Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 72

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 72
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 sheet and our capital adequacy, as well as to provide actionable insights into how key elements of our portfolios may behave during a crisis. We use the outcomes to calibrate our risk appetite to inform our strategic and financial plans, helping to improve the quality of management’s decision making. The results from the stress tests also drive recovery and resolution planning to help enhance the Group’s financial stability under various severe macroeconomic or idiosyncratic scenarios. The selection of stress scenarios is based upon the identification and assessment of our top and emerging risks and our risk appetite. The Prudential Regulation Authority (‘PRA’) cancelled the 2024 Annual Cyclical Scenario stress testing exercise and instead commenced a Desk Based Stress Test exercise, which used PRA models and their in-house expertise to test the resilience of the UK banking system against more than one adverse macroeconomic scenario. HSBC provided 2023 year-end data to support this. The results of this exercise across firms were published in aggregate only, within the Financial Stability Report issued in the fourth quarter of 2024. The PRA announced an updated Stress Testing Framework and intends to return to a concurrent exercise in 2025, involving the submission of stressed projections. Further details will be provided by the PRA during 2025. During 2024, the Group-wide internal stress test was completed and assessed the impact of two contrasting scenarios envisioning severe macroeconomic conditions over a five- year period. These scenarios reflected the uncertain inflation and interest rate environment, heightened geopolitical tensions, banking sector challenges, and global economic stress. The outcomes demonstrated that the Group has sufficient capital to withstand severe but plausible stress conditions. Additionally, the conclusions drawn from this exercise will also be included in the Group Internal Capital Adequacy Assessment Process . Climate risk Climate risk relates to the financial and non- financial impacts that may arise as a consequence of climate change and the move to a net zero economy. Climate risk can impact us either directly or through our relationships with our clients. These include the potential risks arising as a result of our net zero ambition, which could lead to reputational concerns, and potential legal and/ or regulatory enforcement action if we are perceived to mislead stakeholders on our business activities or if we fail to achieve our stated net zero ambition. We seek to manage climate risk across all our businesses in line with our Group-wide risk management framework and continue to incorporate climate considerations within our traditional risk types. For further details of our approach to climate risk management, see ‘Climate risk‘ on page 249 . For further details