10-Q

UNITED STATES SECURITIES AND

EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

FORM 10-Q

___________________

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-08198

___________________

HSBC FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	86-1052062
(State of incorporation)	(I.R.S. Employer Identification No.)
1421 W. Shure Drive, Suite 100, Arlington Heights, IL	60004
(Address of principal executive offices)	(Zip Code)

(224) 880-7000

Registrant’s telephone number, including area code

___________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the

definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o	Non-accelerated filer	x	Smaller reporting company	o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of April 29, 2016, there were 68 shares of the registrant’s common stock outstanding, all of which are owned by HSBC Investments (North America) Inc.

HSBC Finance Corporation

Form 10-Q

TABLE OF CONTENTS

Part/Item No
Part I		Page
Item 1.	Financial Statements (Unaudited):
	Consolidated Statement of Income (Loss)	3
	Consolidated Statement of Comprehensive Income (Loss)	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Changes in Shareholders' Equity	6
	Consolidated Statement of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations:
	Forward-Looking Statements	38
	Executive Overview	39
	Basis of Reporting	43
	Receivables Review	44
	Real Estate Owned	45
	Results of Operations	46
	Segment Results — Group Reporting Basis	50
	Credit Quality	53
	Liquidity and Capital Resources	65
	Fair Value	67
	Risk Management	68
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 4.	Controls and Procedures	73
Part II		Page
Item 1.	Legal Proceedings	73
Item 5.	Other Information	73
Item 6.	Exhibits, Financial Statement Schedules	75
Index		76
Signatures		78

HSBC Finance Corporation

PART I

Item 1.    Financial Statements.

CONSOLIDATED STATEMENT OF INCOME (LOSS) (UNAUDITED)

Three Months Ended March 31,	2016			2015
	(in millions)
Interest income	$	342		$	432
Interest expense on debt held by:
Non-affiliates	107			195
HSBC affiliates	53			53
Interest expense	160			248
Net interest income	182			184
Provision for credit losses	37			27
Net interest income after provision for credit losses	145			157
Other revenues:
Derivative related expense	(115		)	(97		)
Gain on debt designated at fair value and related derivatives	24			59
Servicing and other fees from HSBC affiliates	4			6
Lower of amortized cost or fair value adjustment on receivables held for sale	(55		)	(17		)
Other income	9			7
Total other revenues	(133		)	(42		)
Operating expenses:
Salaries and employee benefits	38			42
Occupancy and equipment expenses, net	6			8
Real estate owned expenses	3			4
Other expenses	49			40
Support services from HSBC affiliates	42			54
Total operating expenses	138			148
Loss from continuing operations before income tax	(126		)	(33		)
Income tax benefit	(56		)	(28		)
Loss from continuing operations	(70		)	(5		)
Discontinued operations (Note 2):
Loss from discontinued operations before income tax	(7		)	—
Income tax benefit	3			—
Loss from discontinued operations	(4		)	—
Net loss	$	(74	)	$	(5	)

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC Finance Corporation

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Three Months Ended March 31,	2016			2015
	(in millions)
Net loss	$	(74	)	$	(5	)
Other comprehensive income, net of tax:
Net change in unrealized gains (losses), net of tax, on:
Derivatives designated as cash flow hedges	8			11
Pension and postretirement benefit plan adjustments	(1		)	—
Other comprehensive income, net of tax	7			11
Total comprehensive income (loss)	$	(67	)	$	6

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC Finance Corporation

CONSOLIDATED BALANCE SHEET (UNAUDITED)

	March 31, 2016			December 31, 2015
	(in millions, except share data)
Assets
Cash	$	106		$	124
Securities purchased under agreements to resell	779			2,724
Receivables, net (including $1.3 billion and $1.7 billion at March 31, 2016 and December 31, 2015, respectively, collateralizing long-term debt and net of credit loss reserves of $272 million and $311 million at March 31, 2016 and December 31, 2015, respectively)	8,433			8,987
Receivables held for sale	8,185			8,265
Properties and equipment, net	2			4
Real estate owned	68			88
Deferred income taxes, net	2,959			2,923
Other assets	1,132			1,017
Assets of discontinued operations	16			13
Total assets	$	21,680		$	24,145
Liabilities
Debt:
Due to affiliates (including $495 million and $496 million at March 31, 2016 and December 31, 2015, respectively, carried at fair value)	$	5,774		$	5,925
Long-term debt (including $1.4 billion and $3.3 billion at March 31, 2016 and December 31, 2015, respectively, carried at fair value and $694 million and $879 million at March 31, 2016 and December 31, 2015, respectively, collateralized by receivables)	7,502			9,510
Total debt	13,276			15,435
Derivative related liabilities	—			57
Liability for postretirement benefits	142			143
Other liabilities	1,611			1,773
Liabilities of discontinued operations	113			102
Total liabilities	15,142			17,510
Shareholders’ equity
Redeemable preferred stock:
Series B (1,501,100 shares authorized, $0.01 par value, 575,000 shares issued and outstanding at both March 31, 2016 and December 31, 2015)	575			575
Series C (1,000 shares authorized, $0.01 par value, 1,000 shares issued and outstanding at both March 31, 2016 and December 31, 2015)	1,000			1,000
Common shareholder’s equity:
Common stock ($0.01 par value, 100 shares authorized; 68 shares issued and outstanding at both March 31, 2016 and December 31, 2015)	—			—
Additional paid-in-capital	23,215			23,245
Accumulated deficit	(18,273		)	(18,199		)
Accumulated other comprehensive income	21			14
Total common shareholder’s equity	4,963			5,060
Total shareholders’ equity	6,538			6,635
Total liabilities and shareholders’ equity	$	21,680		$	24,145

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC Finance Corporation

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

Three Months Ended March 31,	2016			2015
	(in millions)
Preferred stock
Balance at beginning and end of period	$	1,575		$	1,575
Common shareholder’s equity
Common stock
Balance at beginning and end of period	—			—
Additional paid-in-capital
Balance at beginning of period	23,245			23,381
Dividends on preferred stock	(32		)	(32		)
Employee benefit plans, including transfers and other	2			(1		)
Balance at end of period	23,215			23,348
Accumulated deficit
Balance at beginning of period	(18,199		)	(17,768		)
Net loss	(74		)	(5		)
Balance at end of period	(18,273		)	(17,773		)
Accumulated other comprehensive income (loss)
Balance at beginning of period	14			(65		)
Other comprehensive income	7			11
Balance at end of period	21			(54		)
Total common shareholder’s equity at end of period	4,963			5,521
Total shareholders' equity at end of period	$	6,538		$	7,096

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC Finance Corporation

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31,	2016			2015
	(in millions)
Cash flows from operating activities
Net loss	$	(74	)	$	(5	)
Loss from discontinued operations	(4		)	—
Loss from continuing operations	(70		)	(5		)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:
Provision for credit losses	37			27
Lower of amortized cost or fair value adjustment on receivables held for sale	55			17
(Gain) loss on sale of real estate owned, including lower of amortized cost or fair value adjustments	(1		)	—
Depreciation and amortization	1			2
Mark-to-market on debt designated at fair value and related derivatives	(8		)	2
Foreign exchange and derivative movements on long-term debt and net change in non-fair value option related derivative assets and liabilities	65			(447		)
Net change in other assets	(145		)	(187		)
Net change in other liabilities	(162		)	20
Other, net	6			42
Cash provided by (used in) operating activities – continuing operations	(222		)	(529		)
Cash provided by (used in) operating activities – discontinued operations	3			27
Cash provided by (used in) operating activities	(219		)	(502		)
Cash flows from investing activities
Net change in securities purchased under agreements to resell	1,945			536
Net change in interest bearing deposits with banks	—			(1		)
Receivables:
Net collections	510			484
Proceeds from sales of real estate owned	39			48
Sales (purchases) of properties and equipment	2			—
Cash provided by investing activities – continuing operations	2,496			1,067
Cash provided by investing activities – discontinued operations	—			—
Cash provided by investing activities	2,496			1,067
Cash flows from financing activities
Debt:
Net change in due to affiliates	(151		)	—
Long-term debt retired	(2,113		)	(545		)
Shareholders’ dividends	(32		)	(32		)
Cash used in financing activities – continuing operations	(2,296		)	(577		)
Cash used in financing activities – discontinued operations	—			—
Cash used in financing activities	(2,296		)	(577		)
Net change in cash	(19		)	(12		)
Cash at beginning of period(1)	136			175
Cash at end of period(2)	$	117		$	163
Supplemental Noncash Investing and Capital Activities:
Fair value of properties added to real estate owned	$	19		$	39
Transfer of receivables to held for sale	230			296

⁽¹⁾  Cash at beginning of period includes $12 million and $18 million for discontinued operations as of January 1, 2016 and 2015, respectively.

⁽²⁾  Cash at end of period includes $11 million and $16 million for discontinued operations as of March 31, 2016 and 2015, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC Finance Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note		Page	Note		Page
1	Organization and Basis of Presentation	8	9	Pension and Other Postretirement Benefits	25
2	Discontinued Operations	9	10	Related Party Transactions	25
3	Receivables, net	10	11	Business Segments	27
4	Credit Loss Reserves	15	12	Variable Interest Entities	29
5	Receivables Held for Sale	16	13	Fair Value Measurements	30
6	Fair Value Option	19	14	Litigation and Regulatory Matters	35
7	Derivative Financial Instruments	20	15	New Accounting Pronouncements	36
8	Accumulated Other Comprehensive Loss	24

1. Organization and Basis of Presentation

HSBC Finance Corporation is an indirect wholly owned subsidiary of HSBC North America Holdings Inc. (“HSBC North America”), which is an indirect wholly-owned subsidiary of HSBC Holdings plc (“HSBC” and, together with its subsidiaries, "HSBC Group"). The accompanying unaudited interim consolidated financial statements of HSBC Finance Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. HSBC Finance Corporation and its subsidiaries may also be referred to in this Form 10-Q as “we,” “us” or “our.” These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K"). Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

For the three months ended March 31, 2016, our income tax benefit was impacted by a reversal of approximately $15 million associated with an out of period adjustment to our deferred tax asset balance.

