Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 539

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 539
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–3.3         | 30bps                                    |

For CRRs greater than 3.3 that are not impaired, a significant increase in credit risk is considered to have occurred when the origination PD has doubled. The significance of changes in PD was informed by expert credit risk judgement, referenced to historical credit migrations and to relative changes in external market rates. For loans originated prior to the implementation of IFRS 9, the origination PD does not include adjustments to reflect expectations of future macroeconomic conditions since these are not available without the use of hindsight. In the absence of this data, origination PD must be approximated assuming through-the-cycle PDs and through-the-cycle migration probabilities, consistent with the instrument’s underlying modelling approach and the CRR at origination. For these loans, the quantitative comparison is supplemented with additional CRR deterioration-

based thresholds, as set out in the table below:

| Origination CRR | Additional significance criteria – number of CRR grade notchesdeterioration required to identify as significant creditdeterioration (stage 2) (> or equal to) |
| 0.1             | 5 notches                                                                                                                                                     |
| 1.1–4.2         | 4 notches                                                                                                                                                     |
| 4.3–5.1         | 3 notches                                                                                                                                                     |
| 5.2–7.1         | 2 notches                                                                                                                                                     |
| 7.2–8.2         | 1 notch                                                                                                                                                       |
| 8.3             | 0 notch                                                                                                                                                       |

Further information about the 23-grade scale used for CRR can be found on page 170 . For retail portfolios, default risk is assessed using a reporting date 12-month PD derived from internal models, which incorporate all available information about the customer. This PD is adjusted for the effect of macroeconomic forecasts for periods longer than 12 months and is considered to be a reasonable approximation of a lifetime PD measure. Retail exposures are first segmented into homogenous portfolios, generally by country, product and brand. Within each portfolio, the stage 2 accounts are defined as accounts with an adjusted 12-month PD greater than the average 12-month PD of loans in that portfolio 12 months before they become 30 days past due. The expert credit risk judgement is that no prior increase in credit risk is significant. This portfolio-specific threshold therefore identifies loans with a PD higher than would be expected from loans that are performing as originally expected and higher than that which