. In February 2019, Defender Limited appealed the judgement. In July
2020, the Irish Supreme Court ruled in part in favour of Defender Limited and returned the case to the High Court for further proceedings,
which will resume in April 2021.
US litigation:
The Trustee has brought lawsuits against various HSBC companies and others in the US Bankruptcy Court for the Southern District of
New York (the ‘US Bankruptcy Court‘), seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or
determined. HSBC and other parties to the actions have moved to dismiss the Trustee’s claims. The US Bankruptcy Court granted
HSBC’s motion to dismiss with respect to certain of the Trustee’s claims in November 2016. In February 2019, the US Court of Appeals
for the Second Circuit (the ’Second Circuit Court of Appeals’) reversed that dismissal. Following the US Supreme Court’s denial of
certiorari in June 2020, the cases were remanded to the US Bankruptcy Court, where they are now pending.
European interbank offered rates investigations
Various regulators and competition and law enforcement authorities around the world including in the United Kingdom (UK), the United
States of America (’US‘), the European Union, Italy are conducting investigations and reviews related to certain past submissions made
by panel banks and the processes for making submissions in connection with the setting of European interbank offered rates (’Euribor’).

HSBC and/or its subsidiaries (including HSBC Continental Europe as a member of the Euribor panel) have been the subject of regulatory
demands for information and are cooperating with those investigations and reviews.
In December 2016, the European Commission (the ‘Commission‘ or the 'EC') issued a decision finding that HSBC, among other banks,
engaged in anticompetitive practices in connection with the pricing of euro interest rate derivatives in early 2007. The Commission
imposed a fine against HSBC based on a one-month infringement, which has been paid by HSBC Continental Europe. HSBC appealed the
decision and, in September 2019, the General Court of the European Union (the ‘General Court’) issued a decision largely upholding the
EC’s findings on liability, but annulling the fine. HSBC and the EC have appealed the General Court's decision.
Foreign exchange rate investigations and litigation
Various regulators and competition authorities around the world, including in the EU and South Africa, are conducting investigations and
reviews into trading by HSBC and others on the foreign exchange markets. HSBC is cooperating with these investigations and reviews.
In January 2021, HSBC Holdings exited its three-year deferred prosecution agreement with the Criminal Division of the DoJ (the ‘FX
DPA’), regarding fraudulent conduct in connection with two particular transactions in 2010 and 2011. HSBC holdings entered into the FX
DPA in January 2018, following the conclusion of the DoJ’s investigation into HSBC’s historical foreign exchange activities. Under the
terms of the FX DPA, the DoJ is expected to file a motion to dismiss the charges deferred by the FX DPA in due course.
33 Related party transactions
The ultimate parent company of the group is HSBC Holdings plc, which is incorporated in the United Kingdom.
Copies of the Group financial statements may be obtained from the following address:
HSBC Holdings plc
8 Canada Square
London
E14 5HQ
All transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and security,
as for comparable transactions with persons of a similar standing or, where applicable, with other employees. The transactions did not
involve more than the normal risk of repayment or present other unfavourable features.
Key Management Personnel
The table below sets out transactions which fall under IAS 24 ‘Related Party Disclosures’ between HSBC Continental Europe and the Key
Management Personnel of HSBC Continental Europe and on one hand, their respective spouses and children living in the family home,
and on the other hand, controlled companies.
Transactions and balances during the year with Key Management Personnel
2020 2019
Highest amounts Highest amounts
Number of Balance at outstanding Number of Balance outstanding
persons 31 Dec2 during year2 persons at 31 Dec2 during year2
€k €k €k €k
Key Management Personnel 1
Advances and credits 21 26,215 44,237 25 34,074 62,996
Guarantees 21 2,275 3,495 25 3,006 3,006
Deposits 21 54,746 121,248 25 61,004 489,617
1 Includes Key Management Personnel, close family members of Key Management Personnel and entities which are controlled or jointly controlled
by Key Management Personnel or their close family members.
2 The highest balance during the year and the balance at 31 December are considered to be the most significant information to show the
transactions during the year.
Compensation to the Key Management Personnel of HSBC Continental Europe under IAS 24 is disclosed as follows:
Compensation of Key Management Personnel

2020 2019
€k €k
Short-term employee benefits 247 246
Post-employment benefits 96 86
Other long-term employee benefits — —
Termination benefits 80 66
Share-based payments 1,094 855
At 31 Dec 1,517 1,253
Shareholdings, options and other securities of Key Management Personnel

2020 2019
Number of options held over HSBC Holdings ordinary shares under employee share plans — —
Number of HSBC Holdings ordinary shares held beneficially and non-beneficially 1,340,992 1,279,204
At 31 Dec 1,340,992 1,279,204

The Corporate governance report also includes a detailed description of Directors’ remuneration (see page 40 and following).
Transactions with other related parties
There is no significant amount due to joint ventures and associates.
Transactions detailed below include amounts due to/from HSBC Continental Europe and fellow subsidiaries of the HSBC Group.
Transactions and balances during the year with subsidiaries

2020 2019
Highest
balance Balance at Highest balance Balance at
during the year 31 Dec during the year 31 Dec
€m €m €m €m
Assets
Trading assets 8 8 10 1
Derivatives 22,886 20,420 31,664 17,058
Loans and advances to banks 2,403 1,519 3,897 1,437
Loans and advances to customers 180 124 55 55
Reverse repurchase agreement – non trading 4,865 1,504 5,002 4,550
Financial investments 448 445 457 447
Other assets 6,807 971 6,536 1,681
Prepayments and accrued income 100 49 86 69
Financial asset designated at fair value 385 251 632 257
Liabilities
Deposits by banks 6,118 1,782 8,031 5,255
Customer accounts 153 101 156 149
Repurchase agreement – non trading 2,773 1,075 7,008 3,585
Trading liabilities — — — —
Derivatives 23,403 17,752 35,008 17,010
Other liabilities 5,839 3,451 4,325 1,635
Accruals and deferred income 137 101 204 122
Financial liabilities designated at fair value — — — —
Subordinated liabilities 1,860 1,860 1,360 1,360
Guarantees and commitments 5,153 3,769 7,260 2,819
Income Statement
Interest income 83 177
Interest expense 89 163
Fee income 155 145
Fee expense 80 103
Gains less losses from financial investments — —
Other operating income 93 51
Dividend income — —
General and administrative expenses 384 344
34 Events after the balance sheet date
There was no material event subsequent to the reporting date that would require a correction or adjustment to the consolidated financial
statements as at 31 December 2020.

35 HSBC Continental Europe subsidiaries, joint ventures and associates
HSBC Continental Europe classifies investments in entities which it controls as subsidiaries. HSBC Continental Europe consolidation
policy is described in Note 1.
Subsidiaries of HSBC Continental Europe
interest (%)
Country of incorporation Consolidation
Consolidated companies Footnotes or registration method* Main line of business 2020 2019
Retail and Commercial Banking
HSBC Factoring (France) France FC Financial company 100.0 100.0
SAPC Ufipro Recouvrement France FC Service company 99.9 99.9

Beau Soleil Limited Partnership Hong Kong FC Financial company 85.0 85.0
DEM 9 France FC Financial company 100.0 100.0
DEMPAR 1 France FC Financial company 100.0 100.0
Elysées Immo Invest 2 France FC Financial company — 100.0
Finanpar 7 2 France FC Financial company — 100.0
Foncière Elysées France FC Real estate company 100.0 100.0
HSBC Leasing (France) France FC Financial company 100.0 100.0
HSBC Real Estate Leasing (France) France FC Financial company 100.0 100.0
HSBC Services (France) France FC Financial company 100.0 100.0
HSBC SFH (France) France FC Financial company 100.0 100.0
Euro Secured Notes Issuer (ESNI) 4 France FC Financial company 16.7 16.7
SAF Baiyun France FC Financial company 100.0 100.0
SAF Guangzhou France FC Financial company 100.0 100.0
SAF Zhu jiang shi ba France FC Financial company 100.0 100.0
SAF Zhu jiang shi er France FC Financial company 100.0 100.0
SAF Zhu jiang shi jiu France FC Financial company 100.0 100.0
SAF Zhu jiang shi liu France FC Financial company 100.0 100.0
SAF Zhu jiang shi qi France FC Financial company 100.0 100.0
SAF Zhu jiang shi wu France FC Financial company 100.0 100.0
* FC: Full Consolidation – EM: Equity Method.

1 Merger.
2 Dissolution without liquidation.
3 New entries in perimeter.
4 HSBC Continental Europe silo, which is 100%-owned by HSBC Continental Europe and fully consolidated.
5 In the process of liquidation.


interest (%)
Country of incorporation Consolidation Main
Consolidated companies Footnotes or registration method* line of business 2020 2019
SFM France FC Commercial company 100.0 100.0
Sopingest France FC Financial company 100.0 100.0
SNC les Oliviers d’Antibes France FC Financial company 60.0 60.0
Thasosfin 1 France FC Financial company — 100.0
Somers Dublin – DAC Ireland FC Service company 100.0 100.0
Asset Management
CCF & Partners Asset Management Ltd United Kingdom FC Financial company 100.0 100.0
HCM Holdings Ltd 5 United Kingdom EM Financial company 51.0 51.0
HSBC Epargne Entreprise (France) France FC Financial company 100.0 100.0
Services Epargne Entreprise France EM Service company 14.2 14.4
HSBC Global Asset Management (France) France FC Asset management 100.0 100.0
HSBC Global Asset Management (Switzerland) AG Switzerland EM Asset management 50.0 50.0
HSBC REIM (France) France FC Asset management 100.0 100.0
Insurance
HSBC Assurances Vie (France) France FC Insurance company 100.0 100.0
SCI HSBC Assurances Immo France FC Real estate company 100.0 100.0
ERISA Actions Grandes Valeurs France FC Financial company 100.0 100.0
OPCVM8 – Erisa Diversifié N2 FCP France FC Financial company 100.0 100.0
OPCVM9 – Erisa Opportunités FCP France FC Financial company 100.0 100.0
HSBC MIX DYNAMIQUE FCP3DEC France FC Financial company 59.7 61.5
HSBC MUL.ASS.ST.FACT.S FCP3DEC France FC Financial company 100.0 100.0
HSBC PTF WLD Select.4 A C.3DEC France FC Financial company 55.7 54.2
HSBC SELECT DYNAMIC A FCP 2DEC France FC Financial company 78.1 74.4
HSBC GIF EMERG.WEALTH A C.3DEC France FC Financial company 64.1 64.8
HSBC ACTIONS EUR.C FCP 3DEC France FC Financial company 57.3 71.7
HSBC SELECT EQUITY A FCP 4DEC France FC Financial company 76.7 70.7
HSBC EURO PROTECT 80 PLUS PART C France FC Financial company 73.0 71.1
HSBC PORT-WORLD SEL 5-AHEUR France FC Financial company 56.0 54.0
HSBC GLOBAL INVESTMENT FUNDS GEM EQUITY France FC Financial company 64.8 54.4
HSBC RESP INVESTMENT FUNDS SRI GLOBAL EQUITY France FC Financial company 59.3 53.5
HSBC RESP INVE FD-SRI DYNAMIC PART AC France FC Financial company 69.2 66.7
HSBC RESP INVES FUNDS-SRI BALANCED AC France FC Financial company 97.3 99.1
HSBC GB Inv -Economic Scale Japan Eq 3 France FC Financial company 64.7 —
HSBC GLB-US EQUITY IND-ACEUR 3 France FC Financial company 98.4 —
HSBC OBLIG INFLATION EURO AC 3 France FC Financial company 50.8 —
Others
Charterhouse Management Services Limited United Kingdom FC Investment company 100.0 100.0
Charterhouse Administrators Ltd United Kingdom FC Investment company 100.0 100.0
Keyser Ullmann Ltd United Kingdom FC Investment company 100.0 100.0
Société Française et Suisse France FC Investment company 100.0 100.0
Flandres Contentieux France FC Service company 100.0 100.0
Valeurs Mobilières Elysées France FC Investment company 100.0 100.0
* FC: Full Consolidation – EM: Equity Method.

1 Merger.
2 Dissolution without liquidation.
3 New entries in perimeter.
4 HSBC Continental Europe silo, which is 100%-owned by HSBC Continental Europe and fully consolidated.
5 In the process of liquidation.

Main changes in the scope of consolidation during 2020
New Entries in Perimeter

HSBC GB Inv -Economic Scale Japan Eq
HSBC GLB-US EQUITY IND-ACEUR
HSBC OBLIG INFLATION EURO AC
Removals
Merger
Thasosfin1
Dissolution without liquidation

Elysées Immo Invest
Finanpar 7
1 Thasosfin was merged with HSBC Leasing (France) in December 2020.

Non-consolidated entities
HSBC Continental Europe interest
(%)
Non Consolidated Companies Country of incorporation or registration Reason of non-consolidation 2020 2019
SNCB/M6 2007 A France Not consolidated in accordance with IFRS 10 100.0 100.0
SNCB/M6 2007 B France Not consolidated in accordance with IFRS 10 100.0 100.0
SNCB/M6 2008 A France Not consolidated in accordance with IFRS 10 100.0 100.0
SAS CYATHEAS PASTEUR France Not consolidated in accordance with IFRS 10 — 94.9
SNC KEROUAN France Not consolidated in accordance with IFRS 10 — 99.99
SNC Les MERCURIALES France Not consolidated in accordance with IFRS 10 99.99 99.99
SNC MAKALA France Not consolidated in accordance with IFRS 10 99.99 99.99
SNC DORIQUE France Not consolidated in accordance with IFRS 10 99.99 99.99
GIE GNIFI France Not consolidated in accordance with IFRS 10 25.0 25.0
CCF Finance Moyen Orient SAL Lebanon In the course of liquidation since 2002 99.9 99.9
CCF Holding Liban SAL Lebanon In the course of liquidation since 2002 75.0 75.0

63 rue de Villiers 43-47 avenue de la Grande Armée
92208 Neuilly-sur-Seine Cedex 75116 Paris
Statutory Auditors’ report on the consolidated financial statements

(For the year ended 31 December 2020)
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of
English speaking readers. This report includes information specifically required by European regulations or French law, such as
information about the appointment of Statutory Auditors. This report should be read in conjunction with, and construed in accordance
with, French law and professional auditing standards applicable in France.

38, avenue Kléber
75116 Paris
To the shareholders,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated
financial statements of HSBC Continental Europe for the year ended 31 December 2020.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of
the Group at 31 December 2020 and of the results of its operations for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
The audit opinion expressed above is consistent with our report to the Audit Committee.
Basis for opinion
Audit framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under these standards are further described in the “Responsibilities of the Statutory Auditors relating to the audit of
the consolidated financial statements” section of our report.
Independence
We conducted our audit engagement in compliance with the independence rules provided for in the French Commercial Code (Code de
commerce) and the French Code of Ethics (Code de déontologie) for Statutory Auditors, for the period from 1 January 2020 to the date of
our report, and, in particular, we did not provide any non-audit services prohibited by article 5(1) of Regulation (EU) No 537/2014.
Emphasis of matter
Without qualifying our opinion, we draw your attention to Note 1.1 to the consolidated financial statements, which outlines changes in
accounting principles such as the early adoption of the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 as from 1 January
2020 taking into account the effects of the interest rate benchmark reform.
Justification of assessments – Key audit matters
Due to the global crisis related to the Covid-19 pandemic, the financial statements of this period have been prepared and audited under
specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had
numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their
future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies’ internal
organisation and the performance of the audits.
It is in this complex and evolving context that, in accordance with the requirements of articles L.823 9 and R.823-7 of the French
Commercial Code relating to the justification of our assessments, we inform you of the key audit matters relating to the risks of material
misstatement that, in our professional judgement, were the most significant in our audit of the consolidated financial statements, as well
as how we addressed those risks.
These matters were addressed as part of our audit of the consolidated financial statements as a whole, and therefore contributed to the
opinion we formed as expressed above. We do not provide a separate opinion on specific items of the consolidated financial statements.

Statutory Auditors' report on the consolidated financial statements
Measurement of the present value of in-force insurance business (PVIF)

Description of risk How our audit addressed this risk
Present value of in-force insurance business (PVIF) represents the present With the support of our risk modelling experts, we performed the following
value of the profits expected to emerge from the book of in-force policies of procedures:
HSBC Assurance Vie, a subsidiary of HSBC Continental Europe. PVIF is • checking the actuarial model used to calculate PVIF in order to assess its
recorded under balance sheet assets in HSBC Continental Europe’s appropriateness, notably the overall consistency of any changes or of the
consolidated financial statements. lack of any changes in the model with the key assumptions used to
PVIF is measured using models that take account of thousands of possible determine PVIF. This mainly involved:
outcomes to project the HSBC Assurances Vie insurance contract book over
– gaining an understanding of the model and assessing the consistency
a defined time horizon based on the effective length of underlying policies.
of the updated assumptions in relation to past observations and
This estimate is based on economic assumptions such as market data
observable data,
(interest rates, equities, macro-economic scenarios, etc.), and non-economic
assumptions including mortality, lapse rates and expense rates. These – analysing the modelling and the changes made to the modelling of
assumptions are determined based on observed historical mortality and economic data with regard to the characteristics of HSBC Assurances
lapse rates, and the investment strategies applied for HSBC Assurance Vie Vie investments, the asset allocation policy and market practices, and
customers. PVIF may vary based on revisions to these assumptions as well – analysing changes in PVIF in light of the assumptions used in the
as changes in regulations and accounting methods, or adjustments to the model inputs;
model. These revisions led the Group to recognise a pre-tax expense of EUR • testing internal controls deemed to be key to the audit and used by
123 million for the year ended 31 December 2020 (see Note 20 to the management to:
consolidated financial statements).
– validate the appropriateness of the data and assumptions used as
Given the sensitivity of pre-tax profit to changes in PVIF, the complexity of
inputs for the model;
the model and the underlying assumptions, we deemed the measurement of
present value of in-force insurance business to be a key audit matter. – validate the projections and their consistency with the calculated
PVIF.
At 31 December 2020, PVIF amounted to EUR 490 million, versus EUR 613 million at 31 December 2019.
See Notes 1.2 and 20 to the consolidated financial statements.
Financial instruments measured at fair value and classified as level 3

As part of its activities, HSBC Continental Europe holds financial We tested the effectiveness of the controls we deemed key to our audit, put
instruments (assets and liabilities) which are recognised in the balance sheet in place by management to record, value and recognise these financial
at fair value, particularly complex derivative financial instruments and instruments, specifically those regarding:
private equity funds. Fair value is determined using different approaches, • the independent validation of valuation models by the Independent Model
depending on the type and complexity of the instrument. Review – Markets department;
The offsetting entry for the remeasurement of derivative financial
• the independent verification of prices and valuations by the Product
instruments at fair value at the reporting date is recognised in profit or loss.
Control department;
The measurement of derivatives may require the use of internally-developed
models using unobservable data such as long-term interest rates or • the determination of fair value adjustments (“FVA”);
volatilities for certain currencies. The measurement of more complex • the determination of fund net asset values.
instruments may require several unobservable inputs such as volatility We also sought the support of our risk modelling experts to carry out, on the
surfaces, in whole or in part, for less commonly traded option products, and basis of samples, an independent valuation of level 3 instruments using their
correlations between market factors such as foreign exchange rates, interest own models and market inputs in order to assess the valuations generated
rates and equity prices. It also takes account of adjustments for by the HSBC internal models.
counterparty and liquidity risk. These instruments are classified as level 3 in
We examined the assumptions, methods and models used by the Bank to
the fair value hierarchy as defined in IFRS 13.
estimate the main valuation adjustments (counterparty and liquidity risk) in
The private equity portfolio is also valued based on unobservable inputs
order to assess their relevance.
combined with a highly volatile environment due to the Covid-19 crisis,
making the determination of the fair value of these financial instruments For the valuation of the private equity portfolio, we also carried out
even more uncertain. substantive procedures to assess the reliability of fund net asset values
Given the multiple inputs subject to management’s judgement, we deemed
the measurement of these level 3 financial instruments to be a key audit
matter for HSBC Continental Europe’s consolidated financial statements.
At 31 December 2020, instruments classified as level 3 in the fair value hierarchy represented EUR 3,850 million recognised under assets and
EUR 929 million recognised under liabilities.
See Notes 1.2 and 11 to the consolidated financial statements.