During the third quarter of 2015, we reclassified preferred dividends within common shareholder's equity in order to properly present dividends as a reduction to additional paid-in-capital rather than as an increase to accumulated deficit for all periods. Total common shareholder's equity, total shareholders' equity and reported net income for March 31, 2015 was unaffected. The following table reflects the impact of this reclassification for the prior year quarter below:

	March 31, 2015
Additional Paid-in-Capital:
As previously reported	$	23,986
After reclassification	23,348
Accumulated Deficit:
As previously reported	$	(18,411	)
After reclassification	(17,773		)
Cumulative dividends reclassified	$	638

The consolidated financial statements have been prepared on the basis that we will continue as a going concern. Such assertion contemplates the significant losses recognized and the challenges we anticipate with respect to a sustained return to profitability

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HSBC Finance Corporation

under prevailing and forecasted economic and business conditions. HSBC continues to be fully committed and has the capacity to continue to provide the necessary capital and liquidity to fund continuing operations.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Unless otherwise noted, information included in these notes to the consolidated financial statements relates to continuing operations for all periods presented. See Note 2, "Discontinued Operations," for further details. Interim results should not be considered indicative of results in future periods.

2. Discontinued Operations

2012 Discontinued Operations:

Commercial In 2012, we began reporting our Commercial business in discontinued operations as there were no longer any outstanding receivable balances or any remaining significant cash flows generated from this business. At March 31, 2016 and December 31, 2015, assets of our Commercial business totaled $4 million and $5 million, respectively. There were no liabilities in our Commercial business at either March 31, 2016 or December 31, 2015. The following table summarizes the operating results of our discontinued Commercial business for the periods presented:

Three Months Ended March 31,	2016		2015
	(in millions)
Net interest income and other revenues	$	4	$	7
Income from discontinued operations before income tax	2		4

2011 Discontinued Operations:

Card and Retail Services In 2012, HSBC, through its wholly-owned subsidiaries HSBC Finance Corporation, HSBC USA Inc. ("HSBC USA") and other wholly-owned affiliates, sold its Card and Retail Services business to Capital One Financial Corporation (“Capital One”). In addition to receivables, the sale included real estate and certain other assets and liabilities which were sold at book value or, in the case of real estate, appraised value.

The following table summarizes the operating results of our discontinued Card and Retail Services business for the periods presented:

Three Months Ended March 31,	2016			2015
	(in millions)
Net interest income and other revenues	$	—		$	—
Loss from discontinued operations before income tax(1)	(9		)	(4		)

⁽¹⁾  The three months ended March 31, 2016 includes incremental expenses of $7 million for legal matters. For the three months ended March 31, 2015, the amount includes expenses related to activities to complete the separation of the credit card operational infrastructure between us and Capital One.

At March 31, 2016 and December 31, 2015, assets of our discontinued Card and Retail Services business totaled $12 million and $8 million, respectively. Liabilities of our Card and Retail Services business totaled $113 million and $102 million at March 31, 2016 and December 31, 2015, respectively, which primarily consists of certain legal accruals.

See Note 14, "Litigation and Regulatory Matters," for discussion regarding a consent order issued by the Office of the Comptroller of the Currency ("OCC") on April 13, 2016 related to customers who purchased a certain credit monitoring product which was previously marketed and administered by our discontinued Card and Retail Services business.

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HSBC Finance Corporation

3. Receivables, net

Receivables consisted of the following:

	March 31, 2016			December 31, 2015
	(in millions)
Real estate secured:
First lien	$	6,807		$	7,302
Second lien	1,766			1,854
Total real estate secured receivables	8,573			9,156
Accrued interest income and other	132			142
Credit loss reserve for receivables	(272		)	(311		)
Total receivables, net	$	8,433		$	8,987

Deferred origination fees, net of costs, totaled $68 million and $71 million at March 31, 2016 and December 31, 2015, respectively, and are included in the receivables balance. Net unamortized premium on our receivables totaled $31 million and $35 million at March 31, 2016 and December 31, 2015, respectively, and are also included in the receivables balance.

Collateralized funding transactions  Secured financings previously issued under public trusts with a balance of $694 million at March 31, 2016 are secured by $1,305 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts with a balance of $879 million at December 31, 2015 were secured by $1,654 million of closed-end real estate secured receivables.

Aging Analysis of Past Due Receivables The following tables summarize the past due status of our receivables (excluding receivables held for sale) at March 31, 2016 and December 31, 2015. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the terms of the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-aging.

	Past Due				Total Past Due				Total Receivables(2)
March 31, 2016	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	141	$	168	$	309	$	6,498	$	6,807
Second lien	78		48		126		1,640		1,766
Total real estate secured receivables	$	219	$	216	$	435	$	8,138	$	8,573

	Past Due				Total Past Due				Total Receivables(2)
December 31, 2015	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	179	$	219	$	398	$	6,904	$	7,302
Second lien	98		62		160		1,694		1,854
Total real estate secured receivables	$	277	$	281	$	558	$	8,598	$	9,156

⁽¹⁾  Receivables less than 30 days past due are presented as current.

⁽²⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and include certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

Nonaccrual receivables Nonaccrual receivables and nonaccrual receivables held for sale are all receivables which are 90 or more days contractually delinquent as well as second lien receivables (regardless of delinquency status) where the first lien receivable that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have

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HSBC Finance Corporation

made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged receivable subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual.

Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Nonaccrual receivable portfolios(1):
Real estate secured(2)	$	222	$	283
Receivables held for sale	444		386
Total nonaccrual receivables(3)	$	666	$	669

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonaccrual real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  Nonaccrual receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

The following table provides additional information on our total nonaccrual receivables:

Three Months Ended March 31,	2016		2015
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$	18	$	39
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual receivables during the period	2		5

Troubled Debt Restructurings  We report as troubled debt restructurings ("TDR Loans") substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods. Additionally, we report as TDR Loans all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification. TDR Loans also include receivables discharged under Chapter 7 bankruptcy and not re-affirmed. TDR Loans are considered to be impaired loans. The TDR Loan balances in the tables below reflect the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies and include all basis adjustments on the receivable, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased receivables. Additionally, the carrying amount of TDR Loans classified as held for sale has been reduced by both the lower of amortized cost or fair value adjustment as well as the credit loss reserves associated with these receivables prior to the transfer. TDR Loans are considered to be impaired loans regardless of their accrual status.

Modifications for real estate secured receivables may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount, partial forgiveness or deferment of principal or other loan covenants. A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate and making other changes to the loan terms, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. TDR Loans are reserved for based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans. The portion of the credit loss reserves on TDR Loans that is associated with the discounting of cash flows is released from credit loss reserves over the life of the TDR Loan. There are no credit loss reserves associated with TDR Loans classified as held for sale as they are carried at the lower of amortized cost or fair value.

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HSBC Finance Corporation

The following table presents information about receivables held for investment and receivables held for sale which as a result of any account management action taken during the three months ended March 31, 2016 and 2015 became classified as TDR Loans as well as a summary of the type of account management action taken.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured receivables classified as TDR Loans during the period:
First lien held for investment	$	18	$	125
Second lien held for investment	23		16
Real estate secured receivables held for sale	71		10
Total	$	112	$	151
Types of account management actions taken during the period:
Modifications, primarily interest rate modifications	$	56	$	60
Re-age of past due account	56		91
Total	$	112	$	151

The tables below present information about our TDR Loans and TDR Loans held for sale, including the related allowance for credit losses.

	March 31, 2016				December 31, 2015
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans:(1)
Real estate secured:
First lien(2)	$	722	$	834	$	870	$	1,003
Second lien(2)	641		712		652		732
Real estate secured receivables held for sale(3)	6,105		7,381		6,044		7,317
Total real estate secured TDR Loans	$	7,468	$	8,927	$	7,566	$	9,052
Credit loss reserves for TDR Loans:(4)
Real estate secured:
First lien	$	72			$	95
Second lien	133				135
Total credit loss reserves for real estate secured TDR Loans(3)	$	205			$	230

⁽¹⁾  At March 31, 2016 and December 31, 2015, the unpaid principal balance reflected above includes $757 million and $740 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action.

⁽²⁾  At March 31, 2016 and December 31, 2015, the carrying value of TDR Loans held for investment totaling $211 million and $250 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.

⁽⁴⁾  Included in credit loss reserves.

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HSBC Finance Corporation

The following table provides additional information about the average balance and interest income recognized on TDR Loans and TDR Loans held for sale.

Three Months Ended March 31,	2016		2015
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien	$	6,775	$	10,207
Second lien	750		900
Total average balance of TDR Loans	$	7,525	$	11,107
Interest income recognized on TDR Loans:
Real estate secured:
First lien	$	137	$	180
Second lien	20		22
Total interest income recognized on TDR Loans	$	157	$	202

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the three months ended March 31, 2016 and 2015.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured:
First lien	$	4	$	55
Second lien	4		9
Real estate secured receivables held for sale	20		2
Total	$	28	$	66

Consumer Receivable Credit Quality Indicators  Credit quality indicators used for consumer receivables include a loan’s delinquency status, whether the loan is performing and whether the loan is a TDR Loan.

