HSBC Holdings plc ('HSBC' or together with its subsidiaries, 'the Group' or 'HSBC Group') and HSBC UK Bank plc (together with its subsidiaries, 'HSBC UK') note the publication today of the Bank of England's 2022 Annual Cyclical Scenario Stress Test ('ACS') results.
The severe stress scenario used for the 2022 ACS is not a forecast. It is designed to test the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, large falls in asset prices and higher global interest rates, and a separate stress of misconduct costs.
HSBC Group
Under this stress scenario, the Bank of England's results indicate that the Group's common equity tier 1 ('CET1') capital ratio on an IFRS 9 transitional basisb would fall to a low point of 10.7%, above the Group's CET1 hurdle rate of 7.0%. On an IFRS 9 non-transitional basis, the Group's CET1 capital ratio is projected to reach a low point of 9.9%, which is above its IFRS 9 non-transitional CET1 hurdle rate of 6.2%.
HSBC UK
Under this stress scenario, the Bank of England's results indicate that HSBC UK's CET1 capital ratio on an IFRS 9 transitional basisb would fall to a low point of 10.1%, above its CET1 hurdle rate of 6.2%. On an IFRS 9 non-transitional basis, HSBC UK's CET1 capital ratio is projected to reach a low point of 8.9%, which is above its IFRS 9 non-transitional CET1 hurdle rate of 6.4%.
Both the Group and HSBC UK's results incorporate strategic management actions, which have been accepted by the Bank of England for the purposes of this exercise. In practice, under such adverse economic circumstances, the Group would consider a variety of management actions depending on the prevailing circumstances at the time.
The Group's intention, as evidenced by its past actions, is to maintain a conservative and prudent approach to capital management. Today's results demonstrate the Group and HSBC UK's continued capital strength under this severe downside scenario.
The Bank of England's 2022 ACS results are available to view in full at:
http://www.bankofengland.co.uk/stress-testing