Information systems access management
Description of risk How our audit addresssed this risk
Due to the nature of its activities, HSBC Continental Europe executes a User access rights were tested on the applications, operating systems and
large volume of transactions each day. Transactions are authorised, databases used for the consolidated financial statements and those relevant to
executed and recorded using complex information systems. The our audit. More specifically, our work allowed us to assess whether:
integrity of these systems is a key factor in the reliability of the • new user access requests to information systems are duly examined and
consolidated financial statements. authorised;
In previous audits, we identified weaknesses associated with user
• user access rights are revoked in a timely manner following the reassignment
access rights to operating systems, databases and certain applications
of personnel or their departure from the Group;
contributing directly or indirectly to the preparation of the consolidated
financial statements. • user access rights to applications, operating systems and databases are
The weakness of controls relating to access management entails the risk controlled in a consistent manner;
that by omission or error, changes to financial information systems and • highly-privileged user access has only been granted to a very limited group of
processed data may not be appropriate. persons who require such access for the performance of their duties; and
An action plan is currently being implemented by management, seeking • controls on outsourced service providers are in place.
to strengthen the control environment for user access rights and helping
Other areas were assessed independently, such as password policies and
to mitigate the access management risk.
security configurations. An independent assessment was also performed on
We deemed information systems access management to constitute a
controls on modifications to applications and databases. We also tested controls
key audit matter for the HSBC Continental Europe consolidated financial
intended to ensure that business line users and developers do not have access to
statements.
applications, operating systems or databases in the production environment.
When control weaknesses were identified, additional procedures were carried
out:
• we analysed the nature of the access where inappropriate access had been
identified and, where possible, obtained additional evidence of its legitimacy;
• we performed additional tests on specific end‑of‑year reconciliations
(custodians, bank accounts and reconciliation of suspense accounts), as well
as requesting confirmations from external counterparties; and
• we performed tests on other controls carried out by management, such as
performance reviews by business line.
See page 96 of the management report.
Application of IFRS 9 in the calculation of impairment of loans to HSBC Continental Europe business customers
The determination of expected credit losses (ECLs) requires Management has put in place controls designed to ensure the reliability of the
management’s judgement and the corresponding estimates are subject calculation of expected credit losses (ECLs). In this context, we tested the
to a high degree of uncertainty, which grew during the Covid-19 crisis. controls we deemed key to our audit, in order to assess the relevance of the
Management uses multiple assumptions to estimate ECLs. In the course impairment losses recorded, in particular:
of our audit, we focus on the following main assumptions: risk inputs, • the examination and comparative review of several economic scenarios and
the determination of forward-looking economic scenarios and their their probability by a group of experts and an internal governance committee;
probability, business customer risk ratings (CRRs) and the recoverability • the effectiveness of the credit committees set up to assess and approve the
of the loans. estimated impairment, particularly the judgement exercised by management
These assumptions are used in complex, tailor-made models that are to determine the adjustments to be applied;
developed using risk inputs based on historical data which, in the • the validation and monitoring of models;
current economic environment, generated an inappropriate level of
• the credit reviews used to determine customer risk ratings for business
estimated ECLs.
portfolios;
With regard to the determination of forward-looking economic
• the entering of critical data in the source systems, as well as the flow and
scenarios, the Covid-19 crisis triggered unprecedented economic
transformation of the data between the source systems and the engine for
conditions that vary depending on the country and business sector. The
calculating impairment losses;
support programmes introduced by governments together with the
action taken by regulators had an impact on economic factors such as • the calculation and approval of post-model adjustments and expected credit
GDP and the unemployment rate. These inputs therefore limited and losses based on the judgement of the Credit Risk department.
changed the extent and duration of customer defaults. These factors We called upon our experts to assess the reasonableness of the macro-economic
increased the uncertainty surrounding the estimates used to determine variables forecasts, particularly regarding the estimated probability of various
the severity and probability of the impacts of the crisis on scenarios. They examined the sensitivity of expected credit losses to these
macroeconomic variables (MEV) through the different economic assumptions.
scenarios used in the ECL models. We also assessed the relevance of the model methodologies that had not
Lastly, the customer risk ratings (CRRs) used to determine impairment changed during the year, notably taking into account Covid-19 and the need to
were adjusted based on quantitative data and qualitative criteria in order use post-model adjustments. Where expected credit losses were adjusted, we
to reflect the material increase in credit risk due to the Covid-19 crisis. assessed the impairment losses determined by management and the supporting
Accordingly, ECLs were significantly adjusted to take account of these analysis.
uncertainties. The type and scope of these adjustments, which may or In addition, we assessed the level of ECLs using a sample of business customer
may not be based on models and are determined based on the loans, and the relevance of management’s judgement, particularly post-model
judgement of the Credit Risk department, vary depending on the adjustments, the level of customer risk ratings and expert valuations.
business portfolio. We also assessed the information on credit risk provided in the consolidated
Given the Bank’s outstanding loan balances, the uncertainty of the financial statements for the year ended 31 December 2020.
assumptions used and the higher degree of judgement exercised by
management, within the context of the Covid-19 crisis, to estimate the
amount of ECLs, we deemed this to be a key audit matter.
Impairment of loans to Bank customers stood at EUR 904 million at 31 December 2020.
See Note 1.2 to the consolidated financial statements and page 106 of the management report.

Provisions for restructuring and reorganisation

HSBC Continental Europe launched several reorganisation projects We examined and assessed the appropriateness of the recognition criteria and
within its various business lines (Global Banking and Markets – GBM; the assumptions used by the Bank to determine the provisions recognised in the
Commercial Banking – CMB) and its central functions in both France consolidated financial statements.
and its branches. We tested the effectiveness of the controls we deemed key to our audit, put in
Management recorded provisions for restructuring in accordance with place by management to estimate and recognise the provisions.
IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and We also called upon our experts to assess the calculation method used.
IAS 19 “Employee Benefits”. The recognition criteria are specific and
On a sample basis, we verified the consistency of the data used for the
depend on when the restructuring plan was communicated in the
measurement of the provisions.
related country, as well as on the labour laws in force in each country (in
France and in the countries where its branches are located). The We also assessed the information on provisions for restructuring provided in the
recognition criteria may include an agreement with the trade unions, a consolidated financial statements for the year ended 31 December 2020.
notification sent to an employee or a settlement agreement.
As certain inputs are subject to management’s judgement and given the
timetable for recognising the provisions, we deemed provisions for
restructuring to be a key audit matter for HSBC Continental Europe’s
consolidated financial statements.
At 31 December 2020, provisions for restructuring represented EUR 258 million.

See Note 1.3 to the consolidated financial statements.
Impairment of property, plant and equipment and intangible assets (excluding goodwill)
The Covid-19 crisis had a significant impact on the global economy and We called upon valuation (particularly real estate) and accounting standards
therefore on the economic performance of HSBC Continental Europe in experts in our network to verify the relevance and appropriateness of the
2020 and on its forecasts for 2021, which situation management methods used to calculate the recoverable amount of intangible assets and
considered to constitute an indication of potential impairment. property, plant and equipment.
Management therefore decided to carry out impairment tests on all We verified the calculations performed by management.
property, plant and equipment and intangible assets held by HBCE, With regard to the main assumptions used in the models, we:
mainly by comparing the carrying amount of the assets with their
• discussed the relevance of the budget prepared by management, in particular
recoverable amount.
given the economic environment;
Recoverable amount is estimated using a certain number of
• assessed, with the help of our valuation experts, the assumptions used by
assumptions, particularly:
management to determine the impairment to be recognised against property,
• an estimate of future cash flows, long-term growth rates and plant and equipment;
discount rates, mainly to determine the estimated value in use (VIU)
• assessed the sensitivity of the estimated value in use of intangible assets to
of other intangible assets;
the different assumptions used, particularly the discount rate.
• changes in the French real estate office market in the current
We also assessed the information on property, plant and equipment and
environment, particularly with more widespread remote working;
intangible assets provided in the consolidated financial statements for the year
• the type and location of rented real estate assets. ended 31 December 2020.
These different assumptions are subject to estimation uncertainty and
are mainly based on data from internal and external experts contracted
by management, market data and the judgement of management,
particularly with regard to the preparation of the budget for 2021-2025
and therefore the forecasts for income, cost savings, growth rates and
discount rates.
Following the impairment tests, management recognised an impairment
loss of EUR 294 million against intangible assets and EUR 206 million
against property, plant and equipment. At 31 December 2020, non-
impaired intangible (excluding goodwill) and property, plant and
equipment amounted to EUR 23 million and EUR 892 million
respectively. In light of the above, we deemed the impairment of
intangible assets and property, plant and equipment to be a key audit
matter for HSBC Continental Europe’s consolidated financial statements.
See Notes 1.3, 20 and 21 to the consolidated financial statements.
Specific verifications
As required by legal and regulatory provisions and in accordance with professional standards applicable in France, we have also verified
the information pertaining to the Group presented in the Board of Directors’ management report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
We attest that the Group management report includes the consolidated non-financial information statement required under article
L.225-102-1 of the French Commercial Code. However, in accordance with article L.823-10 of the French Commercial Code, we have not
verified the fair presentation and consistency with the consolidated financial statements of the information given in that statement, which
will be the subject of a report by an independent third party.

Other verifications and information pursuant to legal and regulatory requirements
Presentation of the financial statements to be included in the annual financial report
Pursuant to paragraph III of article 222-3 of the AMF’s General Regulations, the Company’s management informed us of its decision to
postpone the application of the single electronic reporting format, as defined by European Delegated Regulation No. 2019/815 of 17
December 2018, to reporting periods beginning on or after 1 January 2021. Accordingly, this report does not contain a conclusion on the
compliance of the presentation of the consolidated financial statements to be included in the annual financial report referred to in
paragraph I of article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) with this format.
Appointment of the Statutory Auditors
We were appointed Statutory Auditors of HSBC Continental Europe by the Annual General Meetings held on 23 April 2015 for
PricewaterhouseCoopers Audit and on 10 May 2007 for BDO Paris Audit & Advisory.
At 31 December 2020, PricewaterhouseCoopers Audit and BDO Paris Audit & Advisory were in the sixth and thirteenth consecutive year
of their engagement, respectively.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for preparing consolidated financial statements giving a true and fair view in accordance with International
Financial Reporting Standards as adopted by the European Union and for implementing the internal control procedures it deems
necessary for the preparation of consolidated financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting, unless it
expects to liquidate the Company or to cease operations.
The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk
management systems, as well as, where applicable, any internal audit systems relating to accounting and financial reporting procedures.
The consolidated financial statements were approved by the Board of Directors.
Responsibilities of the Statutory Auditors relating to the audit of the consolidated financial statements
Objective and audit approach
Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free of material misstatement. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions taken by users on the basis of these consolidated financial statements.
As specified in article L.823-10-1 of the French Commercial Code, our audit does not include assurance on the viability or quality of the
Company’s management.
As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditors exercise
professional judgement throughout the audit.
They also:
• identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures in response to those risks, and obtain audit evidence considered to be sufficient and appropriate to
provide a basis for their opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• obtain an understanding of the internal control procedures relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management and
the related disclosures in the notes to the consolidated financial statements;
• assess the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. This assessment is based on the audit evidence obtained up to the date of the audit report. However,
future events or conditions may cause the Company to cease to continue as a going concern. If the Statutory Auditors conclude that a
material uncertainty exists, they are required to draw attention in the audit report to the related disclosures in the consolidated
financial statements or, if such disclosures are not provided or are inadequate, to issue a qualified opinion or a disclaimer of opinion;
• evaluate the overall presentation of the consolidated financial statements and assess whether these statements represent the
underlying transactions and events in a manner that achieves fair presentation;
• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. The Statutory Auditors are responsible for the management, supervision
and performance of the audit of the consolidated financial statements and for the opinion expressed thereon.
Report to the Audit Committee
We submit a report to the Audit Committee which includes, in particular, a description of the scope of the audit and the audit programme
implemented, as well as the results of our audit. We also report any significant deficiencies in internal control that we have identified
regarding the accounting and financial reporting procedures.

Our report to the Audit Committee includes the risks of material misstatement that, in our professional judgement, were the most
significant in the audit of the consolidated financial statements and which constitute the key audit matters that we are required to
describe in this report.
We also provide the Audit Committee with the declaration provided for in article 6 of Regulation (EU) No 537/2014, confirming our
independence within the meaning of the rules applicable in France, as defined in particular in articles L.822-10 to L.822-14 of the French
Commercial Code and in the French Code of Ethics for Statutory Auditors. Where appropriate, we discuss any risks to our independence
and the related safeguard measures with the Audit Committee.

Partner Partner

Parent company financial
statements
Page
Profit and loss accounts 2020-2019 238
Balance sheets 2020-2019 239
Statement of reported net profit and movements in shareholders
funds 239
2020 Highlights 240
Notes on the parent company

financial statements
1 Principal accounting policies 241
2 Loans and advances to banks 247
3 Loans and advances to customers 247
4 Portfolio of trading, available-for-sale securities and held-to-
maturity securities 248
5 Investments in subsidiaries and equity securities held for
long-term 249
6 Intangible assets 250
7 Tangible assets 251
8 Loan impairment 251
9 Other assets 252
10 Prepayments and accrued income 252
11 Deposit by banks 252
12 Customer accounts 252
13 Debt securities and issue 253
14 Provisions 253
15 Other liabilities 253
16 Accruals and deferred income 254
17 Subordinated debt 254
18 Called up share capital 255
19 Equity 255
20 Pensions, post-employment benefits 255
21 Off-balance sheet items 256
22 Derivatives 257
23 Net interest income 258
24 Income on securities portfolio 258
25 Net fee income 259
26 Gains and losses on portfolio business transactions 259
27 Gains or losses on available-for-sale securities 259
28 General operating expenses 259
29 Gains or losses on disposals of fixed assets 260
30 Tax expense and deferred tax 260
31 Legal proceedings and regulatory matters relating to HSBC
Group entities generally 261
32 Presence in non-cooperative States or territories 262
33 Events after the balance sheet date 262
34 Other information 263
Statutory auditors' report on the financial statements 265
Allocation of net profit 270

Parent Company financial statements
Profit and loss accounts 2020–2019

(in millions of euros) Notes 31 Dec 2020 31 Dec 2019
Income/(Expenses)
Interest and similar income 23 1,935 1,989
Interest and similar expenses 23 (1,400) (1,321)
Finance leases income 176 194
Finance leases expenses (194) (190)
Income from equities and other variable income securities 24 26 50
Commissions received 25 993 952
Commissions paid 25 (205) (239)
Gains and losses on trading securities 26 188 241
Gains or losses on available-for-sale securities 27 96 39
Other banking operating income 139 96
Other banking operating expenses (18) (18)
Net banking operating income 1,736 1,793
General operating expenses 28 (2,007) (1,703)
Depreciation, amortisation and impairment of fixed assets (486) (159)
Gross operating income (757) (69)
Loan impairment charges 8 (211) (133)
Net operating income (968) (202)
Gains or losses on disposals of long-term investments 29 73 (8)
Exceptional items 100
Income tax and deferred tax 30 (111) 63
Gains and losses from regulated provisions — —
Net profit/(loss) for the period (906) (147)

Balance sheet 2020–2019
Assets
Cash and amounts due from central banks and post office banks 4,970 4,683
Treasury bills and money-market instruments2 4 20,700 20,574
Loans and advances to banks3 2 42,138 96,318
Loans and advances to customers4 3 64,100 82,094
Bonds and other fixed income securities2 4 4,420 5,628
Equities and other variable income securities 4 158 244
Investments in subsidiaries and equity securities held for long term 5 85 86
Interests in affiliated parties 5 1,359 1,353
Finance leases 7 448 522
Intangible fixed assets 6 42 347
Tangible fixed assets 7 79 181
Other assets 9 33,261 26,201
Prepayments and accrued income 10 54,134 42,528
Total assets 225,894 280,759
Off-balance sheet items
Financing commitments given 21 47,223 40,093
Guarantees and endorsements given 21 9,695 10,398
Securities commitments (other commitments given) 47,328 51,881
Liabilities
Central bank and post office banks 13 39
Deposit due to credit institutions4 11 28,896 82,458
Customer accounts3 12 63,319 67,474
Debt securities in issue 13 17,319 24,805
Other liabilities2 15 53,455 54,089
Accruals and deferred income 16 53,704 42,493
Provisions for liabilities and charges 14 593 400
Subordinated liabilities 17 2,629 2,128
Share capital 18 491 491
Additional paid-in capital 19 2,155 2,158
Equity 19 1,041 1,041
Special tax-allowable reserves 19 — —
Retained earnings1 19 3,185 3,330
Net profit (loss) for the period 19 (906) (147)
Interim dividend 19 — —
Financing commitments received 21 3,324 5,479
Guarantees and endorsements received 21 17,931 16,692
Securities commitments (other commitments received) 47,908 46,293
1 Before proposed allocation submitted to Annual General Meeting’s approval.

2 After the application of offsetting for assets and liabilities arising from securities borrowing transactions. Refer to Note 1, Note 4 and Note 15.
3 After the application of offsetting of repurchase and reverse repurchase agreements, and regulated savings accounts against balances centralized
at the Caisse des Dépôts et Consignation. Refer to Note 1, Note 2 and Note 12.
4 After the application of offsetting of repurchase and reverse repurchase agreements. Refer to Note 1, Note 3 and Note 11.
Statement of reported net profit and movements in shareholders’ funds

(in millions of euros) 31 Dec 2020 31 Dec 2019
Net profit/(loss) for the period
Total (906) (145)
– per share (in euros)1 (9) (1)
Movements in shareholders‘ funds (excluding the net profit of 2020) (after allocation of 2019 net profit)
– change in revaluation difference — —
– transfer to reserves and change in retained earnings (145) 78
– allocation of net profit for the previous year (145) 78
– appropriation of net profit — —
– change in revaluation reserve and special tax-allowable reserves — —
Change in shareholders’ funds (145) 78
– per share (in euros)1 (1) 1
Proposed dividend —
– total — —
– per share (in euros)1 — —
1 Number of shares outstanding at year end: 98,231,196 in 2020 and 98,231,196 in 2019.

Parent Company financial statements
2020 Highlights
Business review
Net banking operating income was EUR 1,736 million, down EUR 57 million compared to 2019. This decrease is due to the
degradation of economic and financial conditions, while the persistence of a low interest rates environment continued to impact the net
interest income.
General operating expenses were to EUR 2,007 million, up EUR 304 million compared to the previous year. This increase is mainly
driven by restructuring costs of for EUR 258 million and a EUR 49 million increase of the Single Resolution Fund contribution.
Depreciation, amortisation and impairment of tangible and intangible assets was EUR 486 million, up EUR 327 million
compared to 2019, reflecting recent losses and deterioriation in the future forecast.
Loan impairment charges were EUR 211 million up from EUR 133 million in 2019. This increase in all global businesses, is mainly
explained by incremental charges on non-performing loans linked to the global impact of the Covid-19 outbreak and on the deteriorated
forward economic outlook.
Gains on disposals of long-term investments were EUR 73 million compared to a loss of EUR 8 million in 2019, primarily due to the
sale of Visa shares.
Net loss for the period was EUR 906 million compared to a net loss of EUR 147 million in 2019.
At 31 December 2020, the total balance sheet of HSBC Continental Europe amounted to EUR 226 billion compared to EUR 281 billion
at 31 December 2019.
Change of name and new headquarters
On 1 December 2020, HSBC France has changed its name to become HSBC Continental Europe. The new name better reflects the
purpose and nature of its activities, namely an integrated Continental European bank connecting our customers to HSBC’s global
network, and providing access to Continental Europe for HSBC’s customers around the world. The new headquarters for HSBC
Continental Europe is located at 38 avenue Kléber, 75116 Paris, France.
Impairment and write-off of intangible and tangible assets
During 2020, the HSBC Group considered the pervasive macroeconomic deterioration caused by the outbreak of Covid-19, along with the
impact on forecast profitability, to be an indicator of impairment. As a result, an impairment test was performed which led to the
recognition of EUR 400 million in non-financial asset impairments, of which capitalised software impairments and write-offs of EUR 308
million and EUR 92 million in tangible asset impairments. This impairment reflected recent losses and deterioration in the future
forecasts, substantially relating to prior periods. Refer to Note 1.a for related accounting policies and judgments, Note 6 intangible assets
and Note 7 tangible assets.
Recognition of restructuring costs
In line with the Group's Business Update announced in February 2020, HSBC Continental Europe has initiated its own
transformation programme during the year. In July, a social plan (‘Plan de Sauvegarde pour l’Emploi’) was presented for the GBM
business in France. Its objective is to preserve the bank’s future competitiveness and to focus on our strategic positioning while
reducing the size of the GBM business in France.
In October, a plan was presented to the European Work Council (‘EWC’) focused on the European Economic Area (‘EEA’)
branches of HSBC Continental Europe. The plan foresees increasing client-focused activities within the branches and to deliver a
more efficient operating and booking model, better leveraging HSBC Continental Europe’s wider operating infrastructure and
balance sheet.
Implementation of the plan is undertaken in accordance with the respective legal and social frameworks in each of the countries.
In December, a plan for collective voluntary departure (’Rupture Conventionelle Collective’) was presented focused on the CMB
business and Global Functions and HSBC Operations, Services and Technology. This initiative will enable us to better serve
commercial banking clients while focusing on clients valuing our international network. It will also improve operational efficiency
and simplify processes.
During 2020, HSBC Continental Europe recognised EUR 258 million on termination benefits for restructuring costs relating to
these plans. Refer to Note 14 Provisions.
Derecognition of Deferred Tax Assets (‘DTAs')
be written off and no further net DTA should be recognised. Recognition will be reassessed at each balance sheet date. Refer to Note 30
Tax expense and deferred tax.
Funding through Targeted Long-Term Refinancing Operation (‘TLTROs’)
In June 2020, HSBC Continental Europe repaid EUR 2.6 billion in TLTRO II funding and issued EUR 10.6 billion in TLTRO III funding.
Borrowing rates for TLTRO III are at below-market rates as they are issued at, or below, the deposit facility rate. Borrowing rates in these
operations can be as low as 50 basis points below the average interest rate on the deposit facility rate over the period 24 June 2020 to 23
June 2022, capped at -1 per cent, and as low as the interest rate on the deposit facility during the rest of the life of the respective TLTRO
III, if the entity’s benchmark lending is maintained at a prescribed level over specific periods. During 2020, HSBC Continental Europe
judged there to be reasonable assurance that the conditions attached to TLTRO III will be complied with and that the below market rate
foreseen in the first twelve months will be received.

