Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 325

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 325
---
 and maintaining a supply of short-term liquid assets for deployment under extraordinary circumstances. The main market risks to which HSBC Holdings is exposed are banking book interest rate risk and foreign currency risk. Exposure to these risks arises from short-term cash balances, funding positions held, loans to subsidiaries, investments in long-term financial assets, financial liabilities including debt capital issued, and structural foreign exchange hedges. In addition, the impacts of the American Depository Receipts in Grupo Financiero Galicia received as part of the purchase consideration for HSBC Argentina are recognised by HSBC Holdings. The objective of HSBC Holdings’ market risk management strategy is to manage volatility in capital resources, cash flows and distributable reserves that could be caused by movements in market parameters. Market risk for HSBC Holdings is monitored by Holdings ALCO in accordance with its risk appetite statement.

| HSBC Holdings plcAnnual Report on Form 20-F | 233 |

HSBC Holdings uses interest rate swaps and cross-currency interest rate swaps to manage the interest rate risk and foreign currency risk arising from its long-term debt issues. It also uses forward foreign exchange contracts to manage its structural foreign exchange exposures. For quantitative disclosures on HSBC Holdings’ interest rate risk in the banking book see page 245 . Pension risk management processes Our global pensions strategy is to move from defined benefit to defined contribution plans, where local law allows and it is considered competitive to do so. Our most material defined benefit plans have been closed to new entrants for many years, and the majority (including the largest plan in the UK) are also closed to future accrual. In defined contribution pension plans, the contributions that HSBC is required to make are known, while the ultimate pension benefit will vary, typically with investment returns achieved by investment choices made by the employee. While the market risk to HSBC of defined contribution plans is low, the Group is still exposed to operational and reputational risk. In defined benefit pension plans, the level of pension benefit is known. Therefore, the level of contributions required by HSBC will vary due to a number of risks, including: – investments delivering a return below the level required to provide the projected plan benefits; – the prevailing economic environment leading to corporate failures, thus triggering write-downs in asset values (both equity and debt); – a change in either interest rates or inflation expectations, causing an increase in the value of plan liabilities; and – plan members living longer than expected (known as longevity risk). Pension risk is assessed using an economic capital model that takes into account potential variations in