Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 292

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 292
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 is modelled for mortgage portfolios by forecasting future loan-to-value profiles for the remaining maturity of the asset, using national level house price index forecasts and applying the corresponding LGD expectation relative to the updated forecast collateral values. For unsecured retail portfolios historically observed recovery rates are leveraged to measure loss. For both mortgages and unsecured, a limited number of portfolios utilise a macroeconomic dependent stressed LGD applied to the Downside 2 scenario. Management judgemental adjustments In the context of IFRS 9, management judgemental adjustments are typically short-term increases or decreases to the modelled allowance for ECL at either a customer, segment or portfolio level where management believes allowances do not sufficiently reflect the credit risk/expected credit losses at the reporting date. These can relate to risks or uncertainties that are not reflected in the models and/or to any late-breaking events with significant uncertainty, subject to management review and challenge. This includes refining model inputs and outputs and using adjustments to ECL based on management judgement and quantitative analysis for impacts that are difficult to model. The effects of management judgemental adjustments are considered for both balances and allowance for ECL when determining whether or not a significant increase in credit risk has occurred and is allocated to a stage where appropriate. This is in accordance with the internal adjustments framework.

| 186 | HSBC Holdings plcAnnual Report on Form 20-F |

Risk review

Management judgemental adjustments are reviewed under the

governance process for IFRS 9 (as detailed in the section ‘Credit risk

management’ on page 169 ). Review and challenge focuses on the

rationale and quantum of the adjustments with a further review

carried out by the second line of defence where significant. For some

management judgemental adjustments, internal frameworks establish

the conditions under which these adjustments should no longer be

required and as such are considered as part of the governance

process. This internal governance process allows management

judgemental adjustments to be reviewed regularly and, where

possible, to reduce the reliance on these through model recalibration

or redevelopment, as appropriate.

The drivers of management judgemental adjustments continue to

evolve with the economic environment and as new risks emerge.

In addition to management judgemental adjustments there are also

‘Other adjustments’, which are made to address process limitations

and data/model deficiencies and can also include, where appropriate,

the impact of new models where governance has sufficiently

progressed to allow an accurate estimate of ECL allowance to be

incorporated into the total reported ECL.

‘