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale (“delinquency ratio”) for our receivable portfolio.

	March 31, 2016				December 31, 2015
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured receivables(1):
First lien	$	209	3.07	%	$	272	3.73	%
Second lien	72		4.08		94		5.07
Real estate secured receivables held for sale	596		7.28		569		6.88
Total real estate secured receivables(2)	$	877	5.23	%	$	935	5.37	%

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, total real estate secured receivables include $382 million and $363 million, respectively, that are in the process of foreclosure.

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Nonperforming The following table summarizes the status of receivables and receivables held for sale.

	Accruing Loans		Nonaccrual Loans(4)		Total
	(in millions)
At March 31, 2016(1)
Real estate secured(2)(3)	$	8,351	$	222	$	8,573
Real estate secured receivables held for sale	7,741		444		8,185
Total	$	16,092	$	666	$	16,758
At December 31, 2015(1)
Real estate secured(2)(3)	$	8,873	$	283	$	9,156
Real estate secured receivables held for sale	7,879		386		8,265
Total	$	16,752	$	669	$	17,421

⁽¹⁾  The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $139 million and $178 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.

⁽⁴⁾  Nonperforming receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

Troubled debt restructurings  See discussion of TDR Loans above for further details on this credit quality indicator.

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4. Credit Loss Reserves

The following table summarizes the changes in credit loss reserves for real estate secured receivables by product and the related receivable balance by product during the three months ended March 31, 2016 and 2015:

	First Lien			Second Lien			Total
	(in millions)
Three Months Ended March 31, 2016:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	137		$	174		$	311
Provision for credit losses(1)	23			14			37
Net charge-offs:
Charge-offs(1)(2)	(53		)	(26		)	(79		)
Recoveries	2			1			3
Total net charge-offs	(51		)	(25		)	(76		)
Credit loss reserve balance at end of period	$	109		$	163		$	272
Reserve components:
Collectively evaluated for impairment	$	36		$	30		$	66
Individually evaluated for impairment(3)	63			133			196
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	10			—			10
Total credit loss reserves	$	109		$	163		$	272
Receivables:
Collectively evaluated for impairment	$	6,028		$	1,119		$	7,147
Individually evaluated for impairment(3)	532			620			1,152
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	247			27			274
Total receivables	$	6,807		$	1,766		$	8,573
Three Months Ended March 31, 2015:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	1,898		$	319		$	2,217
Provision for credit losses(1)	37			(10		)	27
Net charge-offs:
Charge-offs(2)	(108		)	(39		)	(147		)
Recoveries	12			1			13
Total net charge-offs	(96		)	(38		)	(134		)
Credit loss reserve balance at end of period	$	1,839		$	271		$	2,110
Reserve components:
Collectively evaluated for impairment	$	155		$	53		$	208
Individually evaluated for impairment(3)	1,657			218			1,875
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	27			—			27
Total credit loss reserves	$	1,839		$	271		$	2,110
Receivables:
Collectively evaluated for impairment	$	9,872		$	1,526		$	11,398
Individually evaluated for impairment(3)	8,936			866			9,802
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	500			29			529
Total receivables	$	19,308		$	2,421		$	21,729

⁽¹⁾  The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

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⁽²⁾  For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three months ended March 31, 2016 and 2015 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $20 million during the three months ended March 31, 2016 compared with $15 million during the three months ended March 31, 2015.

⁽³⁾  These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $211 million and $399 million at March 31, 2016 and 2015, respectively. The reserve component above excludes credit loss reserves totaling $9 million and $22 million at March 31, 2016 and 2015, respectively, for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell. These receivables and credit loss reserves are reflected within receivables and credit loss reserves carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

5. Receivables Held for Sale

Real Estate Secured Receivables Real estate secured receivables held for sale which are carried at the lower of amortized cost or fair value are comprised of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Real estate secured receivables held for sale:
First lien	$	8,026	$	8,110
Second lien	159		155
Total real estate secured receivables held for sale	$	8,185	$	8,265

We have been engaged in an on-going evaluation of our balance sheet taking into consideration our liquidity, capital and funding requirements as well as capital requirements of HSBC. During 2013, we established an on-going receivable sales program under which we intend to sell first lien real estate secured receivables held for investment meeting pre-determined criteria when they are written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). During the second quarter of 2015, we expanded our receivable sales program to also include substantially all of our first lien real estate secured receivables held for investment which have been either re-aged, modified or became subject to a bankruptcy filing since 2007, along with any second lien balances associated with these receivables. Under our expanded receivable sales program, we intend to sell substantially all real estate secured receivables when any of the above criteria are met.

During the three months ended March 31, 2016 we transferred real estate secured receivables to held for sale with a total unpaid principal balance (excluding accrued interest) of approximately $282 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell, as applicable, was approximately $267 million, including accrued interest. As we plan to sell these receivables to third party investors, fair value represents the price we believe a third party investor would pay to acquire the receivable portfolios. During the three months ended March 31, 2016, we recorded an initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale totaling $17 million, of which $13 million was attributed to credit factors and recorded as a component of the provision for credit losses in the consolidated statement of income (loss) and $4 million was attributable to non-credit factors and recorded as a component of other revenues in the consolidated statement of income (loss).

During the three months ended March 31, 2016, we recorded $68 million of additional lower of amortized cost or fair value adjustment on receivables held for sale as a component of total other revenues in the consolidated statement of income (loss) related to changes in fair value as a result of establishing separate pools for receivables being marketed. Removing these receivables from their risk-based grouping impacts the valuation of the receivables remaining in the risked-based pools.

During the three months ended March 31, 2015, we transferred real estate secured receivables to held for sale with an unpaid principal balance (excluding accrued interest) of approximately $431 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell was approximately $311 million including accrued interest. During the three months ended March 31, 2015, no initial lower of amortized cost or fair value adjustment was required for these receivables transferred to held for sale as the fair value of the receivables at the time of transfer exceeded the carrying value after consideration of credit loss reserves associated with these receivables.

During the three months ended March 31, 2015, no additional lower of amortized cost or fair value was recorded related to changes in fair value.

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We continue to make progress in our strategy to accelerate the run-off and sale of our real estate secured receivable portfolio. In April 2016, we completed the sale of a pool of real estate secured receivables with an unpaid principal balance of $1,421 million (aggregate carrying value of $1,273 million) at the time of sale to a third-party investor. Aggregate cash consideration received totaled $1,440 million. We currently expect that during the second quarter of 2016 we will incur a gain on sale of approximately $155 million, which includes transaction costs.

Historically, receivables held for sale have been sold to investors or, if the foreclosure process is completed prior to sale, the underlying properties acquired in satisfaction of the receivables have been classified as real estate owned ("REO") and sold. As we continue to work with borrowers, we have also historically agreed to short sales whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation. Accordingly, based on the projected timing of receivable sales and the expected flow of foreclosure volume into REO or settled through a short sale, a portion of the real estate secured receivables classified as held for sale will ultimately become REO or settled through a short sale. As a result, a portion of the non-credit fair value adjustment on receivables held for sale may be reversed in earnings over time.

Receivable Held for Sale Activity During the Period The following table summarizes the activity in receivables held for sale during the three months ended March 31, 2016 and 2015:

	Receivables Held for Sale
	(in millions)
Three Months Ended March 31, 2016:
Real estate secured receivables held for sale at beginning of period	$	8,265
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	230
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(51		)
Carrying value of real estate secured receivables held for sale transferred to REO	(14		)
Carrying value of real estate secured receivables held for sale settled through short sale	(8		)
Change in real estate secured receivable balance, including collections	(237		)
Real estate secured receivables held for sale at end of period(3)	$	8,185
Three Months Ended March 31, 2015:
Real estate secured receivables held for sale at beginning of period	$	860
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	296
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(17		)
Carrying value of real estate secured receivables held for sale transferred to REO	(24		)
Carrying value of real estate secured receivables held for sale settled through short sale	(11		)
Change in real estate secured receivable balance, including collections	(7		)
Real estate secured receivables held for sale at end of period(3)	$	1,097

⁽¹⁾  The initial lower of amortized cost or fair value adjustment on receivables transferred into held for sale during the three months ended March 31, 2016 totaled $17 million. During the three months ended March 31, 2015, there was no initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale.

⁽²⁾  Amount includes any accrued interest associated with the receivable.

⁽³⁾  Real estate secured receivables held for sale in the table above are presented net of the valuation allowance.

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The following table provides a rollforward of our valuation allowance for the three months ended March 31, 2016 and 2015. See Note 13, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.

Three Months Ended March 31,	2016		2015
	(in millions)
Balance at beginning of period	$	13	$	—
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period	4		—
Increase in valuation allowance resulting from changes in fair value	68		—
Change in valuation allowance for collections, charged-off, transferred to REO or short sale	1		—
Balance at end of period	$	86	$	—

The following table summarizes the components of the lower of amortized cost or fair value adjustment during the three months ended March 31, 2016 and 2015:

	Lower of Amortized Cost or Fair Value Adjustments Associated With
	Fair Value		Settlements (Including Short Sales)			Total
	(in millions)
(Income)/Expense:
Three Months Ended March 31, 2016:
Lower of amortized cost or fair value adjustments recorded as a component of:
Provision for credit losses(1)	$	13	$	—		$	13
Other revenues:
Initial lower of amortized cost or fair value adjustment(2)	4		—			4
Subsequent to initial transfer to held for sale	68		(17		)	51
Lower of amortized cost or fair value adjustment recorded through other revenues	72		(17		)	55
Lower of amortized cost or fair value adjustment	$	85	$	(17	)	$	68
Three Months Ended March 31, 2015:
Lower of amortized cost or fair value adjustments recorded as a component of other revenues:
Subsequent to initial transfer to held for sale	$	—	$	17		$	17
Lower of amortized cost or fair value adjustment recorded through other revenues(3)	$	—	$	17		$	17

⁽¹⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which was recorded as provision for credit losses in the consolidated statement of income (loss) as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.