Granting of Pret Garanti par l’Etat (‘PGE’) loans
In March 2020, the French authorities introduced a state guarantee scheme (Prêt Garanti par l’Etat) under which the French State will
guarantee up to EUR 300 billion of new loans granted to French businesses to help mitigate the economic impact of the Covid-19
pandemic. During 2020, loans granted under this government support scheme in France amounted to EUR 4.4 billion.
Repayments and new issuances
In May 2020, HSBC Continental Europe has issued a subordinated debt of Tier 2 capital for EUR 500 million by issuing a subordinated
loan with a maturity of 10 years subscribed by HSBC Bank plc, recognised as subordinated liabilities.
In December 2020, HSBC Continental Europe repaid three unsecured loans granted by HSBC Bank plc for a total notional amount of EUR
2.3 billion, recognised as deposits by banks and issued five series of senior non preferred notes with maturities ranging from three to
seven years for a total notional amount of EUR 2.3 billion subscribed by HSBC Bank plc, recognised as debt securities in issue.
Regulations and accounting policies adopted in 2020
Following the amendment of Regulation n°2014-07 of 26 November 2014 that took place on 22 December 2020 via Regulation n°2020-10
and the adoption of a voluntary change in accounting policy enabling offsetting, HSBC Continental Europe applied offsetting of EUR 32.3
billion for repurchase and reverse repurchase agreements, EUR 4.6 billion for securities borrowing and EUR 1.7 billion for regulated
savings at 31 December 2020. Refer to Note 1.
1 Principal accounting policies
HSBC Holding plc whose head office is located in London, is responsible for consolidated financial statements. HSBC Continental Europe
is part of it, and is responsible for consolidated financial statements in the France perimeter. The head office of HSBC Continental Europe
is located in Paris. These consolidated financial statements are available on the website ‘www.hsbc.fr’ or ‘www.hsbc.com’.
The financial statements of HSBC Continental Europe are prepared in accordance with Regulations 2014-03 and 2014-07.
Regulations and accounting policies adopted in 2020
On 22 December 2020, the National Standard Setter adopted Regulation n°2020-10 as an amendment to ‘Regulation n°2014-07 of
26 November 2014 relating to the accounts of companies in the banking sector’. Following these amendments, HSBC Continental Europe
has applied offsetting for securities borrowing and regulated saving accounts centralised at the Caisse des Dépôts et Consignations. In
addition, in 2020 HSBC Continental Europe adopted a voluntary change in accounting policy enabling offsetting to be applied where it
has been established that reciprocal obligations are settled on a net basis with the same counterparty, currency and maturity date, and
where agreements are in place for which the right of offset can be exercised.
(a) Initial recognition and subsequent measurement of tangible and intangible assets
HSBC Continental Europe applies the component approach in the recording and amortising of fixed assets.
HSBC Continental Europe complies with ANC Regulation 2014 03 and in particular with articles 214 1 to 214 27 for initial recognition,
amortisation and impairment of tangible assets.
Investment property and operational building
For operating and investment fixed assets, HSBC Continental Europe adopted the components approach with the following minimum cap
on the useful lives and methods of the corresponding components:
Components Periods and depreciation and amortisation methods
Infrastructure
Building 25 and 50 years on a straight-line basis
Civil engineering works 25 years on a straight-line basis
Technical installations
Air conditioning Ventilation Heating 10 years on a straight-line basis
Electrical installations 10 years on a straight-line basis
Telephone and electrical fittings 10 years on a straight-line basis
Security fittings 10 years on a straight-line basis
Fittings
Improvements and internal fittings 10 years on a straight-line basis
Goodwill
Acquired goodwill is subject to impairment on the basis of objective indicators.
Goodwill on merger
The goodwill is affected under the terms provided in accordance with the article 745-6 of regulation 2014-03 to the different concerned
assets, and recorded in the accounts under the rules set down in the article 745-7.
The goodwill is amortised or reported in the income statement, under the same rules and conditions as underlying assets to which it is
assigned. (See Note 6).

Notes on the parent company financial statements
Other fixed assets

For other fixed assets, depreciation periods are determined according to the remaining useful lives of the assets concerned:
Components Periods and depreciation and amortisation methods
Office equipment 5 years, reducing or straight-line basis
Furniture 5 to 10 years, reducing or straight-line basis
IT hardware 3 to 7 years, reducing or straight-line basis
Software 3, 5 or 10 years, straight-line basis
Assets held under finance lease

The assets held under the leasing activity are recognised in accordance with the accounting rules defined by the notice n° 2006-C of 4
October 2016 issued by the Emergencies Committee, linked to the interpretation of the advisory opinion n° 2004-15 du 23 June 2004 of
CNC, relating to the definition, recognition and valuation of assets excluding from individual company accounts lease contracts according
to IAS 17 within the scope of articles 211-1 to 224-4 from the regulation n° 2014 of ANC.
Assets held under leasing activity are amortised by using the straight-line method, over the actual duration of use but not exceeding the
duration of the rental contract.
The amortisation periods are as follows:
• furniture and office equipment: 5 years;
• computer equipment: 3 years;
• tools and equipment: 5 to 7 years.
Depreciation and amortisation of fixed assets leased under finance leases are recognised as an expense on finance lease.
In the financial accounting, the outstanding financial contracts is substituted to the net leased fixed-assets. The difference between the
outstanding amounts of financial assets and the net book value of fixed assets is represented by the gross unearned finance income.
(b) Securities portfolio
Securities transactions are recognised in accordance with the principles set out in articles 2311-1 to 2391-1 of 2014-07 ANC regulation.
Securities are categorised as follows:
• trading account securities;
• available-for-sale securities;
• held-to-maturity securities;
• portfolio activity securities;
• other long-term securities;
• interests in subsidiaries and associates.
Securities are recognised on the balance sheet at the date of settlement.
Trading securities
Trading securities are negotiable securities traded on an active market, originally acquired or sold with the intention of reselling or buying
back within short timescale and are held for market activities or form part of a global portfolio trading management.
On the date of acquisition, Trading securities are stated at cost (including accrued interest for fixed-income securities). At the balance
sheet date, the securities are valued at the market price, and changes in value are recognised through profit or loss.
Available for sale securities
Other investment securities are those securities not treated as trading account securities, neither portfolio activity securities nor as
securities covered by articles 2351-1, 2351-2 and 2351-3 of 2014-07 ANC regulation. These are acquired for the purposes of income and
liable to be resold within a relatively short timescale.
On the date of acquisition, they are recorded at cost price (excluding accrued income for fixed-income securities).
At the closing of the period, available-for-sale securities are valued individually at the lowest of their cost price or market value.
Unrealised losses give rise to the recognition of an impairment.
Investment securities
Fixed-income securities that were acquired for holding long term, and in principle till maturity, are categorised as held-to-maturity
securities.
Portfolio activity securities are recognised on the date of acquisition at their purchase price.
Held-to-maturity securities are valued at historical cost.
Where the acquisition price of fixed income securities is greater than their redemption value, the difference is amortised over the residual
life of the securities.
At the closing date, unrealised losses arising from the difference between the book value, adjusted for amortisation and reversal of
differences described above, and the price of fixed income securities are not subject to the impairment, except if there is a strong
probability that the institution will not keep the securities until the maturity because a number of new circumstances and without

depreciation prejudice to establish in application of the Title 2 terms from the book II of current regulation, dealing with credit risk on
securities, if there is any existence of the issuer’s defaulted risk.
Unrealised gains are not recognised.
Portfolio activity securities
This category covers investments made under normal arrangements with the sole objective of making medium-term capital gains without
intention of investing in the long-term in the business of the issuing entity, nor of taking an active part in the management of its
operations. This is particularly the case for securities held in venture capital businesses.
Portfolio activity securities are recognised individually at the lower of their historical cost or value-in-use, determined with regard to the
issuer’s general prospects and the anticipated holding period.
Other long-term securities
‘Other long-term securities’ are equity shares and similar securities that HSBC Continental Europe intends to hold long term to derive a
satisfactory return within an undefined period of time, without however taking any part in managing the businesses in which the shares
are held, but with the intention of fostering long-term business relationships by creating a special link with the issuing companies. These
securities are recorded individually at the lowest of their acquisition value or their value-in-use.
The methods for assessing value-in-use are explained in next section.
Interests in subsidiaries and associates
The heading ‘Interests in subsidiaries and associates’ regroups securities held long-term (equity interests) and holdings in subsidiaries
(shares in group companies).
Interests in subsidiaries and associates are valued individually at the lowest of their cost and their value-in-use, as determined below.
The assessment of the value-in-use of portfolio activity securities, other long term securities and interests in subsidiaries and associates is
carried out using a comprehensive approach based on the combination of a number of criteria:
• economic and financial assessment of the company based mainly on the value of its revalued net assets;
• market appraisal based on research by financial analysts;
• in the evolution of stock market prices for listed companies and for interests in subsidiaries and associates consideration of the
specific relationships that may exist between HSBC Continental Europe and each of the companies involved.
Recognition of gains and losses
Gains or losses on trading securities are recorded under the heading ‘Dealing profits’.
Gains or losses on sale and changes in impairment of available-for-sale securities are recorded under the heading ‘Gains or losses on
available-for-sale securities’.
Concerning the other securities, gains or losses on sale and impairment charges are recognised under the heading ‘Gains or losses on
disposals of long-term investments’ in the income statement.
Sale and repurchase agreements
Stock lending or temporary acquisition, governed for legal purposes by law no. 93-1444 of 31 December 1993, amended by law no.
2003-1311 of 30 December 2003, referred to as stock repurchase agreements, have no impact on the composition and valuation of the
securities portfolio. For accounting purposes, in accordance with article 2411-1 to 2412-4 of 2014-07 ANC regulation, they are considered
as financing transactions, cash movement balanced entries are recognised either as a loan or a deposit. Related income and expenses
are recognised as interest.
Repurchase and reverse repurchase agreements
Repurchase transactions that do not fall within the scope of law no. 93-1444 are categorised under this heading in the balance sheet.
Their treatment for accounting purposes is similar to that described above for securities under sale and repurchase agreements.
A similar treatment is applied to:
– ‘Buy and sell back’ and ‘Sell and buy back’ transactions.
– Loans/borrowing of securities guaranteed by cash deposits.
In accordance with the voluntary change in accounting policy adopted in 2020, repurchase and reverse repurchase agreements are
presented on a net basis.
Securities lending and borrowing
Securities lending and borrowing transactions are recognised in accordance with the principles set out in the article 2361-2 of 2014-07
ANC regulation.
In accordance with the provisions of Regulation 2020-10, securities borrowed are presented net of the corresponding liabilities.
(c) Loans and advances
Loans assessed individually
Non-performing and impaired loans
Non-performing loans and impaired loans are recorded in accordance with the article 2222-1 of 2014-07 ANC regulation.
Non-performing loans include all types of receivables, including secured receivables (for which the bank held a collateral), for which there
is a risk that the bank will not recover in full or in part the contractual cash flows.

Loans and receivables are classified according to HSBC Continental Europe’s internal loan rating system. Performing loans have a rating
of between 1 and 8, non-performing loans have a rating of 9 and impaired loans, including doubtful loans not yet written off, have a
rating of 10.
The following are therefore classified as non-performing loans:
• receivables overdue for more than three months for all types of loans and equipment leases, more than six months for property loans
or leases and more than nine months for loans to local government bodies;
• receivables having risk criteria;
• receivables deriving from debt restructuring for which the debtor is again in default.
HSBC Continental Europe applies the provisions of articles 2221-2 of 2014-07 ANC regulation on identifying overdrafts at risk of default.
For overdrafts, the overdue period starts when:
• the debtor exceeds an authorised limit that has been notified to him by HSBC Continental Europe; or
• the debtor is notified that the amount outstanding exceeds a limit set up by HSBC Continental Europe under its internal control
system; or
• the debtor withdraws amounts without overdraft authorisation.
The downgrade to non-performing loans immediately leads to all amounts outstanding and commitments for that debtor that are in the
same category, according to contagion principle and, if applicable, the downgrade of counterparties belonging to the same group to non-
performing debtors, on a case-by-case assessment.
In application of the article 2221-8, 2231-3 of 2014-07 ANC regulation on accounting treatment at credit risk, HSBC Continental Europe
has introduced a specific system for dealing with restructured debt and impaired loan.
In application of the articles 2221-8 of 2014-07 ANC regulation, impaired loans are those for which the prospect of recovery is very
remote and for which a write-off is being considered. These include receivables which are long overdue or for which the contract has
been terminated in case of leasing, and also receivables that have been categorised as non-performing for more than one year, unless
final write-off is not being considered because of information on the prospects for recovery available at that stage. Interests on impaired
loans are not recognised through profit or loss until the date of actual payment.
Reclassification into performing loans
In application of the article 2221-5 of the 2014-07 ANC regulation, a loan that has been classified as non-performing may be reclassified
as performing when the original scheduled payments have been resumed without further incident.
In the case of restructured loans, the classification of doubtful exposure can be omitted, if the exposure complies firstly with the previous
condition, and, on the other hand, the counterparty risk is lifted.
Risk mitigation instruments
The bank uses the customary risk mitigation instruments including guarantees and collateral (which is re-measured at least annually
depending on its nature) and, to a minor extent, the purchase of credit default swaps (‘CDS’). In this latter case, the risk mitigation impact
is only recognised if the CDS meets the relevant regulatory conditions for recognition (term, currency, etc.).
Recognition of gains and losses
Charges for impairment against non-performing and impaired loans, included in the calculation of the banking result, are determined
annually on the basis of the non recovery risk assessment by analysing each loan individually. In application of the article 2231-1 of the
2014-07 ANC regulation, impairment of non-performing and impaired loans has been calculated on the basis of the difference between
the net present value of expected future recoveries and the carrying amount of the loan. Impairment may not be less than the amount of
unpaid, recognised interest on the loan.
In the income statement, charges and releases of provisions, losses on irrecoverable receivables and recoveries on amortised receivables
are recognised in the ‘Loan impairment charges’ line.
Loans assessed on a portfolio basis
Non-performing loans are not measured on a portfolio basis. Impairment is assessed individually.
Discount on restructured debt
In application of articles 2221-5 and 2231-3 of the 2014-07 ANC regulation, HSBC Continental Europe applies a specific system for
dealing with restructured debt.
On restructuring, any waived principal and interest, accrued or due, is written off.
Moreover, at the time of restructuring, a discount is provided for on the restructured debt for the difference between the present value of
initially anticipated contractual cash flows and the present value of future cash flows of principal and interest arising from the
restructuring plan. The discount rate used is the original effective interest rate for fixed interest loans, or the most recent effective rate
before the restructuring calculated in accordance with contractual terms for floating-rate loans.
This discount is recognised in the net cost of risk on restructuring and is then written back through net interest income over the
remaining period.
Application of the effective interest rate
All liabilities are recognised at amortised cost. These headings include repurchase transactions. Accrued interest on these liabilities is
recorded in the balance sheet in an accrued interest account.

(d) Due to credit institutions and customer accounts
All liabilities towards banks and customers are recognised at amortised cost. These headings include repurchase transactions. Accrued
interest on these liabilities is recorded in the balance sheet in an accrued interest account.
(e) Debt securities in issue
Debt securities are classified according to their nature: deposit certificates, bonds and similar securities, except subordinated securities,
which are recorded under subordinated debt.
Accrued unpaid interest on these securities is recorded in the balance sheet in an accrued interest account with a corresponding amount
recognised in profit or loss.
Premiums or discounts related to bonds in issue are amortised on an actuarial basis over the life of the bond. Related fees are recognised
over the life of the bond on a straight-line basis.
(f) Provisions
In accordance with the article 3222 of 2014-03 ANC regulation, provisions are registered where it is probable that an outflow of
resources, without an at least equivalent inflow being expected from the beneficiary (whether known or not), will be required to
extinguish a legal or implicit obligation arising from past events and where the amount of the obligation can be reliably estimated.
Retirement and other benefit liabilities
HSBC Continental Europe has opted to adopt ANC recommendation 2013-02 on the rules for recognising and measuring obligations for
retirement and similar benefits.
HSBC Continental Europe provides some of its employees post-employment benefits such as pension plans and end of service benefits.
The costs recognised for funding these defined-benefit plans are determined using the projected unit credit method, with annual actuarial
valuations being performed on each plan.
Actuarial gains or losses are recognised immediately through profit or loss.
The current service costs and any past service costs, together with the expected return on scheme assets less the unwinding of the
discount on the scheme liabilities, are recognised as operating expenses.
The net defined-benefit liability recognised in the balance sheet represents the present value of the defined-benefit obligations adjusted
for unrecognised past service costs and reduced by the fair value of the scheme’s assets. Any resulting asset from this is limited to
unrecognised past service costs plus the present value of available refunds and reductions in future contributions to the plan.
Payments to defined-contribution plans and state-managed retirement benefit plans, where HSBC Continental Europe’s obligations under
the plans are equivalent to a defined-contribution plan, are charged as an expense as they fall due.
Provisions for French PEL and CEL home ownership plans and accounts
Home ownership accounts (‘CEL’) and home ownership plans (‘PEL’) are special financial instruments introduced by law no. 65-554 of
10 July 1965. They combine a savings phase and a lending phase which are inextricably linked, the lending phase being contingent to the
savings phase.
In accordance with articles 2621-1 to 2624-2 of 2014-07 ANC regulation on the accounting treatment of CEL and PEL home ownership
plans and accounts with banks and institutions authorised to receive home ownership funds and to grant home ownership loans, HSBC
Continental Europe has provisioned against the adverse consequences of PEL/CEL commitments in its individual company accounts.
PEL commitments are measured by series, without any offset between series. CEL commitments are considered as one single series,
distinct from the PEL series.
Provisions for the adverse consequences of these commitments are calculated using a model which takes into account:
• an estimate of future customer savings and credit behaviour, based on historical data;
• the value of various market parameters, particularly interest rates and volatility, determined from data available at the date of
assessment.
Provision for share-based payments
HSBC Group share plan
Share-based payments are payments based on shares issued by HSBC Holdings Plc.
HSBC Continental Europe employees have the following advantages:
• From 2006, HSBC Holding Plc implemented share plans on HSBC Holding Plc shares.
• Employees can subscribe to HSBC Holdings Plc shares within the employee share ownership plan.
Shares plan
HSBC Continental Europe grants bonus share plans to these employees for services rendered.
The expense is recognised in the income statement on the period between the granted date and the acquisition date.
The cancellation of expense may result due to the inability to meet acquisition conditions during the period of acquisition.
The amount recorded in the income statement corresponds to the shares finally acquired by the employees.
(g) Foreign exchange position
Foreign currency exchange positions (asset and/or liabilities) are remeasured at the end of period prevailing rate, with the corresponding
gains or losses recognised in the bank operating income or expense.

