Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 541

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 541
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. 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 makes use of the IRB framework where possible, with recalibration to meet the differing IFRS 9 requirements as set out in the following

table:

| Model | Regulatory capital                                                                                                                                                                                                                                                                                                                                                                                                     | IFRS 9                                                                                                                                                                                                                                                                                                                  |
| PD    | –Represents long-run average PD throughout a full economic cycle(for mortgage portfolios a hybrid approach, which sits between theextremes of point in time and through the cycle, is used forcalculating long-run averages as required by the PRA)–Default backstop of 90+ days past due for all portfolios (includesunlikely to pay (‘UTP’) criteria in line with internal policy)–May be subject to a sovereign cap | –Represents current portfolio quality and performance, adjusted forthe impact of multiple forward-looking macroeconomic scenarios–Default backstop of 90+ days past due for all portfolios (includesUTP criteria in line with internal policy)                                                                          |
| EAD   | –Cannot be lower than current balance                                                                                                                                                                                                                                                                                                                                                                                  | –Amortisation captured for term products–Future drawdown captured for revolving products                                                                                                                                                                                                                                |
| LGD   | –Downturn LGD (consistent with losses we would expect to sufferduring a severe but plausible economic downturn)–Regulatory floors may apply to mitigate risk of underestimatingdownturn LGD due to lack of historical data–Discounted using appropriate index (minimum 9%)–All collection costs included                                                                                                               | –LGD based on recent portfolio performance data and includes theexpected impact of future economic conditions such as change inthe value of collateral–No floors applied, discounted using the original effective interest rate–Only costs associated with selling collateral and certain third-partycosts are included |
| Other |                                                                                                                                                                                                                                                                                                                                                                                                                        | –Discounted back from point of default to balance sheet date                                                                                                                                                                                                                                                            |

While 12-month PD