⁽²⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which was recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates.

⁽³⁾  During the three months ended March 31, 2015, no lower of amortized cost or fair value adjustment was recorded as a provision for credit losses.

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6. Fair Value Option

We report our results to HSBC in accordance with HSBC Group accounting and reporting policies (the "Group Reporting Basis"), which apply International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as endorsed by the European Union ("EU"). We have elected to apply fair value option ("FVO") reporting to certain of our fixed rate debt issuances which also qualify for FVO reporting under the Group Reporting Basis. The following table summarizes fixed rate debt issuances accounted for under FVO:

	March 31, 2016		December 31, 2015
	(in millions)
Fixed rate debt accounted for under FVO reported in:
Long-term debt	$	1,447	$	3,257
Due to affiliates	495		496
Total fixed rate debt accounted for under FVO	$	1,942	$	3,753
Unpaid principal balance of fixed rate debt accounted for under FVO(1)	$	1,804	$	3,598
Fixed rate long-term debt not accounted for under FVO	$	4,061	$	4,074

⁽¹⁾  Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which decreased the debt balance by $217 million at March 31, 2016 and decreased the debt balance by $283 million at December 31, 2015.

We determine the fair value of the fixed rate debt accounted for under FVO through the use of a third party pricing service. Such fair value represents the full market price (including credit and interest rate impacts) based on observable market data for the same or similar debt instruments. See Note 13, "Fair Value Measurements,” for a description of the methods and significant assumptions used to estimate the fair value of our fixed rate debt accounted for under FVO.

The following table summarizes the components of the gain on debt designated at fair value and related derivatives for the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,	2016			2015
	(in millions)
Mark-to-market on debt designated at fair value(1):
Interest rate component	$	6		$	49
Credit risk component	11			26
Total mark-to-market on debt designated at fair value	17			75
Mark-to-market on the related derivatives(1)(2)	(9		)	(77		)
Net realized gains on the related derivatives(1)	16			61
Gain on debt designated at fair value and related derivatives	$	24		$	59

⁽¹⁾  The derivatives associated with debt designated at fair value are economic hedges but do not qualify for hedge accounting. See Note 7, "Derivative Financial Instruments," for additional discussion of these non-qualifying hedges.

⁽²⁾  Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related expense associated with debt designated at fair value was a loss of $66 million and a gain of $291 million for the three months ended March 31, 2016 and 2015, respectively. Offsetting gains (losses) recorded in derivative related expense associated with the related derivatives was a gain of $66 million and a loss of $291 million for the three months ended March 31, 2016 and 2015, respectively.

The movement in the fair value reflected in gain on debt designated at fair value and related derivatives includes the effect of our own credit spread changes and interest rate changes, including any economic ineffectiveness in the relationship between the related derivatives and our debt and any realized gains or losses on those derivatives. With respect to the credit component, as our credit spreads narrow accounting losses are booked and the reverse is true if credit spreads widen. Differences arise between the movement in the fair value of our debt and the fair value of the related derivative due to the different credit characteristics and differences in the calculation of fair value for debt and derivatives. The size and direction of the accounting consequences of such changes can be volatile from period to period but do not alter the cash flows intended as part of our interest rate management strategy. On a

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cumulative basis, we have recorded fair value option adjustments which increased the value of our debt by $138 million and $155 million at March 31, 2016 and December 31, 2015, respectively.

The change in the fair value of the debt and the change in value of the related derivatives during the three months ended March 31, 2016 and 2015 reflects the following:

• Interest rate curve – During the three months ended March 31, 2016 and 2015, changes in market movements on certain debt and related derivatives that mature in the near term resulted in a gain in the interest rate component on the mark-to-market of the debt and a loss on the mark-to-market of the related derivative. As these items near maturity, their values are less sensitive to interest rate movements. Changes in the value of the interest rate component of the debt as compared with the related derivative are also affected by differences in cash flows and valuation methodologies for the debt and the derivatives. Cash flows on debt are discounted using a single discount rate from the bond yield curve for each bond’s applicable maturity while derivative cash flows are discounted using rates at multiple points along an interest rate yield curve. The impacts of these differences vary as short-term and long-term interest rates shift and time passes. Furthermore, certain FVO debt no longer has any corresponding derivatives.

• Credit – Our secondary market credit spreads widened during both the three months ended March 31, 2016 and 2015. The gain in the credit risk component was lower during the current year period as a result of lower levels of fair value option debt outstanding as a significant amount of our fair value option debt and related derivatives matured subsequent to March 31, 2015.

7. Derivative Financial Instruments

Our business activities involve analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Accordingly, we have comprehensive risk management policies to address potential financial risks, which include credit risk, liquidity risk, market risk, and operational risks. Our risk management policy is designed to identify and analyze these risks, to set appropriate limits and controls, and to monitor the risks and limits continually by means of reliable and up-to-date administrative and information systems. Our risk management policies are primarily carried out in accordance with practice and limits set by the HSBC Group Management Board. The HSBC North America Asset Liability Committee (“HSBC North America ALCO”) meets regularly to review risks and approve appropriate risk management strategies within the limits established by the HSBC Group Management Board. Additionally, our Risk Management Committee receives regular reports on our interest rate and liquidity risk positions in relation to the established limits. In accordance with the policies and strategies established by HSBC North America ALCO, in the normal course of business, we enter into various transactions involving derivative financial instruments. These derivative financial instruments primarily are used as economic hedges to manage risk.

Objectives for Holding Derivative Financial Instruments  Market risk (which includes interest rate and foreign currency exchange risks) is the possibility that a change in underlying market rate inputs will cause a financial instrument to decrease in value or become more costly to settle. Prior to our ceasing originations in our Consumer Lending business and ceasing loan purchase activities in our Mortgage Services business, customer demand for our loan products shifted between fixed rate and floating rate products, based on market conditions and preferences. These shifts in loan products resulted in different funding strategies and produced different interest rate risk exposures. Additionally, the mix of receivables on our balance sheet and the corresponding market risk is changing as we manage the liquidation of all of our receivable portfolios. We maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to our debt liabilities. We manage our exposure to interest rate risk primarily through the use of interest rate swaps with the main objective of managing the interest rate volatility due to a mismatch in the duration of our assets and liabilities. We manage our exposure to foreign currency exchange risk primarily through the use of cross currency interest rate swaps.

Interest rate swaps are contractual agreements between two counterparties for the exchange of periodic interest payments generally based on a notional principal amount and agreed-upon fixed or floating rates. The majority of our interest rate swaps are used to manage our exposure to changes in interest rates by converting floating rate debt to fixed rate or by converting fixed rate debt to floating rate. We have also entered into currency swaps to convert both principal and interest payments on debt issued in one currency to the appropriate functional currency.

To manage our exposure to changes in interest rates, we entered into interest rate swap agreements and currency swaps which have been designated as cash flow hedges under derivative accounting principles, or are treated as non-qualifying hedges. We currently utilize the long-haul method to assess effectiveness of all derivatives designated as hedges.

We do not manage credit risk or the changes in fair value due to the changes in credit risk by entering into derivative financial instruments such as credit derivatives or credit default swaps.

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Control Over Valuation Process and Procedures  A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for derivatives are measured by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Markets Independent Model Review Team of an HSBC affiliate. These valuation models utilize discounted cash flows or an option pricing model adjusted for counterparty credit risk and market liquidity. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indices and therefore demonstrate a similar response to market factors.

Credit Risk of Derivatives  By utilizing derivative financial instruments, we are exposed to counterparty credit risk. Counterparty credit risk is the risk that the counterparty to a transaction fails to perform according to the terms of the contract. We manage the counterparty credit (or repayment) risk in derivative instruments through established credit approvals, risk control limits, collateral, and ongoing monitoring procedures. We utilize an affiliate, HSBC Bank USA, National Association (together with its subsidiaries, "HSBC Bank USA") as the sole provider of derivatives. We have never suffered a loss due to counterparty credit failure.

At March 31, 2016 and December 31, 2015, we had derivative contracts with a notional amount of $7.1 billion and $8.9 billion, respectively, all of which is outstanding with HSBC Bank USA making them our sole counterparty in derivative transactions. Derivative financial instruments are generally expressed in terms of notional principal or contract amounts which are much larger than the amounts potentially at risk for nonpayment by counterparties. Derivative agreements require that payments be made to, or received from, the counterparty when the fair value of the agreement reaches a certain level. When the fair value of our agreements with the affiliate counterparty requires the posting of collateral, it is provided in either the form of cash and recorded on the balance sheet, consistent with third party arrangements, or in the form of securities which are not recorded on our balance sheet. The fair value of our agreements with the affiliate counterparty required us to provide collateral to the affiliate of $537 million at March 31, 2016 and $491 million at December 31, 2015, all of which was provided in cash. These amounts are offset against the fair value amount recognized for derivative instruments that have been offset under the same master netting arrangement and recorded in our balance sheet as derivative financial assets or derivative related liabilities which are included as a component of other assets and other liabilities, respectively.

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The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.