(h) Forward foreign exchange contracts

Unsettled Forward exchange contracts at the closing of the period hedged by a corresponding spot transactions are valued at the period
end spot rate. Differences between spot and forward rates are recorded on a time-apportioned basis in the income statement. Outright
forward exchange contracts and those hedged by forward instruments are restated at the rate for the remaining period.
(i) Financial derivatives
The HSBC Continental Europe group operates on all financial instruments markets, whether on behalf of its customers or for the
purposes of hedging balance sheet items or for arbitration purposes.
Interest rate and currency options
Options are contracts reached between two parties by which one, the buyer, is granted the right to buy or to sell an actual asset or
another financial instrument called an ‘underlying asset’ at the expiry of a certain time period, at a price agreed at the time the contract
was concluded.
Option contracts result in a premium being paid by the buyer to the seller. HSBC Continental Europe has interest rate and currency
options.
The basic accounting treatment principles for these various products are identical.
On closing out the contract, the notional amount of the ‘underlying asset’, which is the subject of the option, is recorded as an off-
balance sheet item.
For income and expenses, a distinction is made between contracts for hedging, contracts entered into for market operations or for
arbitration purposes:
• the income and expenditure on hedging operations is reported symmetrically to the income and expenditure of the item being hedged;
• for market transactions, the positions are revalued at each period end. For transactions quoted on an organised or similar market
within the meaning of Articles 2511-1 to 2516-1 of Book II – Title 5 – Section 1 relating to the recognition of interest rate futures,
Regulation No. 2014 -07 of the ANC, changes in the value of positions are recognised through profit or loss, either by means of margin
calls, or directly by means of a mathematical calculation where the options are not quoted.
Interest-rate futures (tradable futures)
The accounting treatment is identical to that set out above for options.
Currency swaps and/or interest rates (swaps, FRAs)
Currency and/or interest rate swaps are recognised in accordance with the articles 2521-1 and 2529-1 of the 2014-07 ANC regulation.
The contracts are recorded separately depending whether their purpose is to:
• hold stand-alone open positions to take advantage of any beneficial changes in interest rates;
• hedge, demonstrably from the outset, in accordance with the above-mentioned article 4 of CRBF regulation 88-02 as amended,
interest-rate risk affecting an item or a group of similar items or credit risk in the case of Credit Default Swaps (‘CDS’);
• hedge and manage the entity’s overall interest rate risk on assets, liabilities and off-balance sheet items;
• provide for specialist investment management of trading portfolios (trading business).
On the accounting side, methodology varies depending on whether the transactions are for hedging or trading business purposes.
The results of the hedging of assets or liabilities are recorded pro rata temporis. This is particularly the case for swaps traded as part of
the asset / liability management of overall interest rate risk.
Income on positions managed as part of a trading portfolio of swaps is recognised at market value after a reduction to reflect
counterparty risk and future management expense.
The notionals are recorded as off-balance-sheet items.
Counterparty risk on derivatives
The fair value of contracts has to take into account counterparty risk linked to contracts.
The adjustment to value for counterparty risk is at least equal to the cost in equity determined under the terms of articles 2525-3 of
2014-07 ANC regulation.
(j) Deferred taxation
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the balance sheet and the
amount attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent it is probable that future taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities settled.
(k) Segment reporting
This information is not available on the parent company accounts but details are given on a consolidated basis page 12 and following of
the management report.

2 Loans and advances to banks
Breakdown of outstanding loans by remaining contractual maturity

31 Dec 2020 31 Dec 2019
€m €m
Total after netting of loans and advances centralised at the ‘Caisse des Dépôts et Consignation’ 42,138
Loan and advance centralised at the ‘Caisse des Dépôts et Consignation’ presented net against regulated savings accounts1 1,671
Netting on reverse repurchase agreements1 29,434
Total before netting 73,243 96,318
On demand deposits 27,640 37,876

Term deposits 45,512 58,362
≤ 3 months 37,521 51,753
> 3 months and ≤ 1 year 4,833 3,595
> 1 year and ≤ 5 years 3,001 2,832
> 5 years 157 182
Accrued interests 91 80
Total 73,243 96,318
– of which: securities received under reverse repurchase agreements 39,851 70,809
– of which: subordinated loans 47 49
1 Refer to Note 1. In 2019, EUR 2,182 million in loans and advances centralised at the Caisse des Dépôts et Consignation would have been
presented net against regulated savings accounts and EUR 49,739 million in reverse repurchase agreements would have been presented net.
3 Loans and advances to customers
Breakdown of outstanding loans by type

31 Dec 2020 31 Dec 2019
€m €m
Total 64,100
Netting on reverse repurchase agreements1 2,890
Commercial loans 2,601 2,688

Overdraft 3,067 3,853
Other customer facilities2 61,322 75,553
Total 66,990 82,094
– of which: eligible loans for European Central Bank or Banque de France refinancing 22,952 17,219
– of which: reverse repurchase agreements 13,993 29,736
1 Refer to Note 1. In 2019, EUR 4,852 million in reverse repurchase agreements would have been presented net.
2 This is explained by the decrease in the reverse repurchase activity.
Breakdown of outstanding loans by quality

31 Dec 2020 31 Dec 2019
Impairment on
Non-performing non-performing
Performing loans loans loans Total Total
€m €m €m €m €m
Retail loans 17,716 197 (111) 17,802 17,018
Financial customer loans 2,048 — (8) 2,040 2,789
Non-financial customer loans 32,150 1,434 (519) 33,065 32,457
Reverse repurchase agreements 13,993 — — 13,993 29,736
Accrued interests 88 2 — 90 94
Total 65,995 1,633 (638) 66,990 82,094
– of which subordinated loans — —
– of which gross non-performing loans 1,212 1,198
– of which gross impaired loans 421 454
– of which impairment on gross non-performing loans (341) (275)
– of which impairment on gross impaired loans (297) (294)

Breakdown of outstanding loans by remaining contractual maturity

31 Dec 2020 31 Dec 2019
€m €m
Repayable on demand 3,429 5,247
≤ 3 months 14,666 27,444
> 3 months and ≤ 1 year 12,275 11,434
> 1 year and ≤ 5 years 21,491 22,985
> 5 years 15,120 14,891
Accrued interest 9 93
Total 66,990 82,094
4 Portfolios of trading, available-for-sale securities and held-to-maturity securities
31 Dec 2020 31 Dec 2019

Carrying amount Carrying amount
€m €m
Treasury bills and other eligible bills 24,629 20,574
– Trading account securities 20,491 17,824
– Available-for-sale securities 4,129 2,744
– Held-to-maturity securities — —
– Accrued interest 9 6
– of which: securities borrowed presented net against corresponding liabilities1 3,929
Treasury bills and other eligible bills after netting 20,700

Trading account securities 1,474 3,016
– bonds and other quoted securities 1,474 2,036
– unquoted bonds, interbank market securities and tradable debt securities — —
Available-for-sale securities 3,130 2,036
– quoted bonds 3,098 576
– unquoted bonds, interbank market securities and tradable debt securities 32 6
Held-to-maturity securities 570 570
– quoted bonds 570 570
– unquoted bonds, interbank market securities and tradable debt securities — —
– of which subordinated debt 470 470
– of which: securities borrowed presented net against corresponding liabilities1 763
Debt securities after netting 4,420
Equity shares and similar & portfolio equities 158 244

Trading account securities — —
– quoted shares — —
– unquoted shares and similar — —
Available-for-sale securities — 8
– quoted shares — —
– unquoted shares and similar — 8
Portfolio activity securities 158 236
– quoted portfolio activity shares — —
– unquoted portfolio activity shares 158 236
Total 29,970 26,446
1 Refer to Note 1. In 2019, EUR 3,115 million assets arising from securities borrowing transactions would have been deducted from corresponding
liabilities.
Breakdown by remaining contractual maturity of treasury bills and government bonds

31 Dec 2020 31 Dec 2019
€m €m
Treasury bills and other eligible bills
≤ 3 months 1,032 799
> 3 months and ≤ 1 year 2,448 2,438
> 1 year and ≤ 5 years 5,899 5,981
> 5 years 15,241 11,350
Total 24,629 20,574
Debt securities
≤ 3 months 192 176
> 3 months and ≤ 1 year 426 296
> 1 year and ≤ 5 years 2,812 2,128
> 5 years 1,744 3,022
Total 5,183 5,628

Estimated value of the portfolio of financial investments and portfolio equities
31 Dec 2020 31 Dec 2019
Net carrying Estimated Net carrying Estimated
€m €m €m €m
Treasury bills and other eligible bills 4,129 4,214 2,744 2,809
Debt securities 3,130 3,174 2,036 2,070
Equity shares and similar and other portfolio equities 158 199 244 295
Total available-for-sale and portfolio activity securities (excluding related
receivables) 7,417 7,587 5,024 5,174
The financial investments portfolio is made up mainly of fixed income securities for which the interest-rate risk is usually hedged. The
portfolio valuation rules are given in Note 1b.
Unrealised gains and losses in financial investments and portfolio equities

31 Dec 2020
Before provisions Provisions Net amount
€m €m €m
Unrealised gains in available-for-sale and portfolio equities1 172 — 172
– treasury bills and other eligible bills 86 — 86
– bonds and other fixed-income securities 45 — 45
– equity shares and similar & portfolio equities 41 — 41
Unrealised losses in available-for-sale and portfolio equities1 9 7 2
– treasury bills and other eligible bills 1 — 1
– bonds and other fixed-income securities 1 — 1
– equity shares and similar & portfolio equities 7 7 —
1 Available derivatives of associates represent EUR -73 million.
Additional information on the securities given in compliance with ANC 2014-07 regulation dated
26 November 2014
No held-to-maturity securities have been sold during the period.
The premium (Unamortised difference between the acquisition price and the redemption price of securities) of available-for-sale and held-
to-maturity securities amounted to EUR 76 million in 2020 and to EUR 36 million in 2019.
No security was transferred from one portfolio to another portfolio in 2020 or in 2019.
5 Investments in subsidiaries and equity securities held for long term
31 Dec 2020 31 Dec 2019

Net carrying amount Net carrying amount
€m €m
Interests in subsidiaries and associates 64 73
Listed securities — —
– banks — —
– others — —
Non-listed securities 64 73
– banks 45 45
– others 19 28
Other long-term securities 21 13
– banks — —
– others — —
Non-listed securities 21 13
– banks — —
– others 21 13
Interests in group companies 1,359 1,353
– banks — —
– others — —
Non-listed securities 1,359 1,353
– banks 583 571
– others 776 782
Accrued income —
Total (including the 1976 statutory revaluation) 1,444 1,439

31 Dec 2020 31 Dec 2019

€m €m
Gross amounts at 1 January (excluding advances and accrued income) 1,557 1,661
Changes in the year: —
– acquisitions of securities/share issues 22 4
– disposals/capital reductions (17) (108)
– effect of foreign exchange differences — —
– other movements/merger (1) —
Gross amounts at 31 December (excluding advances and accrued interests) 1,561 1,557
Impairments at 1 January (118) (109)
Changes in the year: —
– new allowances (9) (16)
– release of allowances no longer required 10 7
– other movements — —
– effect of foreign exchange differences — —
Impairment at 31 December (117) (118)
Accrued income — —
Net book value including accrued interests 1,444 1,439
6 Intangible assets
31 Dec 2020 31 Dec 2019

€m €m
Gross amounts at 1 Jan 662 467
Changes in the year: — —
– transfers and other movements 1 13
– fixed asset acquisitions 34 183
– fixed asset disposals and other changes1 (165) (1)
Gross amounts value at 31 Dec 532 662
Amortisation at 1 January 315 187
– charges for the period for amortisation and impairment2 333 128
– transfers and other movements — —
– fixed asset disposals and other changes1 (158) —
Amortisation at 31 Dec 490 315
Net book value of fixed assets at 31 Dec 42 347
1 Mainly due to software's write off

2 Include exceptional software write-off of EUR 155 million and impairment of software and other intangible assets for EUR 153 million.
Since 1 January 2016 and according to 2015-06 ANC new regulation of 23 November 2015 which modifies 2014-03 ANC regulation, the
goodwill is recognised in a specific account in the relevant asset category after its affectation (art 745-6). The amortisation method and
period are the same as those applied to amortised assets it is linked to (art 745-7).
Goodwill is impaired when the current value of one or more underlying assets, to which a portion of it was affected, is lower than the
carrying amount of the asset(s) plus the attributed goodwill. The current value is the higher of the market value and the value-in-use (see
articles 214-1 to 214-27 of 2015-06 ANC regulation).
Goodwill allocation of assets

Gross amounts at Carrying amounts
1 Jan 2020 Increases Decreases at 31 Dec 2020
€m €m €m €m
Intangible assets 27.3 — 27.3 —
Tangible assets 5.1 — 0.5 4.6
Financial assets 0.2 — — 0.2
Total 32.6 — 27.8 4.8

7 Tangible assets
31 Dec 2020 31 Dec 2019

€m €m
Gross amounts at 1 Jan 786 751
– transfers and other movements — (12)
– fixed asset acquisitions 51 60
– fixed asset disposals and other changes (73) (13)
Carrying amount at 31 Dec 764 786
Depreciation at 1 January 605 554

– charges for the period for depreciation and impairment2 150 62
– transfers and other movements — —
– fixed asset disposals and other changes1 (70) (11)
Depreciation at 31 December 685 605
1 Of which exit of previous headquarters place for EUR 46 million.

2 Of which impairment for EUR 92 million.
Breakdown of tangible fixed assets by type

31 Dec 2020 31 Dec 2019
€m €m
Operating land and buildings 34 37
Non-operating land and buildings 1 1
Other tangible assets 44 143
Finance lease
31 Dec 2020 31 Dec 2019
€m €m
Assets under construction 3 3
Gross amount1 926 945
Amortisation (481) (427)
Accrued interests — 1
Total 448 522
1 Main assets in 2020: road assets for EUR 348 million, public building and construction for EUR 104 million, IT Office for EUR 175 million.
At 31 December 2020, the financial outstanding amounts to EUR 476 million (EUR 506 million in 2019) and the provision for negative
unearned finance income before deferred tax to EUR 33 million (EUR 52 million in 2019).
8 Loan impairment
Unused
Balance at Amounts amounts Other Balance at
1 Jan 2020 Additions utilised reversed movements 31 Dec 2020
€m €m €m €m €m €m
Impairment on interbank and customer non-performing loans
(excluding doubtful interest) 570 247 (50) (125) (4) 638
Impairment on securities — — — — — —
Provisions for loans commitments 38 36 — (19) (11) 44
Total of impairment and provisions
recognised in cost of risk 608 283 (50) (144) (15) 682
Loan impairment charges

31 Dec 2020 31 Dec 2019
€m €m
Net impairment charge for the period:
– interbank and customer non-performing and impaired receivables (excluding doubtful interest) (195) (119)
– counterparty risk on securities — —
– Loan commitments (18) (16)
– recoveries of amounts previously written off 2 2
Total loan impairment charges (211) (133)
– of which:
unprovided losses on non-performing and impaired receivables (73) (11)
unprovided losses on loan commitments — —
losses hedged by provisions. (50) (83)

9 Other assets
31 Dec 2020 31 Dec 2019

€m €m
Securities transactions settlement accounts 1,881 918
Sundry debtors and other receivables 31,380 25,283
Total 33,261 26,201
10 Prepayments and accrued income
31 Dec 2020 31 Dec 2019

€m €m
Items in course of collection from other banks 128 157
Other assets1 54,006 42,371
Total 54,134 42,528
1 Including mark-to-market on derivatives instruments for EUR 53,173 million in 2020, and 41,250 millions EUR in 2019.
11 Deposit by banks
Deposits by banks
31 Dec 2020 31 Dec 2019
€m €m
Total 28,896
Netting on repurchase agreements1 29,434 —

≤3 months 34,833 46,575
>3 months and ≤ 1 year 2,813 3,500
>1 year and ≤5 years 14,114 5,650
>5 years — 1,250
Total 58,330 82,458
– of which: repurchase agreements 37,281 65,323
1 Refer to Note 1. In 2019, EUR 49,739 million in repurchase agreements would have been presented net.
12 Customer accounts
Breakdown of customer credit balances by type of deposit

31 Dec 2020 31 Dec 2019
€m €m
Total after netting of loans and advances centralised at the ‘Caisse des Dépôts et Consignation’ 63,319
Loan and advance centralised at the ‘Caisse des Dépôts et Consignation’ presented net against regulated savings accounts1 1,671
Netting on repurcahse agreements1 2,890

Special demand accounts 7,999 7,818
Special term accounts 720 722
Term accounts 13,236 11,289
Total customer deposits (excluding repurchase agreements) 61,842 57,966
Total customer credit balance accounts 67,880 67,474
1 Refer to Note 1. In 2019, EUR 2,182 million in loans and advances centralised at the Caisse des Dépôts et Consignation would have been
presented net against regulated savings accounts and EUR 4,852 million in repurchase agreements would have been presented net.

Breakdown of customer credit balances by remaining contractual maturities
31 Dec 2020 31 Dec 2019
€m €m
≤3 months 18,082 18,717
>3 months and ≤1 year 1,601 153,619
>1 year and ≤5 years 225 223
>5 years 57 58
Total 67,880 67,474
13 Debt securities in issue
31 Dec 2020 31 Dec 2019

€m €m
Certificates of deposit (including accrued interest) — —
Interbank market securities and tradable debt securities 7,838 16,110
Bonds 9,460 8,660
Total 17,319 24,805
Breakdown of debt securities by maturity

31 Dec 2020 31 Dec 2019
€m €m
≤3 months 52 1,820
>3 months and ≤1 year 3,317 9,611
>1 year and ≤5 years 5,918 5,872
>5 years 8,011 7,467
Total 17,319 24,805
Issuance premium to be amortised is EUR 9.8 million at 31 December 2020 compared to EUR 13 million at 31 December 2019.
14 Provisions
Unused
Balance at Amounts amounts Other Balance at
1
1 Jan 2020 Additions utilised reversed movements 31 Dec 2020
€m €m €m €m €m €m
Provisions for commitments by signature and disputes 76 36 (2) (20) (12) 78
Other provisions 324 298 (92) (17) 2 515
Total 400 334 (94) (37) (10) 593
1 Primarily provisions on restructuring plans. See '2020 Highlights'.
Provision on PEL/CEL
31 Dec 2020
PEL
> 4 years and
≤ 4 years ≤ 10 years > 10 years Total CEL
€m €m €m €m €m
Amounts collected 19 277 390 686 88
Outstandings collected — — — — —
Provisions — — (6) (6) —
Allocation to provisions/reversal — — — — —
15 Other liabilities
31 Dec 2020 31 Dec 2019

€m €m
Total after stock borrowing deduction 53,455 82,458
Assets arising from securities borrowing transactions deducted from corresponding liabilities1 4,692 —
Securities transactions settlement accounts 279 557

Sundry creditors2 17,137 11,963
Short position and securities received under repurchase agreements confirmed resold 40,731 41,569
Total 58,147 54,089
1 Refer to Note 1. In 2019, EUR 3,115 million assets arising from securities borrowing transactions would have been deducted from corresponding
liabilities.
2 Of which deposits on derivatives received in 2020: EUR 16,283 million and EUR 11,610 million in 2019.

16 Accruals and deferred income
31 Dec 2020 31 Dec 2019

€m €m
Items in course of collection to other banks 111 110
Other liabilities1 53,593 42,383
Total 53,704 42,493
1 Including mark-to-market on derivatives instruments: EUR 52,474 million in 2020 and EUR 41,270 million in 2019.
17 Subordinated debt
Subordinated debts are dated or undated, loans or securities, for which repayment is subordinated to other creditors in case of
liquidation.
Accrued interest, if any, on these subordinated securities is recognised in the balance sheet in an accrued interest account with a
corresponding amount recognised in profit and loss.
31 Dec 2020 31 Dec 2019
€m €m
Subordinated notes — —
Undated subordinated notes 16 16
Subordinated debts 2,610 2,110
Total 2,629 2,128
Securities issued by HSBC Continental Europe

Subordinated securities issued by HSBC Continental Europe, in euros and other currencies, are liabilities which will only be repaid, in the
event of liquidation, after the interests of other creditors have been extinguished but before repayment of the holders of participating
securities or equity.
Participating securities: undated subordinated securities

31 Dec 2020 31 Dec 2019
Date of issue Date of maturity Interest type Currency of issue €m €m
Undated subordinated securities 22.07.1985 TMO - 0,25 FRF 16 16
Accrued interest — —
Total (including accrued interest) 16 16
Participating securities are refunded at a price equal to the par only in the case of the liquidation of the company.
Subordinated debts
Date of Currency of 31 Dec 2020 31 Dec 2019
Date of issue maturity Interest type issue €m €m
Subordinated debts1 22.12.2014 22.12.2029 Floating rate EUR 260 260
Fixed rate as defined
Undated debts2 26.05.2017 perpetual on the contract EUR 200 200
Fixed rate as defined
28.03.2018 perpetual on the contract EUR 300 300
16.12.2019 perpetual Floating rate EUR 250 250
Subordinated debts3 26.05.2017 26.05.2027 Floating rate EUR 300 300
21.06.2018 21.06.2028 Floating rate EUR 300 300
22.05.2020 22.05.2030 Taux variable EUR 500 —
Total for securities issued by HSBC Continental Europe (including accrued interest) 2,612 2,112
1 A total or a part refund will be possible from December 2024. The subordinated liabilities conversion in equity or in debt is not possible.
2 Tier 1: A total or a part refund (Additional Tier 1) will be possible, under certain conditions, from the 26th of May 2022. The conversion in capital of
these shares will be possible under certain conditions.
3 Tier 2: A total or a part refund (Tier 2) will be possible, under certain conditions, from the 26th of May 2022. The subordinated liabilities conversion
in equity or in debt is not possible.

