Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 543

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 543
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 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. For wholesale overdraft facilities, credit risk management actions are taken no less frequently than on an annual basis. Forward-looking economic inputs HSBC applies multiple forward-looking global economic scenarios determined with reference to external forecast distributions representative of its view of forecast economic conditions. This approach is considered sufficient to calculate unbiased expected credit losses 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 178 .

| 384 | HSBC Holdings plcAnnual Report on Form 20-F |

Notes on the financial statements

Critical estimates and judgements

| 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 setout below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                      |
| Judgements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Estimates                                                                                                                                                                                                                                                                                                            |
| –Defining what is considered to be a significant increase in credit risk–Determining the lifetime and point of initial recognition of overdrafts and credit cards–Selecting and calibrating the PD, LGD and EAD models, which support the calculations, includingmaking reasonable and supportable judgements about how models react to current and futureeconomic conditions–Selecting model inputs and economic forecasts, including determining whether sufficient andappropriately weighted economic forecasts are incorporated to calculate unbiased expected credit loss–Making management adjustments to account for late-breaking events, model and data limitations anddeficiencies, and expert credit judgements–Selecting applicable recovery strategies for certain wholesale credit-impaired loans | –The section ‘Measurement uncertainty andsensitivity analysis of ECL estimates’, marked asaudited from page178, sets out the assumptionsused in determining ECL, and provides an indicationof the sensitivity of the result to the application ofdifferent weightings being applied to differenteconomic assumptions |

(j) Insurance contracts A contract is classified as an insurance contract where the Group accepts significant insurance risk from another party by agreeing to compensate that party if it is adversely affected by a specified uncertain future event. An insurance contract may also transfer financial