	March 31, 2016						December 31, 2015
	Derivative Financial Assets			Derivative Financial Liabilities			Derivative Financial Assets			Derivative Financial Liabilities
	(in millions)
Derivatives(1)
Derivatives accounted for as cash flow hedges associated with debt:
Interest rate swaps	$	—		$	(7	)	$	—		$	(18	)
Currency swaps	119			(140		)	97			(178		)
Cash flow hedges	119			(147		)	97			(196		)
Non-qualifying hedge activities:
Derivatives not designated as hedging instruments:
Interest rate swaps	24			(392		)	20			(286		)
Derivatives not designated as hedging instruments	24			(392		)	20			(286		)
Derivatives associated with debt carried at fair value:
Interest rate swaps	—			—			4			—
Currency swaps	25			(152		)	14			(201		)
Derivatives associated with debt carried at fair value	25			(152		)	18			(201		)
Total derivatives	168			(691		)	135			(683		)
Less: Gross amounts offset in the balance sheet(2)	(168		)	691			(135		)	626
Net amounts of derivative financial assets and liabilities presented in the balance sheet(3)	$	—		$	—		$	—		$	(57	)

⁽¹⁾  All of our derivatives are bilateral over-the-counter derivatives.

⁽²⁾  Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes cash collateral paid of $537 million at March 31, 2016 and $491 million at December 31, 2015. At March 31, 2016 and December 31, 2015, we did not have any financial instrument collateral received/posted.

⁽³⁾  At March 31, 2016 and December 31, 2015, we had not received any cash not subject to an enforceable master netting agreement.

Fair Value Hedges  At March 31, 2016 and December 31, 2015, we do not have any active fair value hedges. We recorded fair value adjustments to the carrying value of our debt for terminated fair value hedges which decreased the debt balance by $15 million at March 31, 2016 and $15 million at December 31, 2015.

Cash Flow Hedges Cash flow hedges include interest rate swaps to convert our variable rate debt to fixed rate debt by fixing future interest rate resets of floating rate debt as well as currency swaps to convert debt issued from one currency into U.S. dollar fixed rate debt. Gains and losses on derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) net of tax and totaled losses of $7 million and $15 million at March 31, 2016 and December 31, 2015, respectively. We expect $6 million ($4 million after-tax) of currently unrealized net losses will be reclassified to earnings within one year. However, these reclassified unrealized losses will be offset by decreased interest expense associated with the variable cash flows of the hedged items and will result in no significant impact to our earnings.

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HSBC Finance Corporation

The following table provides the gain or loss recorded on our cash flow hedging relationships.

	Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassed From AOCI into Income (Effective Portion)						Location of Gain (Loss) Recognized in Income on the Derivative(Ineffective Portion)	Gain (Loss) Recognized In Income on Derivative (Ineffective Portion)
	2016		2015			2016			2015				2016		2015
	(in millions)
Three Months Ended March 31,
Interest rate swaps	$	11	$	9	Interest expense	$	—		$	—		Derivative related expense	$	—	$	—
Currency swaps	—		5		Interest expense	(3		)	(3		)	Derivative related expense	4		(2		)
Total	$	11	$	14		$	(3	)	$	(3	)		$	4	$	(2	)

Non-Qualifying Hedging Activities  We have entered into interest rate swaps which are not designated as hedges under derivative accounting principles. These financial instruments are economic hedges but do not qualify for hedge accounting and are primarily used to minimize our exposure to changes in interest rates through more closely matching both the structure and duration of our liabilities to the structure and duration of our assets.

The following table provides detail of the realized and unrealized gain or loss recorded on our non-qualifying hedges:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016			2015
		(in millions)
Interest rate contracts	Derivative related expense	$	(119	)	$	(95	)
Total		$	(119	)	$	(95	)

As we continue to make progress in our strategy to accelerate the run-off and sales of our real estate secured receivable portfolio, the dynamics of the duration of our receivables due to lower prepayment rates and the corresponding increase in interest rate risk are changing. In connection with the receivable sale which was completed in April 2016, we terminated non-qualifying hedges with a notional value of $720 million. We intend to continue reducing the size and potentially eliminate this non-qualifying hedge portfolio corresponding with timing of receivable sales over the course of 2016.

We have elected the fair value option for certain issuances of our fixed rate debt and have entered into interest rate and currency swaps related to debt carried at fair value. The interest rate and currency swaps associated with this debt are non-qualifying hedges but are considered economic hedges and realized gains and losses are reported as “Gain on debt designated at fair value and related derivatives” within other revenues. The derivatives related to fair value option debt are included in the tables below.

The following table provides the gain or loss recorded on the derivatives related to fair value option debt. See Note 6, “Fair Value Option,” for further discussion.

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016		2015
		(in millions)
Interest rate contracts	Gain (loss) on debt designated at fair value and related derivatives	$	—	$	2
Currency contracts	Gain (loss) on debt designated at fair value and related derivatives	7		(18		)
Total		$	7	$	(16	)

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HSBC Finance Corporation

Notional Amount of Derivative Contracts The following table provides the notional amounts of derivative contracts.

	March 31, 2016		December 31, 2015
	(in millions)
Derivatives designated as hedging instruments:
Interest rate swaps	$	1,300	$	1,300
Currency swaps	1,588		1,588
	2,888		2,888
Non-qualifying hedges:
Derivatives not designated as hedging instruments:
Interest rate swaps	2,624		2,624
	2,624		2,624
Derivatives associated with debt carried at fair value:
Interest rate swaps	—		1,859
Currency swaps	1,562		1,562
	1,562		3,421
Total	$	7,074	$	8,933

8. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCI”) includes certain items that are reported directly within a separate component of shareholders’ equity. The following table presents changes in accumulated other comprehensive loss balances.

Three Months Ended March 31,	2016			2015
	(in millions)
Unrealized gains (losses) on cash flow hedging instruments:
Balance at beginning of period	$	(15	)	$	(52	)
Other comprehensive income for period:
Net gains arising during period, net of tax of $4 million and $5 million, respectively	7			9
Reclassification adjustment for losses realized in net income, net of tax of $2 million and $1 million, respectively(1)	1			2
Total other comprehensive income for period	8			11
Balance at end of period	(7		)	(41		)
Pension and postretirement benefit plan liability:
Balance at beginning of period	29			(13		)
Other comprehensive income for period:
Reclassification adjustment for (gains) losses realized in net income, net of tax of $(1) million and $- million, respectively	(1		)	—
Total other comprehensive loss for period	(1		)	—
Balance at end of period	28			(13		)
Total accumulated other comprehensive gain (loss) at end of period	$	21		$	(54	)

⁽¹⁾  The amounts reclassified during the three months ended March 31, 2016 and 2015 relate to interest rate and currency swaps and are included as a component of interest expense in our consolidated statement of income.

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HSBC Finance Corporation

9. Pension and Other Postretirement Benefits

Defined Benefit Pension Plan The components of pension expense for the defined benefit pension plan recorded in our consolidated statement of income and shown in the table below reflect the portion of pension expense of the combined HSBC North America Pension Plan (either the "HSBC North America Pension Plan" or the "Plan") which has been allocated to us.

Three Months Ended March 31,	2016			2015
	(in millions)
Service cost – benefits earned during the period	$	1		$	1
Interest cost on projected benefit obligation	12			12
Expected return on assets	(14		)	(16		)
Amortization of net actuarial loss	7			7
Pension expense	$	6		$	4

Higher pension expense during the three months ended March 31, 2016 was primarily due to lower expected return on plan assets which reflects market conditions and a shift to more fixed income securities in the investment portfolio to better match pension liabilities.

Postretirement Plans Other Than Pensions The components of our net postretirement benefit cost are as follows:

Three Months Ended March 31,	2016			2015
	(in millions)
Interest cost	$	1		$	1
Amortization of reduction in liability resulting from plan amendment	(2		)	—
Net periodic postretirement benefit cost	$	(1	)	$	1

10. Related Party Transactions

In the normal course of business, we conduct transactions with HSBC and its subsidiaries. HSBC policy requires that these transactions occur at prevailing market rates and terms and include funding arrangements, derivatives, servicing arrangements, information technology, centralized support services, item and statement processing services, banking and other miscellaneous services. The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:

	March 31, 2016		December 31, 2015
	(in millions)
Assets:
Cash	$	106	$	124
Securities purchased under agreements to resell(1)	779		2,724
Other assets	201		128
Total assets	$	1,086	$	2,976
Liabilities:
Due to affiliates(2)	$	5,774	$	5,925
Other liabilities	33		62
Total liabilities	$	5,807	$	5,987

⁽¹⁾  Securities under an agreement to resell are purchased from HSBC Securities (USA) Inc. and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below.

⁽²⁾  Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock.

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HSBC Finance Corporation

Three Months Ended March 31,	2016			2015
	(in millions)
Income/(Expense):
Interest income from HSBC affiliates	$	1		$	2
Interest expense paid to HSBC affiliates(1)	(75		)	(77		)
Net interest income (expense)	$	(74	)	$	(75	)
Servicing and other fees from HSBC affiliates	$	4		$	6
Support services from HSBC affiliates	(42		)	(54		)
Stock based compensation income (expense) with HSBC(2)	1			(1		)

⁽¹⁾  Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt.

⁽²⁾  Certain employees participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salary and employee benefits in our consolidated statement of income (loss). Certain employees also participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 9, “Pension and Other Postretirement Benefits.”

Funding Arrangements with HSBC Affiliates:

All of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans and our funding requirements are now sourced primarily through HSBC USA or HSBC North America. Due to affiliates consists of the following:

	March 31, 2016		December 31, 2015
	(in millions)
HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries	$	350	$	500
HSBC USA Inc.	3,012		3,012
HSBC Holdings plc (includes $495 million and $496 million at March 31, 2016 and December 31, 2015 carried at fair value, respectively)	812		813
HSBC North America Holdings Inc.	1,600		1,600
Due to affiliates	$	5,774	$	5,925

HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries - We have various debt agreements with maturities in 2016.