18 Called up share capital
31 Dec 2020 31 Dec 2019

Total (in thousands Total (in thousands
(shares with a nominal value of 5 euros) Number of shares of euros) Number of shares of euros)
At 1 Jan 98,231,196 491,156 73,316,988 366,585
– subscription options exercised — — — —
– new capital issued − merger — — 24,914,208 124,571
– reduction of capital — — — —
At 31 Dec 98,231,196 491,156 98,231,196 491,156
Voting rights
At 31 December 2020, the total of voting rights stood at 98,231,196.
19 Equity
31 Dec 2020 31 Dec 2019

€m €m
Called-up share capital 491 491
Share premium account 2,155 2,158
Reserves 1,041 1,041
– legal reserve 38 38
– long-term gains reserve 406 406
– revaluation reserve 3 3
– extraordinary and other reserve 305 305
– free reserve 294 294
– revaluation reserve on past service costs (5) (5)
Retained earnings1 3,185 3,330
Interim dividend — —
Special tax-allowable reserves — —
Net profit for the year (906) (147)
Equity 5,966 6,873
1 Before proposed appropriation submitted to HSBC Continental Europe Annual General Meeting's approval.
Changes in equity in 2020

2020
€m
Balance at 1 Jan 6,873
Net profit for the year (906)
New shares issued upon exercise of stock options —
Capital increase —
Interim dividend —
Others (1)
Balance at 31 Dec 5,966
Legal reserve
This reserve is built up by appropriating at least one-twentieth of the year’s profit. This appropriation ceases to be mandatory once this
reserve reaches one-tenth of share capital. It is not distributable.
Net long-term gains reserve
Distributing this reserve would lead to an additional tax charge equal to the difference between standard tax rate and reduced tax rate.
Revaluation reserve (1976 revaluation)
This reserve could be incorporated into capital, but it cannot be distributed or used to offset losses.
Other reserves
Amounts put into reserves over five years ago would be subject to a levy if they were to be distributed.
For distributions paid on or after 1 January 2000, HSBC Continental Europe can charge the dividends against profits liable to corporate
income tax for accounting periods ended at most five years ago, starting with the oldest, in application of the decree of 21 December
1999.
20 Pensions, post-employment benefits
31 Dec 2020 31 Dec 2019

€m €m
Provision for employee-related commitments1 158 171
1 Including defined benefits pension plans for Executive Board for EUR 5.1 million in 2020 and for EUR 4.9 million in 2019.

Principal actuarial assumptions of the post-employment defined benefit plans

The principal actuarial financial assumptions used to calculate the defined benefit pension plans at 31 December 2020, and the 2020
periodic costs, were:
Rate of increase
for pensions in
payment and Rate of pay
(in %) Discount rate Inflation rate deferred pensions increase
At 31 Dec 2020 0.4 1.50 0.40 2.57
At 31 Dec 2019 0.65 1.50 1.50 2.61
HSBC Continental Europe determines discount rates in consultation with its actuaries based on the current average yield of high quality
(AA-rated) debt instruments, with maturities consistent with that of the defined benefit obligation.
Provision recognised
31 Dec 2020 31 Dec 2019
€m €m
Present value of benefit obligations 163 178
Fair value of plan assets (6) (7)
Net liability recognised 158 171
The components of the table below have been recognised in on profit & loss.
Net asset/(liability) under defined benefit pension plans

Fair value of plan Present value of defined Net benefit asset/
assets benefit obligations liability
€m €m €m
Net defined benefit liability at 1 January 2020 7 178 171
Current service cost — 7 7
Net interest (income)/cost on the net defined benefit liability — 2 2
Remeasurement effects recognised in other comprehensive income1 — (16) (16)
At 31 Dec 2020 6 163 158
1 Includes curtailment effect of EUR (21) million in 2020 linked to restructuring plans and EUR 5 million due to the change in actualisation rate and
social charges rate.
Fair value of plan assets by asset classes

31 Dec 2020
Quoted market price No quoted market
Fair value in active market price in active market Thereof HSBC
€m €m €m €m
Fair value of plan assets 6 6 — —
– equities — — — —
– bonds 6 6 — —
– property — — — —
– derivatives — — — —
– other — — — —
21 Off-balance sheet items
31 Dec 2020 31 Dec 2019

€m €m
A – Loan commitments
Commitments given 47,223 40,093
Refinancing agreements and other financing commitments in favour of banks 2,544 2,223
In favour of customers 44,679 37,870
– confirmed credit facilities1 44,594 37,841
– acceptances payable and similar instruments 85 29
Commitments received 3,324 5,479
Refinancing agreements and other financing commitments in favour of banks 3,324 5,479
B – Guarantee commitments
Commitments given 9,695 10,398
– guarantees, acceptances and other securities to banks 2,603 2,674
– guarantees, acceptances and other securities to customers 7,093 7,724
Commitments received 17,931 16,692
– guarantees, acceptances and other security from banks 17,931 16,692
1 Primarily new commitments for customers transferred from HSBC Bank plc to HSBC Continental Europe during 2020.

Other pledged assets
31 Dec 2020
€m
Covered bonds 4,000
Loans pledged on guarantee 3G and TRICP 3,029
Loans pledged on guarantee CCBM 17,085
Securities pledged on guarantee 3,170
Total 27,284
22 Derivatives
31 Dec 2020 31 Dec 2019

Hedging Trading Hedging Trading
Fair value contracts1 contracts1 Total1 Fair value contracts1 contracts1 Total1
€bn €bn €bn €bn €bn €bn €bn €bn
Unconditional transactions (1.1) 29 3,634 3,663 (1.3) 35 3,277 3,312
Exchange traded — — 89 89 — — 122 122
– interest rate — — 82 82 — — 115 115
– exchange rate — — — — — — — —
– equity — — 7 7 — — 7 7
Non-exchange traded (1.1) 29 3,545 3,574 (1.3) 35 3,155 3,190
– futures — — 294 294 — — 208 208
– interest rate (0.6) 29 2,712 2,741 (1.3) 35 2,515 2,550
– exchange rate (0.1) — 90 90 0.1 — 93 93
– other contracts (0.4) — 449 449 (0.1) — 339 339
Conditional transactions (0.6) — 723 723 (0.3) 11 902 913
Exchange traded — — 104 104 — — 147 147
Interest rate — — 49 49 — — 72 72
Exchange rate — — 50 50 — — 54 54
Other contracts — — 5 5 — — 21 21
Non-exchange traded (0.6) — 619 619 (0.3) 11 755 766
Caps and floors (0.1) — 229 229 (0.2) — 277 277
Swaptions and options (0.5) — 390 390 (0.2) 11 479 490
– bought (0.5) — 25 25 — 5 26 31
– sold — — 365 365 (0.2) 6 453 459
Total derivatives (1.7) 29 4,357 4,386 (1.6) 46 4,179 4,225
1 Notional contract amounts.
Other information on derivatives

31 Dec 2020 31 Dec 2019
Notional contract amounts €bn €bn
Microhedge contract1 22 30
Macrohedge contract2 7 5
Trading 2,712 2,515
Other — —
1 Interest rate swaps accounted for as micro-hedging are used to hedge interest and currency rate risk of an asset or a liability at the beginning of
the transaction.
2 Interest rate swaps accounted for as macro-hedging are used to hedge and to manage the global interest rate risk of portfolio of assets and
liabilities of the bank.
Derivatives: maturity analysis

31 Dec 2020
≤ 1 year >1 year and ≤ 5 years > 5 years Total
(in billion euro) €bn €bn €bn €bn
Derivatives:
– Exchange contracts 20 47 24 91
– Interest rate contracts 1,329 1,376 1,119 3,824
– Others 433 35 3 471
Total 1,782 1,458 1,146 4,386

Risk-weighted assets – Amount of Exposure At Default (’EAD‘) for derivatives contracts

31 Dec 2020 31 Dec 2019
€m €m
A – Contracts concluded under Master agreement with close-out netting 11,747 11,199
1. Transactions with banks from OECD countries 11,587 11,080
2. Transactions with customers and banks localised outside OECD countries 160 119
B – Other contracts 331 735
1. Transactions with banks from OECD countries 320 725
– interest rate contracts 195 642
– exchange contracts 108 74
– equity derivatives contracts 17 9
– credit derivatives contracts — —
– commodities contracts — —
2. Transactions with customers and banks localised outside OECD countries 11 10
– interest rate contracts 2 2
– exchange contracts 9 8
– equity derivatives contracts — —
Total Exposure at Default 12,078 11,933
Corresponding risk-weighted assets (‘RWA’) 3,078 2,709
Clearing effect on Exposure at Default

31 Dec 2020 31 Dec 2019
€m €m
Original exposure before credit risk mitigation (including close-out netting) 86,613 75,514
Exposure mitigation due to close-out netting (73,243) (62,548)
Exposure mitigation due to credit mitigation (1,292) (1,032)
Exposure value after credit risk mitigation 12,078 11,933
Modification made to the data published at the end of 2019 to correct the allocation of our credit risk equivalents on derivative products
linked to collateral posted to our counterparties. These credit risk equivalents are indeed part of contracts negotiated within the
framework agreement and benefit from a compensation effect (Section A). They were incorrectly reported under ‘Other contracts’ –
Heading B on the 2019 note.
23 Net interest income
31 Dec 2020 31 Dec 2019

€m €m
Interest and similar income
Banks and financial institutions 537 531
Customers 1,069 1,111
Bonds and other fixed-income securities 329 347
Total 1,935 1,989
Interest and similar expenses
Banks and financial institutions 745 652
Customers 276 264
Subordinated liabilities 55 41
Other bonds and fixed-income securities 324 365
Total 1,400 1,321
24 Income on securities portfolio
31 Dec 2020 31 Dec 2019

€m €m
Income
Available-for-sale and similar & portfolio activity securities 2 9
Interests in subsidiaries and associates and other long-term securities — —
Interests in group companies 24 41
Total 26 50

25 Net fee income
31 Dec 2020 31 Dec 2019

€m €m
Fees
Income 993 952
On transactions with banks 34 27
On transactions with customers 95 98
On foreign exchange transactions 1 1
On primary securities market activities 125 98
On provision of services for third parties 543 553
On commitments 152 131
Other commission 43 44
Expenses (205) (239)
On transactions with banks (31) (18)
On corporate actions (49) (60)
On forward financial instrument activities (6) (8)
On provision of services for third parties (110) (141)
On commitments (1) (3)
Other commission (8) (9)
Total fees 788 713
26 Gains and losses on portfolio business transactions
31 Dec 2020 31 Dec 2019

€m €m
Gains or losses
Trading securities (317) (358)
Foreign exchange transactions 220 131
Other derivatives 284 468
Total 188 241
27 Gains or losses on available-for-sale securities
31 Dec 2020 31 Dec 2019

€m €m
Results for available-for-sale securities
Gains or losses 49 44
Impairment 12 (7)
– charges — (9)
– releases 12 2
Results for portfolio activity securities
Gains or losses 27 5
Impairment 8 (3)
– charges (2) (3)
– releases 10 —
Total1 96 39
1 Refer to Note 4.
28 General operating expenses
31 Dec 2020 31 Dec 2019

€m €m
Employee compensation and benefits
Salaries and wages, social security, taxes and levies on compensation (857) (847)
Pension expense (98) (98)
Profit sharing — 1
Incentive plan — 1
Employee compensation and benefits subtotal (955) (943)
Other administrative expenses1 (1,052) (760)
Total operating expenses (2,007) (1,703)
1 Includes termination benefits arising from restructuring plans. Refer to '2020 Highlights'.
Share award plans

At 31 December 2020, allowance stood at EUR 7.5 million.

29 Gains or losses on disposals of fixed assets
31 Dec 2020 31 Dec 2019

€m €m
Gains or losses on held-to-maturity securities — —
Gains or losses on tangible and intangible fixed assets 2 2
Gains or losses on investments in subsidiaries and associates, long-term securities and other group companies1 71 (10)
Total 73 (8)
1 Includes gain on sale of Visa shares of EUR 65 million.
30 Tax expense and deferred tax
31 Dec 2020 31 Dec 2019

€m €m
Current tax
At standard rate (9) 30
At reduced rate — —
Deferred taxation (102) 33
Total (111) 63
Deferred tax is calculated according to the principles set out in Note 1.

The rates used for calculating taxes are:
Echéance 2021 Echéance 2020 Echéance 2019
% % %
Standard rate 31.00 33.33 33.33
Reduced rate (PVLT gains rate) 3.7 4.0 4.0
Reduced rate (gains on disposal of property to SIIC) 19.0 19.0 19.0
Reduced rate (common funds on risk placement) 15.0 15.0 15.0
Tax contribution
CSB 3.3 3.3 3.3
Exceptional contribution — — —
Deferred taxation
Standard rate on DT if assumption of recovery on 2020 N/A N/A 31.00
Standard rate on DT if assumption of recovery on 2021 N/A 31.00 28.00
Standard rate on DT if assumption of recovery on 2022 27.50 27.50 26.50
Standard rate on DT from 2023 25.00 25.00 25.00
Reduced rate on DT if assumption of recovery on 2020 N/A N/A 3.72
Reduced rate on DT if assumption of recovery on 2021 N/A 3.7 3.4
Reduced rate on DT if assumption of recovery on 2022 3.3 3.3 3.2
Reduced rate on DT from 2023 3.0 3.0 3.0
To which are added the applicable tax contributions

At the end of December 2020, the deferred taxes were recorded on taxation gaps generated by temporary differences.
The deferred tax rate at 27.5 % or 25 % (more CSB) is applicable according to the assumptions of recovery of these deferred taxes.
As the recoverability of deferred tax assets was uncertain, an amount of EUR 306 million of deferred tax assets was not recorded at
31/12/2020.
Tax group
Since 2001, the parent company of the tax group has been HSBC Bank plc Paris branch.
In 2020, tax benefits allowed by HSBC Bank plc to the HSBC Continental Europe group amounted to EUR 28.5 million. The proportion of
benefits passed on to HSBC Continental Europe was EUR 28.5 million.
In 2019, tax benefits allowed by HSBC Bank plc to the HSBC Continental Europe group amounted to EUR 53.9 million. The proportion of
benefits passed on to HSBC Continental Europe was EUR 53.9 million.
Deferred tax in the balance sheet
The net deferred tax receivable recognised in the balance sheet at 31 December 2020 was EUR 16 million compared with EUR 119
million at 31 December 2019.
At 31 December 2020 this receivable is made up of deferred tax assets of EUR 49 million against EUR 152 million at 31 December 2019
and a deferred tax liability of EUR 34 million compared with EUR 33 million at 31 December 2019.

31 Legal proceedings and regulatory matters relating to HSBC Group entities generally
HSBC group entities, including HSBC Continental Europe entities, are party to various significant legal proceedings and regulatory
matters arising out of their normal business operations. Apart from the matters described below and in the section 2.19a Legal Risks and
Litigation management of the 2020 Registration Document, HSBC Continental Europe considers that none of these matters is significant.
HSBC Continental Europe recognises a provision for a liability in relation to these matters when it is probable that an outflow of economic
benefits will be required to settle an obligation which has arisen as a result of past events, and for which a reliable estimate can be made
of the amount of the obligation. Any provision recognised does not constitute an admission of wrongdoing or legal liability. While the
outcome of these matters is inherently uncertain, management believes that, based on the information available to it, appropriate
provisions, as necessary, have been made in respect of such legal proceedings as at 31 December 2020.
Anti-money laundering and sanctions-related matters
In December 2012, among other agreements, HSBC Holdings agreed to an undertaking with the UK Financial Services Authority which
was replaced by a Direction issued by the UK Financial Conduct Authority ('FCA') in 2013, and again in July 2020, and consented to a
cease-and-desist order with the Federal Reserve Board (‘FRB’), both of which contained certain forward-looking anti-money laundering
(‘AML’) and sanctions-related obligations. HSBC also agreed to retain an independent compliance monitor (who is, for FCA purposes, a
‘Skilled Person’ under section 166 of the Financial Services and Markets Act, and for FRB purposes, an ‘Independent Consultant’) to
produce periodic assessments of the Group’s AML and sanctions compliance programme (the ‘Skilled Person/ Independent Consultant’).
In December 2012, HSBC Holdings, entered into an agreement with the office of Foreign Assets Control ('OFAC') regarding historical
transactions involving parties subject to OFAC sanctions.
HSBC’s engagement with the Skilled Person appointed pursuant to the 2013 Direction was terminated in February 2020 and a new
Skilled Person with a narrower mandate has been appointed to assess the remaining areas that require further work in order for HSBC to
transition fully to business-as-usual financial crime risk management. A new Independent Consultant is also being appointed to continue
to carry out an annual OFAC compliance review at the FRB’s discretion.
Bernard L. Madoff Investment Securities LLC
Bernard L. Madoff (‘Madoff’) was arrested in December 2008 in the United States and later pleaded guilty to running a Ponzi scheme. His
firm, Bernard L. Madoff Investment Securities LLC (‘Madoff Securities’), is being liquidated in the US by a trustee (the ‘Trustee’).Various
non-US HSBC companies provided custodial, administration and similar services to a number of funds incorporated outside the US
whose assets were invested with Madoff Securities.
Various HSBC companies have been named as defendants in lawsuits arising out of Madoff Securities' fraud, amongst which are HSBC
Institutional Trust Services (Ireland) DAC and/or its subsidiary Somers Dublin DAC.
On 1 August 2018 HSBC Continental Europe acquired from HSBC Bank plc 100 per cent of the shares of HTIE. Pursuant to the terms of
the Sale and Purchase Agreement, HSBC Continental Europe and/or its subsidiaries will be indemnified by HSBC Bank plc in respect of
certain liabilities relating to the activities and/or Somers Dublin DAC prior to the acquisition of HTIE (newly HSBC Continental Europe
Dublin Branch).
The Madoff-related proceedings that HTIE and/or Somers Dublin DAC are involved in are described below:
Defender case:
In November 2013, Defender Limited brought an action against HTIE and others, based on allegations of breach of contract and claiming
damages and indemnification for fund losses. The trial commenced in October 2018. In December 2018, the Irish Court issued a
judgement in HTIE’s favour on a preliminary issue, holding that Defender Limited had no effective claim against HTIE. This judgement
concluded the trial without further issues in dispute being heard. In February 2019, Defender Limited appealed the judgement. In July
2020, the Irish Supreme Court ruled in part in favour of Defender Limited and returned the case to the High Court for further proceedings,
which will resume in April 2021.
US litigation:
The Trustee has brought lawsuits against various HSBC companies and others in the US Bankruptcy Court for the Southern District of
New York (the ‘US Bankruptcy Court‘), seeking recovery of transfers from Madoff Securities to HSBC in an amount not yet pleaded or
determined. HSBC and other parties to the actions have moved to dismiss the Trustee’s claims. The US Bankruptcy Court granted
HSBC’s motion to dismiss with respect to certain of the Trustee’s claims in November 2016. In February 2019, the US Court of Appeals
for the Second Circuit (the ’Second Circuit Court of Appeals’) reversed that dismissal. Following the US Supreme Court’s denial of
certiorari in June 2020, the cases were remanded to the US Bankruptcy Court, where they are now pending.

European interbank offered rates investigations

Various regulators and competition and law enforcement authorities around the world including in the United Kingdom (UK), the United
States of America (’US‘), the European Union, Italy are conducting investigations and reviews related to certain past submissions made
by panel banks and the processes for making submissions in connection with the setting of European interbank offered rates (’Euribor’).
HSBC and/or its subsidiaries (including HSBC Continental Europe as a member of the Euribor panel) have been the subject of regulatory
demands for information and are cooperating with those investigations and reviews.
In December 2016, the European Commission (the ‘Commission‘) issued a decision finding that HSBC, among other banks, engaged in
anticompetitive practices in connection with the pricing of euro interest rate derivatives in early 2007. The Commission imposed a fine
against HSBC based on a one-month infringement, which has been paid by HSBC Continental Europe. HSBC appealed the decision and,
in September 2019, the General Court of the European Union (the ‘General Court’) issued a decision largely upholding the EC’s findings
on liability, but annulling the fine. HSBC and the EC have appealed the General Court's decision.
Foreign exchange rate investigations and litigation
Various regulators and competition authorities around the world, including in the EU and South Africa, are conducting investigations and
reviews into trading by HSBC and others on the foreign exchange markets. HSBC is cooperating with these investigations and reviews. In
January 2021, HSBC Holdings exited its three-year deferred prosecution agreement with the Criminal Division of the DoJ (the ‘FX DPA’),
regarding fraudulent conduct in connection with two particular transactions in 2010 and 2011. HSBC holdings entered into the FX DPA in
January 2018, following the conclusion of the DoJ’s investigation into HSBC’s historical foreign exchange activities.
32 Presence in non-cooperative States or territories
HSBC Continental Europe does not hold any direct or indirect presence in any non-cooperative States or territories in accordance with the
article 238-0 A of the General Tax Code.
33 Events after the balance sheet date
There was no material event subsequent to the reporting date that would require a correction or adjustment to the statutory financial
statements as at 31 December 2020.

