Company: HBCYF
Filing Date: 2025-10-28
Form Type: 6-K
Source: 0001654954-25-012267
Chunk: 57

Company: HSBC HOLDINGS PLC
Filing Date: 2025-10-28
Form: 6-K
Chunk 57
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ed to determine an unbiased ECL estimate.

Management assessed the current economic environment, reviewed the latest economic forecasts and discussed key risks before selecting the economic scenarios and their weightings.

Management judgemental adjustments are used where modelled allowance for ECL does not fully reflect the identified risks and related uncertainty, or to capture significant late-breaking events.

Methodology

At 30 September 2025, four economic scenarios were used to capture the latest economic expectations and to articulate management's view of the range of risks and potential outcomes. In each quarter, scenarios are updated with the latest economic forecasts and distributional estimates. Three scenarios - the Upside, Central and Downside - are drawn from external consensus forecasts, market data and distributional estimates of the entire range of economic outcomes. The fourth scenario, the Downside 2, represents management's view of severe downside risks.

Scenarios produced to calculate ECL are aligned to HSBC's top and emerging risks.

#### Description of economic scenarios
The Central scenario reflects the expectation of lower average GDP growth in the US, UK and other key markets in 2025-2026, relative to the fourth quarter of 2024. The weaker outlook incorporates the impact of higher US tariff rates and increased policy uncertainty on future global trade volumes, investment spending and employment. The scenario is consistent with a US tariff rate, measured as an effective trade-weighted average, of 18% at the end of 2025. It includes the higher reciprocal tariff rates that were implemented following the end of the temporary pause in the third quarter of 2025, the suspension of higher tariff rates with mainland China and the trade agreements the US has concluded with key partners.

However, forecasts have improved relative to the fourth quarter of 2024 for mainland China and Hong Kong, when projections were weighed down by expectations of a sharper escalation in US tariffs. For the third quarter of 2025, strong fiscal support, more accommodative monetary conditions and ongoing trade redirection have increased confidence that these economies can avoid a significant downturn.

Risks to the Central scenario outlook are captured in the outer scenarios. The key sources of forecast risk and uncertainty in the third quarter of 2025 include trade policies and the rates at which future tariffs are levied, geopolitical tensions, inflation and the outlook for monetary policy.

Outer scenarios for most markets are configured as demand side shocks, but the approach may vary depending on the risk profile of each country. To the downside, scenarios explore the intensification and crystallisation of key risk themes and are modelled so that