Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 295

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 295
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 Hong Kong and the US, and

adjustments to exposures to the automotive and industrial sectors in

Germany.

At 31 December 2024, retail management judgemental adjustments

to allowance for ECL were $ 0.0b n (31 December 2023 $ 0.6b n). The

reduction in adjustments compared with 31 December 2023 for

inflation-related adjustments was primarily due to the reduction of

inflation related risk in the UK and the sale of the Canadian banking

business. Other credit judgements decreased due to reductions in

economic uncertainty, primarily in the UK and Asia, and model

redevelopments which captured macro-economic risks more

effectively.

Economic scenarios sensitivity analysis of ECL estimates Management considered the sensitivity of the ECL outcome against the economic forecasts as part of the ECL governance process by recalculating the allowance for ECL under each scenario described above for selected portfolios, applying a 100% weighting to each scenario in turn. The weighting is reflected in both the determination of a significant increase in credit risk and the measurement of the resulting allowances.

| HSBC Holdings plcAnnual Report on Form 20-F | 187 |

The allowance for ECL calculated for the Upside and Downside scenarios should not be taken to represent the upper and lower limits of possible ECL outcomes. The impact of defaults that might occur in the future under different economic scenarios is captured by recalculating allowances for loans at the balance sheet date. There is a particularly high degree of estimation uncertainty in numbers representing tail risk scenarios when assigned a 100% weighting. For wholesale credit risk exposures, the sensitivity analysis excludes allowance for ECL and financial instruments related to defaulted (stage 3) obligors. The measurement of stage 3 ECL is relatively more sensitive to credit factors specific to the obligor than future economic scenarios, and therefore the effects of macroeconomic factors are not necessarily the key consideration when performing individual assessments of allowances for obligors in default. Loans to defaulted obligors are a small portion of the overall wholesale lending exposure, even if representing the majority of the allowance for ECL. Due to the range and specificity of the credit factors to which the ECL is sensitive, it is not possible to provide a meaningful alternative sensitivity analysis for a consistent set of risks across all defaulted obligors. For retail mortgage exposures the sensitivity analysis includes allowance for ECL for defaulted obligors of loans and advances. This is because the retail ECL for secured mortgage portfolios, including loans in all stages