34 Other information
34.1 Interests in subsidiaries and related parties at 31 December 2020

Dividends
Reserves + Guaran- received
retained Book value Loans and tees by HSBC
earnings of securities held advances given by Last Continent
before granted by HSBC year’s al Europe
appropria- HSBC Continen Last net in the last
(in thousands of euros unless Legal Share tion of net Ownership Continental tal year’s profit financial
otherwise stated) status Business capital profit interest % Cost Net Europe Europe sales or loss year
A – Information on companies whose book value at cost exceeds 1% of HSBC Continental Europe’s share capital
1 – Subsidiaries (over 50%)
HSBC SFH (France)
(ex–HSBC Covered Bonds),
Immeuble Coeur Défense –110
esplanade du Général de Limited
Gaulle – 92400 Courbevoie company Financial
(France) (SA) company 113,250 558 100.00 113,239 113,239 — — 55,408 387 831
HSBC Factoring (France)
38, avenue Kléber – 75116 Limited
Paris company
(France) (SA) Factoring 9,240 112,866 100.00 39,236 39,236 1,518,394 — 37,879 15,729 —
Société Française et Suisse, Limited
38, avenue Kléber – 75116 company Investment
Paris (France) (SA) company 599 8,897 100.00 60,384 9,738 — — — (4) —
Limited
SAPC UFIPRO Recouvrement liability Dept
38, avenue Kléber – 75116 company collecting
Paris (France) (SARL) company 7,619 1,582 99.98 16,262 9,197 — — — (5) —
HSBC Epargne Entreprise

(France), Immeuble Coeur
Défense–110 esplanade du Limited Limited
Général de Gaulle – 92400 company company
Courbevoie (France) (SA) (SA) 31,000 796 100.00 30,148 27,956 — — 5,350 (4,381) —
HSBC Global Asset
Management (France)
Immeuble Coeur Défense–110
esplanade du Général de Limited
Gaulle – 92400 Courbevoie company Asset
(France) (SA) managemet 8,050 42,530 93.67 134,546 134,546 460 — 168,697 16,819 17,910
HSBC Services (France)
(ex – HSBC Securities) Limited
38, avenue Kléber – 75116 company Commercial
Paris (France) (SA) company 2,442 532 100.00 36,877 2,967 — — — (11) —
Valeurs Mobilières Elysées (ex Limited Limited
– Nobel), 38, avenue Kléber – company company
75116 Paris (France) (SA) (SA) 41,920 8,220 100.00 67,757 51,277 — — — (623) —
Simplified
HSBC Leasing (France) joint-stock
38, avenue Kléber – 75116 company
Paris (France) (SAS) Leasing 168,528 173,122 100.00 281,756 281,756 223,011 — — 19,034 —
Limited
SFM 38, avenue Kléber – company Holding
75116 Paris (France) (SA) company 40,000 48,317 100.00 84,053 84,053 — — — 5,070 —
Simplified
Foncière Elysées S.A. joint-stock
38, avenue Kléber – 75116 company
Paris (France) (SAS) Real estate 14,043 15,728 100.00 44,478 38,252 — — 160 (114) —
Charterhouse Management Limited
Services Ltd company
8 Canada Square – London under Investment
E14 5HQ (Royaume-Uni) english law company 11,315 — 100.00 11,314 11,314 — — 27 12 —
HSBC Real Estate Leasing Limited
(France), 38, avenue Kléber – company Crédit-bail
75116 Paris (France) (SA) immobilier 38,255 60,672 80.98 37,190 37,190 — — 113,638 7,010 —
Limited
CCF & Partners Asset company
Management Ltd under
8 Canada Square – London English Investment
E14 5HQ (Royaume-Uni) law holding 5,629 — 100.00 4,792 4,792 — — — — —
HSBC Assurances Vie
(France), Immeuble Coeur
Défense-110 esplanade du Limited
Général de Gaulle – 92400 company Insurance
Courbevoie (France) (SA) company 115,000 573,007 100.00 513,999 513,999 — — 1,366,787 65,187 —

B – Aggregate data concerning companies whose book value at cost does not exceed 1% of HSBC Continental Europe’s share capital
1 – Subsidiaries
a) French subsidiaries
(aggregated) — — — — — — — — — — —
b) Foreign subsidiaries
(aggregated) — — — — — — — — — — —
2 – Related party companies
a) French companies
(aggregated) — — — — 4 — — — — — —
b) Foreign companies
(aggregated) — — — — — — — — — — —
34.2 Transactions with subsidiaries and other related parties

31 Dec 2020
Other related
Subsidiaries parties
€m €m
Assets
Treasury bills and money-market instruments — 9,396
Loans and advances to customers 100 516
Bonds and other fixed income securities 570 763
Liabilities
Due to credit institutions 3,671 5,894
Customer accounts 625 12
Debt securities — —
Other liabilities — 9,539
Subordinated liabilities — 2,610
Financing commitments given 1,547 —
Guarantees and endorsements given — 234
Securities commitments (other commitments given) — —

63 rue de Villiers 43-47, avenue de la Grande Armée
92208 Neuilly-sur-Seine Cedex 75116 Paris
Statutory Auditors‘ report on the financial statements
(For the year ended 31 December 2020)

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English
speaking readers. This report includes information specifically required by European regulations or French law, such as information about
the appointment of Statutory Auditors. This report should be read in conjunction with, and construed in accordance with, French law and
professional auditing standards applicable in France.
38, avenue Kléber
75116 Paris
To the Shareholders,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying financial
statements of HSBC Continental Europe for the year ended 31 December 2020.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company
at 31 December 2020 and of the results of its operations for the year then ended in accordance with French accounting principles.
The audit opinion expressed above is consistent with our report to the Audit Committee.
Basis for opinion
Audit framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under these standards are further described in the “Responsibilities of the Statutory Auditors relating to the audit of
the financial statements” section of our report.
Independence
We conducted our audit engagement in compliance with the independence rules provided for in the French Commercial Code (Code de
commerce) and the French Code of Ethics (Code de déontologie) for Statutory Auditors, for the period from 1 January 2020 to the date of
our report, and, in particular, we did not provide any non-audit services prohibited by article 5(1) of Regulation (EU) No. 537/2014.
Emphasis of matter
Without qualifying our opinion, we draw your attention to Note 1 to the financial statements, which outlines changes in accounting
principles such as the adoption of Regulation 2020-10 of 22 December 2020 of the French accounting standard-setter (Autorité des
Normes Comptables – ANC) and the voluntary change in accounting method for the presentation of sale and repurchase agreements.
Justification of assessments – Key audit matters
Due to the global crisis related to the Covid-19 pandemic, the financial statements of this period have been prepared and audited under
specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of sanitary emergency have had
numerous consequences for companies, particularly on their operations and their financing, and have led to greater uncertainties on their
future prospects. Those measures, such as travel restrictions and remote working, have also had an impact on the companies’ internal
organisation and the performance of the audits.
It is in this complex and evolving context that, in accordance with the requirements of articles L.823-9 and R.823-7 of the French
Commercial Code relating to the justification of our assessments, we inform you of the key audit matters relating to the risks of material
misstatement that, in our professional judgement, were the most significant in our audit of the financial statements, as well as how we
addressed those risks.
These matters were addressed as part of our audit of the financial statements as a whole, and therefore contributed to the opinion we
formed as expressed above. We do not provide a separate opinion on specific items of the financial statements.

Statutory auditors' report on the financial statements
Complex derivative financial instruments measured at fair value based on unobservable data
As part of its activities, HSBC Continental Europe holds complex derivative We tested the effectiveness of the controls we deemed key to our audit, put
financial instruments. in place by management to record, value and recognise these financial
Derivative financial instruments are financial assets or liabilities measured at instruments, and specifically those regarding:
fair value on the balance sheet. The offsetting entry for the remeasurement • the independent validation of valuation models by the Independent Model
of financial instruments at fair value at the reporting date is recognised in Review – Markets department;
profit or loss. The measurement of derivatives may require the use of
• the independent verification of prices and valuations by the Product
internally developed models using unobservable data such as long-term
Control department;
interest rates or volatilities for certain currencies. The measurement of more
complex instruments may require several unobservable inputs such as • the determination of fair value adjustments (“FVA”).
volatility surfaces, in whole or in part, for less commonly traded option We also sought the support of our experts in risk modelling to carry out, on a
products, and correlations between market factors such as foreign sample basis, an independent valuation of instruments measured based on
exchange rates, interest rates and equity prices. It also takes account of unobservable data, using their own models and market inputs in order to
adjustments for counterparty and liquidity risk. assess the valuations generated by HSBC Continental Europe’s internal
In view of the multiple inputs subject to management’s judgement, we models.
deemed the measurement of complex derivative financial instruments We examined the assumptions, methods and models used by the Bank to
whose fair value is based on unobservable data to be a key audit matter for estimate the main valuation adjustments (counterparty and liquidity risk) in
HSBC Continental Europe’s financial statements. order to assess their relevance.
At 31 December 2020, derivative instruments (including those whose fair value is measured based on unobservable data) represented EUR 53,173
million recognised under assets and EUR 52,474 million recognised under liabilities.
See Notes 10 and 16 to the financial statements.
Information systems access management

Due to the nature of its activities, HSBC Continental Europe executes a large User access rights were tested on the applications, operating systems and
volume of transactions each day. Transactions are authorised, executed and databases used for the financial statements and those relevant to our audit.
recorded using complex information systems. The integrity of these systems More specifically, our work allowed us to assess whether:
is a key factor in the reliability of the financial statements. • new user access requests to information systems are duly examined and
In previous audits, we identified weaknesses associated with user access authorised;
rights to operating systems, databases and certain applications contributing
• user access rights are revoked in a timely manner following the
directly or indirectly to the preparation of the financial statements.
reassignment of personnel or their departure from the Group;
The weakness of controls relating to access management entails the risk
that by omission or error, changes to financial information systems and • user access rights to applications, operating systems and databases are
processed data may not be appropriate. controlled in a consistent manner;
An action plan is currently being implemented by management, seeking to • highly-privileged user access has only been granted to a very limited
strengthen the control environment for user access rights and helping to group of persons who require such access for the performance of their
mitigate the access management risk. duties; and
We deemed information systems access management to constitute a key • controls on outsourced service providers are in place.
audit matter for the HSBC Continental Europe financial statements.
Other areas were assessed independently, such as password policies and
security configurations. An independent assessment was also performed on
controls on modifications to applications and databases. We also tested
controls intended to ensure that business line users and developers do not
have access to applications, operating systems or databases in the
production environment.
When control weaknesses were identified, additional procedures were
carried out:
• we analysed the nature of the access where inappropriate access had
been identified and, where possible, obtained additional evidence of its
legitimacy;
• we performed additional tests on specific end‑of‑year reconciliations
(custodians, bank accounts and reconciliation of suspense accounts), as
well as requesting confirmations from external counterparties; and
• we performed tests on other controls carried out by management, such
as performance reviews by business line.
See page 96 of the management report.

Individual impairment of consumer loans in Commercial Banking
As part of its wholesale lending businesses, at year end HSBC Continental Management has put in place controls designed to ensure the reliability of
Europe estimates the risk of impairment of its portfolio and recognises any the calculation of individual impairment. In this context, we tested the
appropriate allowances. The Covid-19 crisis led to an increase in the cost of controls we deemed key to our audit, in order to assess the relevance of the
risk in 2020. impairment losses recorded. Our tests concerned the controls in place for
Assessing the existence of a risk of non-recovery and the amount of the monitoring loans, regularly reviewing credit files and approving individual
allowance set aside requires the Bank’s management to exercise judgement impairment.
and is subject to a high degree of uncertainty, which grew during the We performed a critical assessment of the tests used by management to
Covid-19 crisis. This assessment primarily takes into account potential risk verify that the estimated allowances determined using internally-developed
indicators such as payments that are contractually past-due or other factors models were proportionate to the actual losses observed in prior periods.
such as indications of a deterioration in the financial condition and outlook We also tested the appropriateness of the methods and policies used to
of borrowers affecting their ability to pay, business sectors experiencing determine allowances, using a sample of loans selected based on risk.
economic stress, the recoverable amount of guarantees, likely available Based on this sample, we independently assessed the level of allowances
dividends in the event of liquidation or bankruptcy, and the viability of the recognised.
customer’s business model.
Given the material nature of these outstandings for the Bank, the
significance of management’s judgement in estimating the allowances and
the higher historical cost of risk in an admittedly less favourable context, we
deemed this to be a key audit matter.
Impairment of doubtful receivables stood at EUR 638 million at 31 December 2020.

See Notes 3 and 8 to the financial statements.
Provisions for restructuring and reorganisation

HSBC Continental Europe launched several reorganisation projects within its We examined and assessed the appropriateness of the recognition criteria
various business lines (Global Banking and Markets – GBM; Commercial and the assumptions used by the Bank to determine the provisions
Banking – CMB) and its central functions in both France and its branches. recognised in the financial statements.
Accordingly, management recognised provisions for restructuring. The We tested the effectiveness of the controls we deemed key to our audit, put
recognition criteria are specific and depend on when the restructuring plan in place by management to estimate and recognise the provisions.
was communicated in the related country, as well as on the labour laws in We also called upon our experts to assess the calculation method used.
force in each country (in France and in the countries where its branches are
On a sample basis, we verified the consistency of the data used for the
located). The recognition criteria may include an agreement with the trade
measurement of the provisions.
unions, a notification sent to an employee or a settlement agreement.
We also assessed the information on provisions for restructuring provided in
As certain inputs are subject to management’s judgement and given the
the financial statements for the year ended 31 December 2020.
timetable for recognising the provisions, we deemed provisions for
restructuring to be a key audit matter for HSBC Continental Europe’s
financial statements.
At 31 December 2020, provisions for restructuring represented EUR 258 million.

See Note 14 to the financial statements and page 240 of the Registration Document.

Statutory auditors' report on the financial statements
Specific verifications
In accordance with professional standards applicable in France, we have also performed the specific verifications required by French
legal and regulatory provisions.
Information given in the management report and in the other documents provided to the shareholders with respect
to the Company’s financial position and the financial statements
We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the
Board of Directors’ management report and in the other documents provided to the shareholders with respect to the Company’s financial
position and the financial statements, with the exception of the following matter.
Concerning the fair presentation and the consistency with the financial statements of the information about payment terms referred to in
article D.441-4 of the French Commercial Code, we have the following matter to report:
As indicated in the management report, this information does not include banking transactions and related transactions, as the Company
has decided that such transactions do not fall within the scope of the required information.
Report on corporate governance
We attest that the Board of Directors’ report on corporate governance sets out the information required by articles L.225-37-4 and
L.22-10-10 of the French Commercial Code.
Other verifications and information pursuant to legal and regulatory requirements
Presentation of the financial statements to be included in the annual financial report
Pursuant to paragraph III of article 222-3 of the AMF’s General Regulations, the Company’s management informed us of its decision to
postpone the application of the single electronic reporting format, as defined by European Delegated Regulation No. 2019/815 of 17
December 2018, to reporting periods beginning on or after 1 January 2021. Accordingly, this report does not contain a conclusion on the
compliance of the presentation of the financial statements to be included in the annual financial report referred to in paragraph I of article
L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) with this format.
Appointment of the Statutory Auditors
We were appointed Statutory Auditors of HSBC Continental Europe by the Annual General Meetings held on 23 April 2015 for
PricewaterhouseCoopers Audit and on 10 May 2007 for BDO Paris Audit & Advisory.
At 31 December 2020, PricewaterhouseCoopers Audit and BDO Paris Audit & Advisory were in the sixth and thirteenth consecutive year
of their engagement, respectively.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for preparing financial statements giving a true and fair view in accordance with French accounting
principles, and for implementing the internal control procedures it deems necessary for the preparation of financial statements that are
free of material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting, unless it expects to
liquidate the Company or to cease operations.
The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk
management systems, as well as, where applicable, any internal audit systems relating to accounting and financial reporting procedures.
The financial statements were approved by the Board of Directors.
Responsibilities of the Statutory Auditors relating to the audit of the financial statements
Objective and audit approach
Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial
statements as a whole are free of material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions taken by users on the basis of these financial statements.
As specified in article L.823-10-1 of the French Commercial Code, our audit does not include assurance on the viability or quality of the
Company’s management.
As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditors exercise
professional judgement throughout the audit. They also:
• identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, design and perform
audit procedures in response to those risks, and obtain audit evidence considered to be sufficient and appropriate to provide a basis
for their opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• obtain an understanding of the internal control procedures relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management and
the related disclosures in the notes to the financial statements;

• assess the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. This assessment is based on the audit evidence obtained up to the date of the audit report. However,
future events or conditions may cause the Company to cease to continue as a going concern. If the Statutory Auditors conclude that a
material uncertainty exists, they are required to draw attention in the audit report to the related disclosures in the financial statements
or, if such disclosures are not provided or are inadequate, to issue a qualified opinion or a disclaimer of opinion;
• evaluate the overall presentation of the financial statements and assess whether these statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Report to the Audit Committee
We submit a report to the Audit Committee which includes in particular a description of the scope of the audit and the audit programme
implemented, as well as the results of our audit. We also report any significant deficiencies in internal control that we have identified
regarding the accounting and financial reporting procedures.
Our report to the Audit Committee includes the risks of material misstatement that, in our professional judgement, were the most
significant in the audit of the financial statements and which constitute the key audit matters that we are required to describe in this
report.
We also provide the Audit Committee with the declaration provided for in article 6 of Regulation (EU) No. 537/2014, confirming our
independence within the meaning of the rules applicable in France, as defined in particular in articles L.822-10 to L.822-14 of the French
Commercial Code and in the French Code of Ethics for Statutory Auditors. Where appropriate, we discuss any risks to our independence
and the related safeguard measures with the Audit Committee.


Partner Partner

Other information related to social accounts
Allocation of net profit

31 Dec 2020 31 Dec 2019
€m €m
Results available for distribution
– retained earnings 3,185 3,330
– net profit for the year (906) (147)
Total (A) 2,278 3,184
Allocation of income
– dividends — —
– legal reserve — —
– free reserve — —
Total (B) — —
Retained earnings (A-B) 2,278 3,184
Five-year highlights
(Articles R. 225-81 and R. 225-102 of the French Commercial Code)
2020 2019 2018 2017 2016
€m €m €m €m €m
Share capital at year end
Called up share capital 491 491 367 337 337
Number of issued shares 98,231,196 98,231,196 67,437,827 67,437,827 67,437,827
Nominal value of shares in euros 5 5 5 5 5
Results of operations for the year
Sales 3,285 3,560 3,043 2,869 2,847
Profit before tax, depreciation and provisions (455) (120) 59 238 292
Profit after tax, depreciation and provisions (906) (147) 78 172 117
Per share data (in euros)
Profit after tax, but before depreciation and provisions (5.8) (0.6) 1.3 3.3 4.5
Profit after tax, depreciation and provisions (9.2) (1.5) 1.1 2.5 1.7
Dividend paid per ordinary share, eligible as of 1 January — — — 1.66 4.00
Employees (France)
Number of employees1 8,835 9,314 8,377 8,080 8,382
Average number of employees (excluding employees available) 9,058 9,281 8,341 8,202 8,652
Salaries and wages 640 639 543 515 515
Employee benefits 248 247 249 249 249
Payroll and other taxes 58 53 64 61 63
Incentive schemes and/or employee profit-sharing scheme2 — 6 20 23 23
1 Banking status employees, registered as at 31 December of each year.