HSBC USA Inc. - We have a $5.0 billion, 364-day uncommitted unsecured revolving credit agreement with HSBC USA, which expires during the fourth quarter of 2016. The credit agreement allows for borrowings with maturities of up to 5 years. At both March 31, 2016 and December 31, 2015, $3,012 million was outstanding under this credit agreement with $512 million maturing in September 2017, $1.5 billion maturing in January 2018 and $1.0 billion maturing in September 2018.

HSBC Holdings plc - We have a public subordinated debt issue with a carrying amount of $3.0 billion which matures in 2021. Of this amount, HSBC Holdings plc holds $812 million at March 31, 2016 and $813 million at December 31, 2015.

HSBC North AmericaHoldings Inc. -We have a $600 million loan agreement with HSBC North America which provides for three$200 million borrowings with maturities between 2034 and 2035. In October 2015, we entered into a $1.0 billion loan agreement with HSBC North America which has a maturity date in October 2017.

We have the following funding arrangements available with HSBC affiliates, although there are no outstanding balances at either March 31, 2016 or December 31, 2015:

• $1.0 billion, 364-day committed revolving credit facility with HSBC USA. This credit facility expires in May 2017; and

• $1.0 billion, 364-day uncommitted revolving credit facility with HSBC North America. This credit facility expires January 2017.

In November 2013, we obtained a surety bond for $2.5 billion to secure a stay of execution of the partial judgment in the Jaffe litigation while we appealed the judgment. This surety bond was guaranteed by HSBC North America and we paid HSBC North America an annual fee for providing the guarantee which was included as a component of interest expense. Given the mandate of the Court of Appeals for the Seventh Circuit reversing the judgment, during the third quarter of 2015 we terminated the surety bond and related guarantee by HSBC North America. During the three months ended March 31, 2015, we recorded $2 million related to the guarantee provided by HSBC North America prior to its termination.

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HSBC Finance Corporation

As previously discussed, we maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to affiliate and third-party debt liabilities. HSBC Bank USA is our sole counterparty in derivative transactions. The notional amount of derivative contracts outstanding with HSBC Bank USA totaled $7.1 billion and $8.9 billion at March 31, 2016 and December 31, 2015, respectively. The fair value of our agreements with HSBC Bank USA required us to provide collateral to HSBC Bank USA of $537 million at March 31, 2016 and $491 million at December 31, 2015, all of which was provided in cash. See Note 7, “Derivative Financial Instruments,” for additional information about our derivative portfolio.

In addition to the lending arrangements discussed above, in 2010, we issued 1,000 shares of Series C Preferred Stock to HSBC Investments (North America) Inc. for $1.0 billion. Dividends paid on the Series C Preferred Stock totaled $22 million and $22 million during the three months ended March 31, 2016 and 2015, respectively. During periods in which there is an accumulated deficit, dividends on the Series C preferred stock are paid from additional paid-in-capital.

During the three months ended March 31, 2015, we had a deposit totaling $2,001 million with HSBC Bank USA at current market rates. At March 31, 2016 and December 31, 2015, we no longer maintained this deposit with HSBC Bank USA. Interest income earned on this deposit was included in interest income from HSBC affiliates in the table above and was insignificant during the three months ended March 31, 2015. As the deposit was terminated prior to December 31, 2015, there was no interest income during three months ended March 31, 2016.

Services Provided Between HSBC Affiliates:

Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. The following summarizes these activities:

• Servicing activities for real estate secured receivables across North America are performed both by us and HSBC Bank USA. As a result, we receive servicing fees from HSBC Bank USA for services performed on their behalf and pay servicing fees to HSBC Bank USA for services performed on our behalf. The fees we receive from HSBC Bank USA are reported in Servicing and other fees from HSBC affiliates. This includes fees received for servicing real estate secured receivables (with a carrying amount of $666 million and $696 million at March 31, 2016 and December 31, 2015, respectively) that we sold to HSBC Bank USA in 2003 and 2004. Fees we pay to HSBC Bank USA are reported in Support services from HSBC affiliates.

• We also provide various services to HSBC Bank USA, including processing activities and other operational and administrative support. Fees received for these services are included in Servicing and other fees from HSBC affiliates.

• HSBC North America's technology and certain centralized support services including human resources, corporate affairs, risk management, legal, compliance, tax, finance and other shared services are centralized within HSBC Technology & Services (USA) Inc. ("HTSU") also provides certain item processing and statement processing activities for us. The fees we pay HTSU for the centralized support services and processing activities are included in Support services from HSBC affiliates. We also receive fees from HTSU for providing certain administrative services to them as well as receiving rental revenue from HTSU for certain office space. The fees and rental revenue we receive from HTSU are included in Servicing and other fees from HSBC affiliates.

• We use HSBC Global Services Limited, an HSBC affiliate located outside of the United States, to provide various support services to our operations including among other areas, customer service, systems, collection and accounting functions. The expenses related to these services are included in Support services from HSBC affiliates.

• Banking services and other miscellaneous services are provided by other subsidiaries of HSBC, including HSBC Bank USA, which are included in Support services from HSBC affiliates.

11. Business Segments

We have one reportable segment: Consumer. Our Consumer segment consists of our run-off Consumer Lending and Mortgage Services businesses. While these businesses are operating in run-off, they do not qualify to be reported as discontinued operations. There have been no changes in measurement or composition of our segment reporting as compared with the presentation in our 2015 Form 10-K.

Our segment results are presented in accordance with the Group Reporting Basis which apply IFRSs as issued by the IASB and endorsed by the EU, and, as a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis (a non-U.S. GAAP financial measure) as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources such as employees are primarily made on this basis. However, we continue to monitor liquidity, capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

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HSBC Finance Corporation

We are currently in the process of re-evaluating the financial information used to manage our businesses, including the scope and content of the U.S. GAAP financial data being reported to our Management and our Board. To the extent we make changes to this reporting in 2016, we will evaluate any impact such changes may have on our segment reporting.

A summary of differences between U.S. GAAP and the Group Reporting Basis as they impact our results are presented in Note 18, "Business Segments," in our 2015 Form 10-K. There have been no significant changes since December 31, 2015 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

The following table reconciles our segment results on the Group Reporting Basis to the U.S. GAAP consolidated totals:

	Group Reporting Basis Consumer Segment Totals			Group Reporting Basis Adjustments(1)			Group  Reporting Basis Reclassifications(2)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2016:
Net interest income	$	220		$	(25	)	$	(13	)	$	182
Other operating income (Total other revenues)	(91		)	(55		)	13			(133		)
Total operating income (loss)	129			(80		)	—			49
Loan impairment charges (Provision for credit losses)	95			(58		)	—			37
Net interest income and other operating income less loan impairment charges	34			(22		)	—			12
Operating expenses	135			3			—			138
Profit (loss) before tax	$	(101	)	$	(25	)	$	—		$	(126	)
Balances at end of period:
Customer loans (Receivables)	$	12,981		$	(4,386	)	$	(22	)	$	8,573
Assets	23,063			(1,399		)	—			21,664
Three Months Ended March 31, 2015
Net interest income	$	281		$	(40	)	$	(57	)	$	184
Other operating income (Total other revenues)	(78		)	(21		)	57			(42		)
Total operating income (loss)	203			(61		)	—			142
Loan impairment charges (Provision for credit losses)	21			6			—			27
Net interest income and other operating income less loan impairment charges	182			(67		)	—			115
Operating expenses	148			—			—			148
Profit (loss) before tax	$	34		$	(67	)	$	—		$	(33	)
Balances at end of period:
Customer loans (Receivables)	$	22,492		$	(735	)	$	(28	)	$	21,729
Assets	32,428			(1,510		)	—			30,918

⁽¹⁾  Group Reporting Basis Adjustments consist of accounting differences between U.S. GAAP and the Group Reporting Basis which have been described in Note 18, "Business Segments," in the 2015 Form 10-K.

⁽²⁾  Represents differences in balance sheet and income statement presentation between U.S. GAAP and the Group Reporting Basis.

Included in loan impairment charges for the three months ended March 31, 2016 is a loan impairment adjustment of approximately $100 million representing the cumulative impact of the correction of an error under the Group Reporting Basis of accounting and reporting policies (a non-U.S. GAAP financial measure). During the first quarter of 2016, management identified a calculation error in the loan impairment allowance model for the segment collectively evaluated for impairment. The cumulative impact of this item was an understatement of the loan impairment allowance of approximately $100 million at March 31, 2016. Loan impairment allowances under U.S. GAAP were unaffected.

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HSBC Finance Corporation

12. Variable Interest Entities

We consolidate variable interest entities (“VIEs”) in which we are deemed to be the primary beneficiary through our holding of a variable interest which is determined as a controlling financial interest. The controlling financial interest is evidenced by the power to direct the activities of the VIEs that most significantly impact their economic performance and obligations to absorb losses of, or the right to receive benefits from, the VIEs that could be potentially significant to the VIEs. We take into account all of our involvements in VIEs in identifying (explicit or implicit) variable interests that individually or in the aggregate could be significant enough to warrant our designation as the primary beneficiary and hence require us to consolidate the VIEs or otherwise require us to make appropriate disclosures. We consider our involvement to be significant where we, among other things, (i) provide liquidity facilities to support the VIE's debt issuances, (ii) enter into derivative contracts to absorb the risks and benefits from the VIEs or from the assets held by the VIEs, (iii) provide a financial guarantee that covers assets held or liabilities issued, (iv) design, organize and structure the transaction and (v) retain a financial or servicing interest in the VIEs.

