Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 234

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 234
---
 of investment and productivity growth, may lead to economic recession and lower customer and client activity. Rapid changes to the economic environment can also create challenging operating conditions for financial institutions such as HSBC and may affect our earnings and profits. A key source of uncertainty for 2025 and beyond comes from the expected shift in economic and financial policies in the US. Potential changes in US tariff policy and other countries’ responses are likely to have significant consequences for the global growth outlook and global trade, and may result in higher inflation and affect interest rate expectations. The uncertain outcome of the Chinese government’s policies introduced to stimulate domestic growth and support a rebalancing of the economy including the property sector is also a source of potential risk. In particular, the economic challenges affecting the Chinese property sector could further affect our customers in the region and reduce their activity and demand for our services. – Inflation and monetary policy: The combined pressure of tariffs, inflation and higher interest rates can have material impacts on our customers as these factors would erode real purchasing power and increase debt service costs. Higher interest rates may affect the credit rating of our customers and their ability to repay debt. This could negatively impact the Group’s risk-weighted assets (’RWAs’) and capital position, resulting in increases in expected credit losses and other impairment charges (’ECL’) and potential liquidity stresses due to, amongst other factors, increased customer drawdowns. There could be further adverse impacts on the Group's income if higher rates were to result in lower lending volumes and weaker wealth and insurance revenue. Across most of our markets, high headline inflation continued to subside throughout 2024 and major central banks, including the US Federal Reserve and the Bank of England, enacted monetary easing in the second half of 2024. However, uncertainty over the trajectory of US economic and trade policies, specifically around additional trade barriers and/or tariffs and immigration has shifted the balance of risks around inflation and the future interest rate trajectory and may affect future global growth. – Financial stability: Changing economic conditions and shifting policy create a more uncertain and volatile environment for asset markets. Accommodative financial conditions in the aftermath of the Covid-19 pandemic may have increased vulnerabilities given the rise in asset price valuations and the increase in debt levels. Changes to asset prices can adversely affect HSBC by increasing the financial vulnerability of customers and decreasing the value of collateral and other claims. – Fiscal policy and high levels of government debt: Through the Covid-19 pandemic period, government debt levels across both developed and emerging markets increased sharply, and in