2 Based on previous year’s profits.
List of equity shares and debt securities held at 31 December 2020 (excluding trading securities)
Held-on maturity, available-for-sale and portfolio activity securities
31 Dec 2020
€m
A – Held-to-maturity securities 571
Debt securities 571
Treasury bills and other eligible bills —
Other public sector securities —
Money market instruments —
Negotiable certificates of deposit —
Negotiable medium-term notes —
Bonds and similar assets 570
Accrued interest 1
B – Available-for-sale and portfolio activity securities 7,434
Debt securities 7,276
Treasury bills and other eligible bills —
Other public sector securities 4,129
Money market instruments —
Commercial paper —
Negotiable certificates of deposit —
Negotiable medium-term notes —
Asset-backed securities —
Bonds and similar 3,130
Negotiable medium-term notes issued by banks —
Accrued interest 17
Equity shares 158
Equity shares and similar 158
Mutual fund units —
Total held-to-maturity, available-for-sale and portfolio activity securities 8,005

Interests in related parties, other participating interests and long-term securities
31 Dec 2020
€m
A – Other participating interest and long-term securities 85
Securities listed on a recognised French exchange —
Unlisted French securities 85
Foreign securities listed on a recognised French exchange —
Foreign securities listed elsewhere —
Unlisted foreign securities —
Accrued income —
B – Interests in related parties 1,359
Listed French securities —
Unlisted French securities 1,343
Listed foreign securities —
Unlisted foreign securities 16
Accrued income —
Total interests in related parties, other participating interests and long-term securities 1,444

Other Information
HSBC Continental Europe’s principal subsidiaries and investment

policy
HSBC Continental Europe’s principal subsidiaries at 31 December 2020
Commercial Banking
Distribution HSBC Factoring (France) (100 per cent)
Real estate Foncière Elysées (100 per cent)

HSBC Real Estate Leasing (France) (100 per cent)
Structured financing and HSBC SFH (France) (100 per cent)
Global Banking SFM (100 per cent)
HSBC Leasing (France) (100 per cent)
Asset Management
France HSBC Global Asset Management (France) (100 per cent)

HSBC Epargne Entreprise (France) (100 per cent)
HSBC REIM (France) (100 per cent)
Abroad HSBC Global Asset Management (Switzerland) (50 per cent)
Insurance
France HSBC Assurances Vie (France) (100 per cent)
Subsidiaries and equity investments
France Valeurs Mobilières Elysées (100 per cent)

Société Française Suisse (100 per cent)
Abroad Charterhouse Management Services Ltd (100 per cent)
Stated percentages indicate the group’s percentage of control.

The subsidiaries are classified in the area where they principally operate.

Summary business activities of HSBC Continental Europe’s principal subsidiaries at
31 December 2020
Commercial Banking
(in thousands of euros)
Total assets Shareholders’ funds Net profit group’s percentage
2020 2019 2020 2019 2020 2019 2020 2019
2,715,393 3,793,722 137,835 122,016 15,729 14,269 100 100
HSBC Factoring (France) HSBC Factoring (France)'s activity has ben impacted by Covid-19 crisis with a turnover decrease of 8,5 per cent to reach EUR 20
million at the end of December 2020. Net income is up for 10 % despite the Covid-19 crisis, after an increase of 30 % in 2019.

2020 2019 2020 2019 2020 2019 2020 2019
3,376,820 4,381,071 114,225 114,668 387 874 100 100
HSBC SFH (France) is a company dedicated to refinancing HSBC Continental Europe by issuing covered bonds secured by home
HSBC SFH (France) loans (cover pool). HSBC SFH (France) launched its first issue on 20 January 2010. On 28 October 2020, the bonds of EUR 1
billion, issued on 28 October 2013, with a seven year maturity and having a coupon of 1,875 per cent matured and has been
repaid to the investors. At 31 December 2020, issues totaled EUR 3.3 billion secured by a cover pool of EUR 4 billion.
837,951 911,757 360,684 341,650 19,034 99,414 100 100
HSBC Leasing (France) HSBC Leasing (France) specialises in lease finance for major corporates. The company holds subsidiaries intended for leasing
activities with a call option. It operates more particularly in the aeronautics sector by financing assets on behalf of airlines. The
equity interests in 2020 totaling EUR 0,8 billion, a decrease of 11 per cent compared to 2019.
983,745 1,350,048 105,937 98,927 7,010 7,258 100 100
HSBC Real Estate Leasing (France) The net income for this subsidiary specialised in real estate leasing dropped by 3,5 per cent compared to 2019. Production this
year was non-existent due to the pandemic, as opposed to a EUR 99 million production in 2019. Portfolio contains 304 buildings,
one of which is under construction.
Asset Management
2020 2019 2020 2019 2020 2019 2020 2019
133,392 140,445 57,938 60,543 16,514 19,632 100 100
Profit before tax fell, reflecting lower fees mainly due the fall of equity market in March 2020 (Covid 19 crisis) and penalising the
year 2020. Assets managed and distributed amounted to EUR 86.5 billion compared with EUR 83.8 billion at end 2019. As in
HSBC Global Asset Management 2019, HSBC Global Asset Management (France) win some awards such as:
(France) • Multi-Asset (sur 1 an et 3 ans) pour le produits Multi-Asset Factors
• Obligations (‘ISR’), 2ème place (Les Globes de la Gestion)
• Obligations ‘ISR Government Bond’, Meilleur fonds Obligataire ISR (Etica -Italie)
• HSBC Continental Europe ‘Meilleur Gamme de Fonds Diversifiés’ (certificat Banques de Réseau)
74,022 57,047 31,796 21,252 (4 381) (4 455) 100 100
HSBC Epargne Entreprise (France) is an investment company, wholly-owned by HSBC Continental Europe, specialising in
HSBC Epargne Entreprise employee savings & pensions accounts administration for the HSBC Group in France. It has a clientele of 2,300 companies and
(France) manages 217,000 personal accounts. The employee savings funds it offers are managed by HSBC Global Asset Management
(France), with assets under management totaling EUR 3.8 billion as of 31 December 2020, making the Group the seventh-largest
employee savings manager in France. Its products are distributed via the HSBC Group distribution network in France, covering the
needs of companies of all sizes.
18,130 18,925 10,502 8,938 6,564 6,333 100 100
HSBC REIM (France) is the subsidiary of the Asset Management business specialising in real estate management on behalf of
third parties. As of 31 December 2020, the market value of assets under management was EUR 3.3 billion. The main fund
HSBC REIM (France) managed, Elysées Pierre is a Classic Real Estate Investment Placement Company which celebrated its 30th anniversary in 2016.
Its capitalisation of more than EUR 2.4 billion ranks it among the top 10 REITs on the market and the 126 component buildings of
its assets are mainly offices in Ile-de-France, one of the deepest and most liquid markets in Europe and in the world. This fund has
a return and valuation strategy that results in an internal rate of return (‘IRR’) over 10 years as at 31 December 2019 at 8.2 per
cent. The specialised press regularly praised the management qualities and the long-term performance of the SCPI.

Other Information
Insurance
2020 2019 2020 2019 2020 2019 2020 2019
23,301,030 23,451,308 891,769 822,326 63,927 58,870 100 100
HSBC Assurances Vie (France) manufactures a wide range of products and services to meet HSBC Group customer's needs
(individuals, professionals and companies) in terms of life insurance, pension and protection. In 2020, impacted by the sanitary
and economic crisis, insurance manufacturing gross written premium on saving stands at EUR 1,312 million (35 per cent down
HSBC Assurances Vie compared to 2019), including EUR 505 million on unit-linked contracts, which account for 39 per cent of new money compared to
(France) 25 per cent last year. The net new money was negative for HSBC Continental Europe Retails Network by EUR 175 million in 2020,
of which a positive net new money of EUR 268 million related to unit-linked contracts. The life insurance liabilities managed by
the insurance company now stand at EUR 23.2 billion compared to EUR 23.3 billion last year. Within these, unit-linked contracts
represent EUR 5.1 billion, increased by EUR 0.5 billion compared to 2019, due to the positive net new money and the favourable
variation of the fair value of contracts. The arbitrage movement towards unit-linked contracts amounts to + EUR 96 million on the
HSBC Continental Europe Retails Network.
Own investments
2020 2019 2020 2019 2020 2019 2020 2019
9,496 9 502 9,492 9 496 (4) 5 100 100
Société Française et Suisse
(‘SFS’) Société Française et Suisse has yielded profit loss compared to 2019. The total balance sheet is mainly composed of free cash
flow.
49,830 56 668 49,517 54 804 (623) 4 658 100 100
Valeurs Mobilières Elysées is a subsidiary in which principal investments are booked under HSBC France. These investments
Valeurs Mobilières Elysées include listed midcaps and Private Equity funds. HSBC having decided in 2009 not invest any further in listed midcap shares,
Valeurs Mobilières Elysées manages a portfolio of gradually declining listed shares. No new Private Equity investments will be
booked under Valeurs Mobilières Elysées, therefore this portfolio will also decline gradually. Because of the pandemic, asset
valuation has taken a hit, therefore generating loss in 2020.

Investment policy
2015
• Subscription by HSBC Leasing (France), a wholly-owned subsidiary of HSBC Continental Europe, to capital increase made by HSBC
Middle East Leasing Partnership.
Cost: USD 150.5 million.
• Capital decrease of Valeurs Mobilières Elysées.
Proceeds: EUR 50.0 million.
• Capital decrease of HSBC Services (France).
2016
• Capital decrease of CCF Charterhouse GmbH & Co. Asset Leasing KG, owned up to 99 per cent by HSBC Leasing (France).
• Sale of Visa Europe share to Visa Inc.
Capital gain: EUR 108 million.
2017
• Investment increase by HSBC Leasing (France), a wholly-owned subsidiary of HSBC Continental Europe, in the joint operation HSBC
Middle East Leasing Partnership.
Cost: USD 100.3 million.
2018
• Acquisition by HSBC Continental Europe of certain assets and liabilities held by HSBC Bank plc Athens Branch.
Amount of the investment: EUR 1.
• HSBC Continental Europe acquires 100 percent of the capital of HSBC Institutional Trust Services (Ireland) DAC from HSBC Securities
Services Holdings (Ireland) DAC, itself a subsidiary of HSBC Bank plc.
Amount of investment: USD 21.5 million .
• HSBC Continental Europe acquires 100 per cent of the share capital of HSBC Bank Polska S.A. from HSBC Bank plc Paris Branch.
Amount of the investment: EUR 88.4 million.
2019
• Acquisition by HSBC Continental Europe of certain assets and liabilities held by HSBC Bank plc in the Netherlands, Spain, Ireland,
Czech Republic, Italy, Belgium and in Luxembourg.
Amount of the investment: EUR 370.3 million.
2020
• No material transactions to report.

Other Information
Proposed resolutions to the Sixth resolution

Combined General Meeting Voting under the quorum and majority conditions to transact
ordinary business, the Shareholders hereby re-elect Mrs Carola
to be held on 11 March 2021 Gräfin von Schmettow, who is retiring by rotation, as Director for a
further term of three years ending at the conclusion of the Annual
First resolution General Meeting held to approve the financial statements for the
year ending 31 December 2023.
Voting under the quorum and majority conditions to transact
ordinary business, and having heard and considered the report of Seventh resolution
the Directors, the Statutory Auditors' report on the financial
statements for the year ended 31 December 2020, and the report Voting under the quorum and majority conditions to transact
on corporate governance and the Statutory Auditors’ report ordinary business, in accordance with article L. 511-73 of the
relating thereto, the shareholders hereby approve the company’s French Monetary and Financial Code, the shareholders hereby
financial statements for that year as presented, together with the issue a favourable opinion on the aggregate amount of
business operations reflected therein and summarised in the compensation of all kinds paid in 2020 to categories of personnel
reports. as referred to in Article L. 511-71 of the French Monetary and
Financial Code having a significant impact on risks, which
Second resolution amounts to EUR 71,482,332.
Voting under the quorum and majority conditions to transact Eighth resolution
ordinary business, the shareholders, having noted that the year
ended 31 December 2020 shows a net result of EUR Voting under the quorum and majority conditions to transact
- 906,098,899.83, hereby approve the proposed distribution of this special business, and having heard and considered the report of
net result made by the Board of Directors and resolve to the Directors, the shareholders hereby decide to amend Article 10
appropriate it as follows: of the Articles of Association, as follows:
Net result for the year EUR - 906,098,899.83 • The first sentence of the first indent becomes: "– the eight (8)
Plus retained profits EUR 3,184,897,620.24 members at the least and sixteen (16) at the most, appointed by
Total sum available for distribution EUR 2,278,798,720.41 the Ordinary General Meeting;"
To be distributed as follows: • The penultimate paragraph becomes: "The Board of Directors is

thus composed of twelve (12) Directors at the least and twenty
Retained earnings EUR 2,278,798,720.41 (20) at the most."
The shareholders duly note that dividends paid in respect of the Ninth resolution
three previous financial years were as follows:
Year Net dividend per share
ordinary and special business, the shareholders hereby confer full
2017 EUR 1.66 powers on the bearer of an original, copy or abstract of the
2018 - minutes of this meeting for the purpose of completing any
2019 - formalities required by law.
Dividends paid in respect of the three previous years are eligible
for the tax deduction referred to in article 158 paragraph 3.2 of the
General Tax Code.
Third resolution
ordinary business, and having heard and considered the report of
the Directors and the report of the Statutory Auditors regarding
the consolidated statements for the year ended 31 December
2020, the shareholders hereby approve the consolidated financial
statements for that year as presented.
Fourth resolution
ordinary business, and having heard and considered the Statutory
Auditors’ report on regulated agreements governed by article L.
225-38 of the French Commercial Code, the shareholders hereby
approve successively the agreements described therein under the
conditions referred to in article L. 225-40 of said Code.
Fifth resolution
ordinary business, the Shareholders hereby ratify the co-optation
of Mr Stephen O’Connor decided by the Board on 12 February
2021 to replace Mr Nuno Matos, who resigned, for the remainder
of the term of office of his predecessor, that is until the conclusion
of the Annual General Meeting held to approve the financial
statements for the year ending 31 December 2021.

Documents and information on display
Information on HSBC Continental
Any person requiring additional information on the HSBC
Europe and its share capital Continental Europe group may, without commitment, request
documents by mail from:
Information on the company HSBC Continental Europe – 38 avenue Kléber, 75116 Paris, France.
The Articles of Association of the Company can be found in the
Name ‘About HSBC’ section of the HSBC Continental Europe website
HSBC Continental Europe. New name of HSBC France since www.hsbc.fr.
1 December 2020. The information made available on hsbc.fr website are not part of
Commercial name the Universal Registration Document, unless the informations are
included by reference in the current Registration Document.
HSBC and, for the Private Banking business, HSBC Private
Banking. Financial year
Date of incorporation From 1 January to 31 December.
1894. Distribution of profits

Registered office A minimum of 5 per cent of the net profit for the year, less any
prior year losses, is transferred to the legal reserve until such time
38 avenue Kléber – 75116 Paris – France. as it has reached one tenth of the company’s share capital and at
Legal Form any time after that should it fall back below the minimum
requirement.
Société Anonyme incorporated under the laws of France, governed
The balance, plus any retained earnings, less any sums which the
notably by the French Commercial Code. The company is a credit
shareholders deem expedient to transfer to new or existing
institution and authorised bank, and as such is also governed by
reserves or to retained earnings, comprises the profit available for
the French Monetary and Financial Code.
distribution among the shareholders.
Term However, except in the event of a reduction of the company’s
The company’s term ends on 30 June 2043, unless previously share capital, no distribution may be made if total shareholders’
wound up or extended. funds are, or would as a result, become lower than the amount of
the company’s share capital plus any non-distributable reserves.
Corporate purpose (article 3 of the Articles of
Association of HSBC Continental Europe) By way of derogation to the provisions of this article, sums may be
transferred to a special employee profit-sharing reserve, as
The company’s corporate purpose is the transaction in all provided for by law.
countries of any and all banking, finance, lending, guarantee,
trading, brokerage or fee-earning business together with the Form of shares
provision of any and all investment services and related services Shares have to be registered. They result in registration on an
within the meaning of articles L. 321-1 and L. 321-2 of the French individual account pursuant to the conditions and according to the
Monetary and Financial Code, and more generally, to conduct methods stipulated by the legal and regulatory provisions in force.
within the limits permitted by law any and all commercial,
industrial or agricultural, securities or real estate, financial or other Voting rights
operations as well as to provide any and all services directly or Each fully paid up share entitles the holder to one vote.
indirectly connected with or which may facilitate the achievement
of the foregoing object. Transfer of shares
Trade and companies Register, APE code and LEI The transfer of shares takes place by way of a transfer from one
account to another.
775 670 284 RCS Paris – APE 6419Z.
There are no restrictions on disposals of shares or negotiable
LEI: F0HUI1NY1AZMJMD8LP67. securities giving access to the share capital in cases of inheritance
Legal and regulatory framework or liquidation of matrimonial property, or on disposals to a spouse,
descendant or ascendant.
Subject to the laws and regulations relating to credit institutions,
Any other disposals or transfers of shares or negotiable securities
including articles in the French Monetary and Financial Code
giving access to the capital, including between shareholders,
applicable to them, the company is governed by commercial law,
whether free of charge or for valuable consideration, whether the
including articles L. 210-1 and following of the French Commercial
said disposals or transfers take place by way of donation,
Code and its Articles of Association.
exchange, disposal, capital contribution, merger, demerger, partial
HSBC Continental Europe is a credit institution licensed as a bank. asset transfer, distribution following the liquidation of a
As such, the company may conduct all banking operations. It is, shareholding company, universal asset transfer from a company,
moreover, authorised to perform any services or related realisation of a security, or by way of compulsory or voluntary
investment mentioned in articles L. 321-1 and L. 321-2 of the public tender, and whether they relate only to legal or beneficial
French Monetary and Financial Code, with the exception of ownership, shall be subject to the approval of the Board of
operating a multilateral trading facility. In its capacity as provider Directors according to the conditions described below.
of investment services, it is subject to the regulations applicable to
The transferor’s request for approval, which must be served on the
them under the supervision of the Autorité des marchés financiers.
company, shall state the name, forenames, profession and
It is particularly subject to compliance with a number of prudential address of the transferee, or the company name and registered
rules and controls by the Autorité de contrôle prudentiel et de office in the case of a company, the number of shares or
résolution and the European Central Bank. Its Senior Management negotiable securities giving access to the capital of which the
and all the people it employs are bound by professional secrecy, disposal or transfer is envisaged, the price offered or an estimate
violation of which is punishable by law. It is also an insurance of the value of the shares or negotiable securities giving access to
broker. the capital. This request for approval must be countersigned by
the transferee.