We are required to evaluate whether to consolidate a VIE when we first become involved and on an ongoing basis. In almost all cases, a qualitative analysis of our involvement in the entity provides sufficient evidence to determine whether we are the primary beneficiary. In rare cases, a more detailed analysis to quantify the extent of variability to be absorbed by each variable interest holder is required to determine the primary beneficiary.

Consolidated VIEs  Historically, we have organized special purpose entities (“SPEs”) primarily to meet our funding needs through collateralized funding transactions. As part of these transactions, we transferred certain receivables to these trusts which in turn issued debt instruments collateralized by the transferred receivables. The entities used in these transactions are VIEs. As we are the servicer of the assets of these trusts and have retained the benefits and risks, we determined that we are the primary beneficiary of these trusts. Accordingly, we consolidate these entities and report the debt securities issued by them as secured financings in long-term debt. As a result, all receivables transferred in these secured financings remain and continue to remain on our balance sheet and the debt securities issued by them have remained and continue to be included in long-term debt. As all of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans, we no longer use collateralized funding transactions to meet our funding needs.

The assets and liabilities of the consolidated secured financing VIE consisted of the following as of March 31, 2016 and December 31, 2015:

	March 31, 2016						December 31, 2015
	Consolidated Assets			Consolidated Liabilities			Consolidated Assets			Consolidated Liabilities
	(in millions)
Real estate collateralized funding vehicles:
Receivables, net:
Real estate secured receivables	$	1,305		$	—		$	1,654		$	—
Accrued interest income and other	56			—			76			—
Credit loss reserves	(71		)	—			(94		)	—
Receivables, net	1,290			—			1,636			—
Other liabilities	—			(22		)	—			(22		)
Long-term debt	—			694			—			879
Total	$	1,290		$	672		$	1,636		$	857

The assets of the consolidated VIE serve as collateral for the obligations of the VIE. The holders of the debt securities issued by these vehicles have no recourse to our general assets.

Unconsolidated VIEs We do not have any unconsolidated VIEs.

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HSBC Finance Corporation

13. Fair Value Measurements

Accounting principles related to fair value measurements provide a framework for measuring fair value and focus on an exit price that would be received to sell an asset or paid to transfer a liability in the principal market (or in the absence of the principal market, the most advantageous market) accessible in an orderly transaction between willing market participants (the “Fair Value Framework”). Where required by the applicable accounting standards, assets and liabilities are measured at fair value using the “highest and best use” valuation premise. Fair value measurement guidance clarifies that financial instruments do not have alternative use and, as such, the fair value of financial instruments should be determined using an “in-exchange” valuation premise. Although the fair value measurement literature provides a valuation exception and permits an entity to measure the fair value of a group of financial assets and financial liabilities with offsetting credit risk and/or market risks based on the exit price it would receive or pay to transfer the net risk exposure of a group of assets or liabilities if certain conditions are met, we have not elected to make fair value adjustments to a group of derivative instruments with offsetting credit and market risks.

Fair Value Adjustments  The best evidence of fair value is quoted market price in an actively traded market, where available. In the event listed price or market quotes are not available, valuation techniques that incorporate relevant transaction data and market parameters reflecting the attributes of the asset or liability under consideration are applied. Where applicable, fair value adjustments are made to ensure the financial instruments are appropriately recorded at fair value. The fair value adjustments reflect the risks associated with the products, contractual terms of the transactions, and the liquidity of the markets in which the transactions occur.

Credit risk adjustment - The credit risk adjustment is an adjustment to a group of financial assets or financial liabilities to reflect the credit quality of the parties to the transaction in arriving at fair value. A credit valuation adjustment to a financial asset is required to reflect the default risk of the counterparty. Where applicable, we take into consideration the credit risk mitigating arrangements including collateral agreements and master netting arrangements in estimating the credit risk adjustments.

Valuation Control Framework  A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for long-term debt for which we have elected fair value option are measured by a third-party valuation source (pricing service) by reference to external quotations on the identical or similar instruments. Once fair values have been obtained from the third-party valuation source, an independent price validation process is performed and reviewed by the HSBC U.S. Valuation Committee. For price validation purposes, we obtain quotations from at least one other independent pricing source for each financial instrument, where possible. We consider the following factors in determining fair values:

Ÿ similarities between the asset or the liability under consideration and the asset or liability for which quotation is received;

Ÿ collaboration of pricing by reference to other independent market data such as market transactions and relevant benchmark indices;

Ÿ whether the security is traded in an active or inactive market;

Ÿ consistency among different pricing sources;

Ÿ the valuation approach and the methodologies used by the independent pricing sources in determining fair value;

Ÿ the elapsed time between the date to which the market data relates and the measurement date; and

Ÿ the manner in which the fair value information is sourced.

Greater weight is given to quotations of instruments with recent market transactions, pricing quotes from dealers who stand ready to transact, quotations provided by market-makers who originally underwrote such instruments, and market consensus pricing based on inputs from a large number of participants. Any significant discrepancies among the external quotations are reviewed by management and adjustments to fair values are recorded where appropriate.

Fair values for derivatives are determined by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Markets Independent Model Review Team of an HSBC affiliate. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indexes and therefore demonstrate a similar response to market factors.

We have various controls over our valuation process and procedures for receivables held for sale. As these fair values are generally determined using value estimates from third party and affiliate valuation specialists, the controls may include analytical reviews of quarterly value trends, corroboration of inputs by observable market data, direct discussion with potential investors and results of actual sales of such receivable, all of which are submitted to the HSBC U.S. Valuation Committee for review.

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Fair Value of Financial Instruments  The fair value estimates, methods and assumptions set forth below for our financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this Form 10-Q. The following table summarizes the carrying values and estimated fair value of our financial instruments at March 31, 2016 and December 31, 2015.

	March 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	106	$	106	$	106	$	—	$	—
Securities purchased under agreements to resell	779		779		—		779		—
Real estate secured receivables(1):
First lien	6,781		6,691		—		—		6,691
Second lien	1,652		1,126		—		—		1,126
Total real estate secured receivables	8,433		7,817		—		—		7,817
Real estate secured receivables held for sale	8,185		8,710		—		1,475		7,235
Due from affiliates	201		201		—		201		—
Financial liabilities:
Due to affiliates carried at fair value	495		495		—		495		—
Due to affiliates not carried at fair value	5,279		5,513		—		5,513		—
Long-term debt carried at fair value	1,447		1,447		—		1,447		—
Long-term debt not carried at fair value	6,055		6,453		—		6,453		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	124	$	124	$	124	$	—	$	—
Securities purchased under agreements to resell	2,724		2,724		—		2,724		—
Real estate secured receivables(1):
First lien	7,237		7,174		—		—		7,174
Second lien	1,750		1,156		—		—		1,156
Total real estate secured receivables	8,987		8,330		—		—		8,330
Real estate secured receivables held for sale	8,265		8,668		—		—		8,668
Due from affiliates	128		128		—		128		—
Financial liabilities:
Due to affiliates carried at fair value	496		496		—		496		—
Due to affiliates not carried at fair value	5,429		5,693		—		5,693		—
Long-term debt carried at fair value	3,257		3,257		—		3,257		—
Long-term debt not carried at fair value	6,253		6,664		—		6,664		—

⁽¹⁾  The receivable held for investment carrying value included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. The receivable held for investment carrying value included in this table also includes accrued finance charges and is net of credit loss reserves. However, the basis adjustments on the loans, accrued finance charges and credit loss reserves are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivables held for investment account balances.

Receivable values presented in the table above were determined using the Fair Value Framework for measuring fair value, which is based on our best estimate of the amount within a range of values we believe would be received in a sale as of the balance sheet

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date (i.e. exit price). The secondary market demand and estimated value for our receivables may be heavily influenced by economic conditions, including house price depreciation, elevated unemployment, changes in consumer behavior, changes in discount rates and the lack of financing options available to support the purchase of receivables. For certain consumer receivables, investors incorporate numerous assumptions in predicting cash flows, such as future interest rates, higher charge-off levels, slower voluntary prepayment speeds, different default and loss curves and estimated collateral values than we, as the servicer of these receivables, believe will ultimately be the case. The investor's valuation process reflects this difference in overall cost of capital assumptions as well as the potential volatility in the underlying cash flow assumptions, the combination of which may yield a significant pricing discount from our intrinsic value. The estimated fair values at March 31, 2016 and December 31, 2015 reflect these market conditions. The estimated fair value of total real estate secured receivables held for investment as a percentage of carrying value at March 31, 2016 was essentially flat as compared with December 31, 2015 reflecting stable conditions in the housing industry during the first quarter of 2016. The fair value of receivables held for sale in total at March 31, 2016 continues to exceed the carrying value of these receivables as they are carried at the lower of amortized cost or fair value.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis  The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting(1)			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
March 31, 2016:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		144			—		—			144
Derivative netting	—		—			—		(168		)	(168		)
Total derivative financial assets	—		168			—		(168		)	—
Total assets	$	—	$	168		$	—	$	(168	)	$	—
Due to affiliates carried at fair value	$	—	$	(495	)	$	—	$	—		$	(495	)
Long-term debt carried at fair value	—		(1,447		)	—		—			(1,447		)
Derivative related liabilities:
Interest rate swaps	—		(399		)	—		—			(399		)
Currency swaps	—		(292		)	—		—			(292		)
Derivative netting	—		—			—		691			691
Total derivative related liabilities	—		(691		)	—		691			—
Total liabilities	$	—	$	(2,633	)	$	—	$	691		$	(1,942	)
December 31, 2015:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		111			—		—			111
Derivative netting	—		—			—		(135		)	(135		)
Total derivative financial assets	—		135			—		(135		)	—
Total assets	$	—	$	135		$	—	$	(135	)	$	—
Due to affiliates carried at fair value	$	—	$	(496	)	$	—	$	—		$	(496	)
Long-term debt carried at fair value	—		(3,257		)	—		—			(3,257		)
Derivative related liabilities:
Interest rate swaps	—		(304		)	—		—			(304		)
Currency swaps	—		(379		)	—		—			(379		)
Derivative netting	—		—			—		626			626
Total derivative related liabilities	—		(683		)	—		626			(57		)
Total liabilities	$	—	$	(4,436	)	$	—	$	626		$	(3,810	)

⁽¹⁾  Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

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Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a recurring basis during the three months ended March 31, 2016 or 2015.