Other Information
Approval will be given in the form of a notice, or will be deemed to In these cases, the rules governing approval and the buyback
have been given, in the absence of a reply within three months of conditions shall apply to the securities subscribed, and the time
the date of the request for approval. given to the Board of Directors to notify the third party subscriber
whether it accepts him as a shareholder shall be three months
The approval decision will be made by the Board of Directors, by a
from the date of final completion of the capital increase.
majority of the Directors present or represented. The transferor
shall be entitled to vote, if he is a Director. The decision will not be In the event of a buyback, the price shall be equal to the value of
justified, and in the event of a refusal, shall never give rise to any the new shares or negotiable securities giving access to the capital
claim. determined under the conditions provided by article 1843-4 of the
French Civil Code.
If the proposed transferee is approved, the transfer will be
completed in favour of the transferee upon presentation of the Custodian and financial service
supporting documents, which must be supplied within one month
of service of the decision of the Board of Directors, failing which a CACEIS Corporate Trust.
fresh approval will be required.
History of the company
If the company does not approve the proposed transferee, the
transferor will have a period of eight days from the date of service 1894: The Banque Suisse et Française (‘BSF’) is founded. It will
of the refusal to notify the Board whether or not he abandons his become the Crédit Commercial de France (‘CCF’).
proposal. 1987: CCF privatisation. Apart from its national network, CCF has
If the transferor does not expressly abandon his proposal under progressively created a group of regional banks operating under
the conditions set out above, the Board of Directors shall be their own brand.
obliged within a period of three months from the date of service of 1994: Centenary of CCF.
the refusal, to arrange for the purchase of the shares or negotiable
securities giving access to the capital, by a shareholder, a third 2000: CCF joins the HSBC Group and becomes the European
party, or, with the transferor’s consent, by the company, with a platform of the HSBC Group.
view to a reduction of the capital. 2002: Crédit Commercial de France changes its legal name to CCF.
In the event that the offered shares or negotiable securities giving 2005: CCF becomes HSBC France and certain of its subsidiaries
access to the capital are purchased by shareholders or third change their legal name and adopt the HSBC brand. HSBC France,
parties, the Board of Directors shall inform the transferor of the HSBC Hervet, HSBC de Baecque Beau, HSBC UBP and HSBC
names, forenames, profession and address of the purchasers, or of Picardie constitute the new HSBC network.
the company name and registered office in the case of a company.
The sale price shall be fixed by agreement between the purchasers 2008: Disposal by HSBC France of its regional banking
and the transferor. subsidiaries (Société Marseillaise de Crédit, Banque de Savoie,
Banque Chaix, Banque Marze, Banque Dupuy, de Parseval, Banque
In the event that the offered shares or negotiable securities giving Pelletier and Crédit Commercial du Sud-Ouest).
access to the capital are purchased by the company, the Board of
Directors must first ask for the transferor’s consent. The transferor 2008: Merger of HSBC Hervet, HSBC de Baecque Beau, HSBC
must give his answer within eight days of receiving this request. UBP and HSBC Picardie with HSBC France.
In the absence of agreement between the parties, the price of the 2011: Merger of HSBC Private Bank France with HSBC France.
shares and negotiable securities giving access to the capital shall 2013: HSBC France acquires HSBC Assurances Vie (France).
be determined by an expert valuation, under the conditions
2017-2018: Creation of branches in Greece, the United Kingdom,
provided by article 1843-4 of the French Civil Code.
Belgium, Luxembourg, Ireland, Italy, Poland, the Czech Republic,
If, upon the expiry of a period of three months, the purchase has the Netherlands and Spain.
not been completed, approval shall be deemed to have been
January 2018: Acquisition of certain assets and liabilities from the
given. However, this period may be extended by the courts on an
HSBC Bank plc branch in Greece and launch of the activities of the
application by the company.
HSBC France branch in Greece.
The transferor may, at any time, and at the latest within a period of
August 2018: Acquisition of HSBC Bank Polska S.A. and HSBC
eight days of determination of the price by the expert, abandon
Institutional Trust Services (Ireland) DAC.
the disposal of his shares or negotiable securities giving access to
the capital. February 2019: Acquisition of certain assets and liabilities from the
HSBC Bank plc branches in Belgium, Ireland, Italy, the Czech
Disposals to the purchaser or purchasers nominated by the Board
Republic, the Netherlands and Spain and launch of the activities of
of Directors shall be completed by means of a transfer order
the HSBC France branches in those countries.
signed by the Chairman of the Board of Directors, who shall serve
it to the transferor within eight days of its date, with an invitation March 2019: Acquisition of certain assets and liabilities from the
to attend the registered office to receive the sale price, which shall HSBC Bank plc branch in Luxembourg and launch of the activities
not bear interest. of the HSBC France branch in this country.
All notices, requests, answers, opinions, waivers, information and April 2019: Merger of HSBC Bank Polska S.A. and HSBC
consents provided for by this article shall be validly given if sent by Institutional Trust Services (Ireland) DAC with HSBC France.
extrajudicial instrument or by registered letter with proof of receipt May 2019: Creation of a branch in Sweden and launch of the
requested. activities in this branch in October 2019.
When an expert is used to determine the price of the shares or December 2020: HSBC France becomes HSBC Continental Europe
negotiable securities giving access to the share capital under the and transfers its registered office 38 avenue Kléber 75116 Paris.
conditions provided by article 1843-4 of the French Civil Code, the
expert’s fees shall be paid in equal shares by the assignor and
assignee.
This approval clause, which is the purpose of this article, also
applies to disposals of allocation rights in the event of capital
increases by way of incorporation of reserves, profits or issue
premiums, and disposals of subscription rights in respect of
capital increases in cash or individual waivers of subscription
rights in favour of named individuals.

Material contracts Information on the share capital
HSBC Continental Europe currently has no material contracts, At 31 December 2020, the share capital amounted to EUR
other than those concluded as part of the normal course of its 491,155,980 divided into 98,231,196 fully paid up shares, each
business, that gives any member of the Group a right or obligation with a nominal value of EUR 5.
having a material impact on the issuer’s ability to fulfil its
obligations to holders of issued securities.
Movements in share capital

Number Share capital in Share premium in
of shares euros euros
At 1 Jan 2020 98,231,196 491,155,980 2,137,326,990.33
Increase (Reduction) during the year — — —
At 31 Dec 2020 98,231,196 491,155,980 2,137,326,990.33
At 1 Jan 2019 73,316,988 366,584,940 475,040,848.70
Increase (Reduction) during the year 24,914,208 124,571,040 1,662,286,141.63
At 31 Dec 2019 98,231,196 491,155,980 2,137,326,990.33
At 1 Jan 2018 67,437,827 337,189,135 16,139,054.64
Increase (Reduction) during the year 5,879,161 29,395,805 458,901,794.06
At 31 Dec 2018 73,316,988 366,584,940 475,040,848.70
At 1 Jan 2017 67,437,827 337,189,135 16,139,054.64
At 31 Dec 2017 67,437,827 337,189,135 16,139,054.64
At 1 Jan 2016 67,437,827 337,189,135 16,139,054.64
At 31 Dec 2016 67,437,827 337,189,135 16,139,054.64
Ownership of share capital and voting rights at 31 December 2020

HSBC Bank plc has owned 99.99 per cent of the share capital and voting rights since 31 October 2000. This percentage has not varied
since then. HSBC Bank plc is a wholly-owned subsidiary of HSBC Holdings plc, a company quoted in London, Hong Kong, New York and
Bermuda.
Dividend and payout policy

2020 2019 2018 2017 2016
Number of shares at 31 December 98,231,196 98,231,196 73,316,988 67,437,827 67,437,827
Average number of shares outstanding during the year 98,231,196 92,571,906 69,531,366 67,437,827 67,437,827
EPS 1 EUR (10.43) EUR (0.41) EUR (0.24) EUR 2.63 EUR 4.61
Net dividend — — — EUR 1.66 EUR 4.00
Exceptional dividend — — — EUR 4.45 —
Dividend + tax credit — — — — —
Payout2 — — — 232.3% 62.8%
1 Calculated on the weighted average number of shares outstanding after deducting own shares held.
2 Dividend paid as a percentage of reported earnings.
At the Annual General Meeting to be held on 11 March 2021, the Board will propose not to distribute a dividend in respect of year 2020.
Dividends which are not claimed within five years of the payment date lapse and become the property of the French Treasury.

Other Information
Persons responsible of the Registration Document and for auditing

the financial statements
Person responsible for the Registration Document
Mr Jean Beunardeau, Chief Executive Officer
Statement by the person responsible for the Registration Document
I declare that the information contained in this Registration Document is in accordance with the facts and that it makes no omission likely
to affect its meaning.
I declare, to the best of my knowledge, that the accounts have been prepared in accordance with applicable accounting standards and
are a fair reflection of the assets, liabilities, financial position and profit or loss of the company and all the undertakings included in the
consolidation scope, and that the Management Report of which the cross reference table can be found on page 283 presents a fair view
of the company’s business, results and financial position and that of all the undertakings included in the consolidation scope, as well as a
description of the main risks and uncertainties to which they are exposed.
Paris, 24 February 2021

Jean Beunardeau, CEO

Persons responsible for auditing the financial statements
Date first Date
Incumbents appointed re-appointed Date term ends
1
PricewaterhouseCoopers Audit 2015 2018 2024
Represented by Agnès Hussherr2
63, rue de Villiers
92200 Neuilly-sur-Seine
BDO Paris Audit & Advisory3,4 2007 2018 2024
Represented by Michel Léger5
43-47, avenue de la Grande Armée
75116 Paris
1 Member of the Compagnie Régionale des Commissaires aux comptes of Versailles.

2 PricewaterhouseCoopers Audit represented by Agnès Hussherr as of financial year 2020.
3 Member of the Compagnie Régionale des Commissaires aux comptes of Paris.
4 Previous corporate name: BDO France – Léger & Associés.
5 BDO Paris Audit & Advisory represented by Michel Léger as of financial year 2019.
Statutory Auditors’ fees paid in 2020 within the HSBC Continental Europe group are available in Note 6 to the consolidated financial
statements on page 190.

Other Information
Cross-reference table
The following cross-reference table refers to the main headings required by the European regulation 2017/1129 (Annex I and Annex II)
implementing the directive known as ‘Prospectus’ and to the pages of the Universal Registration Document 2019 D.20-0071.
Pages in 2019 Universal Pages in this 2020 Universal

Sections of Annex I of the EU Regulation 2017/1129 Registration Document Registration Document
1 Persons responsible, third party information, experts' reports and competent
authority approval
1.1 Persons responsible page 268 page 280
1.2 Experts' reports N/A N/A
1.3 Third party information N/A N/A
1.4 Competent authority approval N/A N/A
2 Statutory auditors page 269 page 281
3 Risk factors pages 78 to 150 pages 80 to 163
4 Information about the issuer page 265 page 277
5 Business overview
5.1 Principal activities pages 4, 9 to 19 and 229 pages 4, 9 to 20 and 240
5.2 Principal markets pages 4, 9 to 19 and 229 pages 4, 9 to 20 and 240
5.3 Important events pages 172 to 173, 229 to 230 pages 182 to 173, 240 to 241
5.4 Strategy and objectives pages 4 to 9 pages 4 to 9
5.5 Potential dependence N/A N/A
5.6 Founding elements of any statement by the issuer concerning its position pages 4 and 19 pages 4 and 20
5.7 Investments pages 218 to 221, 259 to 262, pages 227 to 230, 272 to 275,
272 to 273 284 to 285
6 Organisational structure
6.1 Brief description of the group pages 3 to 20, 252 and 259 to pages 3 to 21, 263 and 272 to
262 275
6.2 Issuer's relationship with other group entities pages 259 to 261 pages 272 to 274
7 Operating and financial review
7.1 Financial condition pages 156, 158, 227 to 228 pages 165, 167, 238 to 239
7.2 Operating results pages 12 to 19, 156 and 227 pages 13 to 20, 165 and 238
8 Capital resources
8.1 Issuer's capital resources pages 160 and 243 pages 169 and 255
8.2 Sources and amounts of the issuer's cash flows page 159 page 168
8.3 Borrowing requirements and funding structure pages 78, 119 to 121, 151 pages 80, 129 to 130, 132 to 135
8.4 Information regarding any restrictions on the use of capital resources that have materially
affected, or could materially affect the issuer's operations N/A N/A
8.5 Sources of funds needed N/A N/A
9 Regulatory environment pages 11 and 151 pages 11 to 12, 142 to 143
10 Trend information pages 5, 8 and 9 pages 4 to 5, 8 and 9
11 Profit forecasts or estimates N/A N/A
12 Administrative, management and supervisory bodies and senior management
12.1 Administrative and management bodies pages 22 to 29 pages 23 to 31
12.2 Administrative and management bodies conflicts of interests page 38 page 39
13 Remuneration and benefits
13.1 Amount of remuneration paid and benefits in kind granted pages 39 to 49, 176 to 180 pages 40 to 49, 186 to 190
13.2 Total amounts set aside or accrued by the issuer or its subsidiaries to provide for pension, pages 39 to 49, 176 to 180, 244 pages 40 to 49, 186 to 190,
retirement or similar benefits to 245 255 to 256
14 Board practices
14.1 Date of expiration of the current term of office pages 22 to 29 pages 23 to 31
14.2 Information about members of the administrative, management or supervisory bodies'
service contracts N/A N/A
14.3 Information about the issuer's audit committee and remuneration committee pages 32 to 33, 36 pages 33 to 34, 36 to 37
14.4 Corporate governance regime page 22 page 23
14.5 Potential material impacts on the corporate governance N/A N/A
15 Employees
15.1 Number of employees page 177 page 186
15.2 Shareholdings and stock options page 44 page 44 to 45
15.3 Arrangements involving the employees in the capital of the issuer N/A N/A
16 Major shareholders
16.1 Shareholders holding more than 5 per cent of the share capital or voting rights pages 265 to 267 pages 277 to 279
16.2 Different voting rights pages 265 pages 277
16.3 Control of the issuer pages 22 to 23, 269 pages 23 to 24, 281
16.4 Arrangements, known to the issuer, which may at a subsequent date result in a change in
control of the issuer N/A N/A
17 Related party transactions page 50 to 52, 216 to 217, 218 page 50 to 52, 225 to 226,
to 221, 252 to 253 227 to 230, 263 to 264

18 Financial information concerning the issuer's assets and liabilities, financial
position and profits and losses
18.1 Historical financial information pages 19, 155 to 221, 226 to pages 20, 164 to 230, 237
253, 271 to 264, 283
18.2 Interim and other financial information N/A N/A
18.3 Auditing of historical annual financial information pages 222 to 225 and 254 to pages 231 to 236 and 265
256 to 269
18.4 Pro forma financial information N/A N/A
18.5 Dividend policy pages 183 and 267 pages 192 and 279
18.6 Legal and arbitration proceedings pages 137 to 138, 215 to 216, pages 149 to 151, 224 to
250 to 251 225, 261 to 262
18.7 Significant change in the issuer's financial position pages 19, 218 and 251 pages 19, 226 and 262
19 Additional information
19.1 Share capital pages 213, 243 and 267 pages 222, 255 and 279
19.2 Memorandum and Articles of Association pages 265 to 267 pages 277 to 279
20 Material contracts page 266 page 279
21 Documents available page 265 page 277
Pages in 2019 Universal Pages in this 2020 Universal

Sections of Annex II of the EU Regulation 2017/1129 Registration Document Registration Document
1 Information to be disclosed about the issuer page 2 page 2
According to article 28 of the European Regulation 809/2004, are included by reference in this Registration Document:
• the consolidated financial statements for the year ended 31 December 2018 and the Statutory Auditors’ report on those consolidated
financial statements, presented on pages 146 to 219 and 220 to 224 of reference document D.19-0065 filed with the AMF on
20 February 2019; the information can be found here : https://www.hsbc.com/-/files/hsbc/investors/investing-in-hsbc/all-reporting/
subsidiaries/2018/annual-results/hsbc-france/190220-hbfr-ara-2018-fr.pdf
• the consolidated financial statements for the year ended 31 December 2019 and the Statutory Auditors’ report on those consolidated
financial statements, presented on pages 155 to 220 and 222 to 225 of reference document D.20-0071 filed with the AMF on
19 February 2020; the information can be found here : https://www.hsbc.com/-/files/hsbc/investors/investing-in-hsbc/all-reporting/
subsidiaries/2019/annual-results/hsbc-france/200219-hbfr-ara-2019-fr.pdf
These documents are available on the website www.hsbc.fr and on that of the Autorité des marchés financiers www.amf-france.org.
Anyone wishing to obtain additional information on the HSBC Continental Europe group can, without obligation, request the documents
by mail:
38 Avenue Kléber
75116 Paris
France
This Registration Document includes the annual financial report: 2020
Parent company financial statements pages 237 to 264
Consolidated financial statements pages 164 to 230
Management report Refer to the Management report cross ref table Statement by person responsible pages 283 and 280
Statutory Auditors’ report pages 231 to 236 and 265 to 269
Cross table on Management report:

Analyses of the activity, results and financial situation pages 4 to 21 and 240
Risk factors pages 80 to 129 and 131 to 163
Capital and Leverage Management pages 129 and 130
Authorities to increase the share capital page 279
Corporate, social and environmental responsibility pages 53 to 79
Corporate governance report pages 22 to 49
Remuneration policy compensation and other advantages to the executive Director pages 40 to 49
Mandates and functions of the Executive Directors pages 23 to 30
Activities of the subsidiaries and Investment policy pages 227 to 230 and 272 to 275
Five year highlights pages 20 and 270
Information on supplier payable amounts schedule page 21
Other legal documents relating to the Annual General Meeting to be held on 11 March 2021 pages 276
Information on HSBC Continental Europe and its share capital pages 277 to 279

Other Information
Network of offices Other locations of the HSBC Continental

Europe Group abroad
HSBC network in France Belgium

HSBC Continental Europe HSBC Continental Europe
279 locations branch
38 avenue Kléber Square de Meeûs 23
75116 Paris 1000 Brussels
Telephone: 33 1 40 70 70 40 Telephone: +32 2 761 2670
www.hsbc.fr Czech Republic
HSBC Continental Europe subsidiaries HSBC Continental Europe
Distribution Na Florenci 2116/15, Nové Město
HSBC Factoring (France) 110 00 Prague 1
38 avenue Kléber Telephone: +42 (0)22 5024 555
75116 Paris Greece

Telephone: 33 1 40 70 72 00 HSBC Continental Europe
Asset Management branch
HSBC Global Asset Management (France) 109-111, avenue Messoghion
Immeuble Cœur Défense 115 26 Athens
110 esplanade du Général de Gaulle Telephone: 30 2106961113
92400 Courbevoie Ireland

Mail address: 38 avenue Kléber 75116 Paris HSBC Continental Europe
Telephone: 33 1 40 70 70 40 branch
HSBC Epargne Entreprise (France) 1 Grand Canal Square, Grand Canal Harbour
Immeuble Cœur Défense Dublin 2, D02 P820
110 esplanade du Général de Gaulle Telephone: +353 (0) 1 635 6000
92400 Courbevoie Italy
Telephone: 33 1 40 70 27 17 HSBC Global Asset Management (France)
HSBC REIM (France) branch
Immeuble Cœur Défense Via Mike Bongiorno 13
110 esplanade du Général de Gaulle 20124 Milan
92400 Courbevoie Telephone: 39 02 72 437 496
Assurance branch
HSBC Assurances Vie (France) Via Mike Bongiorno 13
Immeuble Cœur Défense 20124 Milan
110 esplanade du Général de Gaulle Telephone: +39 02 72437600
92400 Courbevoie Luxembourg
branch
Other locations of the HSBC Group in France
16, boulevard d'Avranches
HSBC Bank plc Paris Branch L-1160 Luxembourg

Telephone: +352 27 12 33 1
38 avenue Kléber
75116 Paris
Telephone: 33 1 40 70 70 40

Netherlands Sweden
HSBC Continental Europe HSBC Global Asset Management (France)
branch branch
De Entree 236, Birger Jarlsgatan 4
1101 EE Amsterdam ZO SE-114 34 Stockholm
Telephone: +31 (0) 20 567 1230 Telephone: 46 8 4545435
Poland HSBC Continental Europe
HSBC Continental Europe branch
branch Birger Jarlsgatan 4
Rondo ONZ 1 SE-114 34 Stockholm
00-124 Varsovie Telephone: 46 8 4545435
Telephone: +48 22 354 05 00 Switzerland
Spain HSBC Global Asset Management (Suisse) AG
HSBC Global Asset Management (France) co-company
branch Bederstrasse 49
Plazza Pablo Ruiz Picasso, 1 CH-8027 Zürich
Torre Picasso Telephone: 41 44 206 26 00
28020 Madrid
Telephone: +34 914 566 979
branch
Plaza Pablo Ruiz Picasso, 1
Torre Picasso planta, 33
28020 Madrid
Telephone: +34 914 566 100

© Copyright HSBC Continental Europe 2021
All rights reserved
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or other-wise, without the prior written permission of HSBC Continental Europe.
Published by Finance Department, HSBC Continental Europe, Paris
Printing and made in France
The FSC® logo identifies products which contain wood from well-managed forests certified in accordance with the rules of the Forest
Stewardship Council®.
38 Avenue Kléber
75116 Paris
France
Telephone: (33 1) 40 70 70 40
www.hsbc.fr

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HSBC Continental Europe

Universal registration document and Annual Financial

Universal registration document and Annual Financial Report 2020 1

Presentation of information Cautionary statement regarding forward-

2 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 3

Presentation of activity and strategy

About HSBC Group

4 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 5

About HSBC Continental Europe

6 Universal registration document and Annual Financial Report 2020

HSBC in Continental Europe

8 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 9

10 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 11

12 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 13

Significant revenue items by business segment – (gains)/losses

Year ended 31 Dec 20192

Significant cost items by business segment – (recoveries)/charges

Year ended 31 Dec 2019 1

14 Universal registration document and Annual Financial Report 2020

Year ended 31 Dec 2019 1

Adjusted profit/(loss) for the period

Year ended 31 Dec 2019 1

Universal registration document and Annual Financial Report 2020 15

Global Banking and Markets

16 Universal registration document and Annual Financial Report 2020

Balance Sheet Information

Universal registration document and Annual Financial Report 2020 17

Profit before tax by country

Net Interest Margin

Net Interest Income

18 Universal registration document and Annual Financial Report 2020

Summary of interest expense by type of liability and equity

Post-balance sheet events

Universal registration document and Annual Financial Report 2020 19

Historical data (unaudited)

During the year 2020:

20 Universal registration document and Annual Financial Report 2020

Information on supplier payable amounts schedule

1 Excluding the European branches of HSBC Continental Europe SA.

Information on client receivable amounts schedule

1 Excluding the European branches of HSBC Continental Europe SA.

Universal registration document and Annual Financial Report 2020 21

to the management report referred to in article L. 225-100 to the

Corporate governance bodies and regime

u Audit Committee Nomination Committee

Financial Crime Risk

Forums and Working Groups

22 Universal registration document and Annual Financial Report 2020

Universal registration document and Annual Financial Report 2020 23

24 Universal registration document and Annual Financial Report 2020

Paule Cellard Lindsay Gordon

First elected: 2019. Term ends: 2022

Universal registration document and Annual Financial Report 2020 25

26 Universal registration document and Annual Financial Report 2020