Information on Level 3 Assets and Liabilities There were no assets or liabilities recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2016 or 2015.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2016 and 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of March 31, 2016 or 2015 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2015 Form 10-K for discussion of our policy in measuring fair value.

	Non-Recurring Fair Value Measurements  as of March 31, 2016								Total Gains (Losses) for the Three Months Ended March 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	1,299	$	6,886	$	8,185	$	(68	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		274		—		274		(26		)
Real estate owned(2)	—		80		—		80		(5		)
Total assets at fair value on a non-recurring basis	$	—	$	1,653	$	6,886	$	8,539	$	(99	)

	Non-Recurring Fair Value Measurements  as of March 31, 2015								Total Gains (Losses) for the Three Months Ended March 31, 2015
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	333	$	764	$	1,097	$	(17	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		529		—		529		(72		)
Real estate owned(2)	—		186		—		186		(4		)
Total assets at fair value on a non-recurring basis	$	—	$	1,048	$	764	$	1,812	$	(93	)

⁽¹⁾  Total gains (losses) for the three months ended March 31, 2016 and 2015 include amounts recorded on receivables that were subsequently transferred to held for sale.

⁽²⁾  Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a non-recurring basis during the three months ended March 31, 2016 or 2015.

Significant Transfers Between Level 2 and Level 3 During the three months ended March 31, 2016 and 2015 we transferred real estate secured receivables held for sale totaling $1,299 million and $333 million, respectively, from Level 3 to Level 2 prior to the sale of these receivables.

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The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of March 31, 2016 and December 31, 2015:

	Fair Value						Range of Inputs
Financial Instrument Type	Mar. 31, 2016		Dec. 31,  2015		Valuation Technique	Significant Unobservable Inputs	March 31, 2016				December 31, 2015
	(in millions)
Receivables held for sale carried at the lower of amortized cost or fair value:
Real estate secured	$	6,886	$	8,265	Third party appraisal valuation based on	Collateral loss severity rates(1)	0	%	-	100%	0	%	-	100%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10%
					market discount rate	Market discount rate	4	%	-	14%	4	%	-	14%

⁽¹⁾  As discussed below, as a result of our decision in 2015 to expand our receivable sales program, we added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio. At March 31, 2016 and December 31, 2015, the weighted average collateral loss severity rate was 43 percent and 42 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values.

Valuation Techniques  The following summarizes the valuation methodologies used for assets and liabilities recorded at fair value on both a recurring and non-recurring basis and for estimating fair value for financial instruments not recorded at fair value but for which fair value disclosures are required.

Cash:  Carrying amount approximates fair value due to the liquid nature of cash.

Securities purchased under agreements to resell:  The fair value of securities purchased under agreements to resell approximates carrying amount due to the short-term maturity of the agreements.

Receivables and receivables held for sale:  The estimated fair value of our receivables and receivables held for sale is determined by developing an approximate range of value from a mix of various sources appropriate for the respective pools of assets aggregated by similar risk characteristics. These sources include recently observed over-the-counter transactions where available and fair value estimates obtained from an HSBC affiliate and, for receivables held for sale, a third party valuation specialist for distinct pools of receivables. These fair value estimates are based on discounted cash flow models using assumptions we believe are consistent with those that would be used by market participants in valuing such receivables and trading inputs from other market participants which includes observed primary and secondary trades. As a result of our decision during the second quarter of 2015 to expand our receivable sales program, we have added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio.

Valuation inputs include estimates of future interest rates, prepayment speeds, default and loss curves, estimated collateral values (including expenses to be incurred to maintain the collateral) and market discount rates reflecting management's estimate of the rate of return that would be required by investors in the current market given the specific characteristics and inherent credit risk of the receivables and receivables held for sale. Some of these inputs are influenced by collateral value changes and unemployment rates. We perform analytical reviews of fair value changes on a quarterly basis and periodically validate our valuation methodologies and assumptions based on the results of actual sales of such receivables. We also may hold discussions on value directly with potential investors. Since some receivables pools may have features which are unique, the fair value measurement processes use significant unobservable inputs which are specific to the performance characteristics of the various receivable portfolios.

Real estate owned:  Fair value is determined based on third party valuations obtained at the time we take title to the property and, if less than the carrying amount of the receivable, the carrying amount of the receivable is adjusted to the fair value less estimated cost to sell. The carrying amount of the property is further reduced, if necessary, at least every 45 days to reflect observable local market data, including local area sales data.

Due from affiliates:  Carrying amount approximates fair value because the interest rates on these receivables adjust with changing market interest rates.

Long-term debt and Due to affiliates:  Fair value is primarily determined by a third party valuation source. The pricing services source fair value from quoted market prices and, if not available, expected cash flows are discounted using the appropriate interest

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rate for the applicable duration of the instrument adjusted for our own credit risk (spread). The credit spreads applied to these instruments are derived from the spreads recognized in the secondary market for similar debt as of the measurement date. Where available, relevant trade data is also considered as part of our validation process.

Derivative financial assets and liabilities:  Derivative values are defined as the amount we would receive or pay to extinguish the contract using a market participant as of the reporting date. The values are determined by management using a pricing system maintained by HSBC Bank USA. In determining these values, HSBC Bank USA uses quoted market prices, when available. For non-exchange traded contracts, such as interest rate swaps, fair value is determined using discounted cash flow modeling techniques. Valuation models calculate the present value of expected future cash flows based on models that utilize independently-sourced market parameters, including interest rate yield curves, option volatilities, and currency rates. Valuations may be adjusted in order to ensure that those values represent appropriate estimates of fair value. These adjustments are generally required to reflect factors such as market liquidity and counterparty credit risk that can affect prices in arms-length transactions with unrelated third parties. Finally, other transaction specific factors such as the variety of valuation models available, the range of unobservable model inputs and other model assumptions can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded for a particular position.

Counterparty credit risk is considered in determining the fair value of a financial asset. The Fair Value Framework specifies that the fair value of a liability should reflect the entity's non-performance risk and accordingly, the effect of our own credit risk (spread) has been factored into the determination of the fair value of our financial liabilities, including derivative instruments. In estimating the credit risk adjustment to the derivative assets and liabilities, we take into account the impact of netting and/or collateral arrangements that are designed to mitigate counterparty credit risk.

14.    Litigation and Regulatory Matters

The following supplements, and should be read together with, the disclosure in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K. Only matters with significant updates and new matters since our disclosure in our 2015 Form 10-K are reported herein.

In addition to the matters described below and in our 2015 Form 10-K, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities.

In view of the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of such matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation, governmental and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. Once established, reserves are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters.

For the legal matters disclosed below, including litigation, governmental and regulatory matters, as well as for the legal matters disclosed in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K as to which a loss in excess of accrued liability is reasonably possible in future periods and for which there is sufficient currently available information on the basis of which we believe we can make a reliable estimate, we believe a reasonable estimate could be as much as $3.1 billion for HSBC Finance Corporation. The legal matters underlying this estimate of possible loss will change from time to time and actual results may differ significantly from this current estimate.

Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in any particular quarterly or annual period.

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Litigation - Continuing Operations

Securities Litigation Jaffe v. Household International, Inc., et al. (N.D. Ill. No. 02 C5893) The pretrial schedule including the trial date of June 6, 2016, remains in place and has not been modified by the Court.

Mortgage Securitization Activity

We have received notice of several claims from investors and from trustees of residential mortgage-backed securities (“RMBS”) related to our activities as a sponsor and the activities of our subsidiaries as originators in connection with RMBS transactions closed between 2005 and 2007 as well as the following lawsuits: (i) Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp.; and (ii) Deutsche Bank, as Trustee of HASCO 2007-HE2 v. Decision One, HSBC Finance Corp. and HSBC Bank USA. The trial in Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp. has been rescheduled to September 2016.

We expect these types of claims may continue. As a result, we may be subject to additional claims, litigation and governmental and regulatory scrutiny related to our participation as a sponsor or originator in the U.S. mortgage securitization market. The range of reasonably possible losses in excess of our accrued liability for all of our mortgage securitization activities has been included in the reasonably possible losses discussed above.

Litigation - Discontinued Operations

Salveson v. JPMorgan Chase et al. (N.D.Cal. No. 13-CV-5816) On February 24. 2016, the court denied plaintiffs' motion for reconsideration of the motion to dismiss and granted defendants' motion for reconsideration, dismissing the state law claim on substantive grounds. Plaintiffs have appealed that decision.

Telephone Consumer Protection Act Litigation In April 2016, a putative class action entitled Monteleone v. HSBC Finance Corporation, et al. was filed in the United States District Court for the Northern District of Illinois against HSBC Finance Corporation, HSBC Mortgage Corporation, HSBC Mortgage Services Inc., HSBC Bank USA and HTSU. The action alleges that the HSBC defendants contacted plaintiff, or the members of the class he seeks to represent, on their cellular telephones using an automatic telephone dialing system or an artificial or prerecorded voice, without prior express consent, in violation of the Telephone Consumer Protection Act, 47 U.S.C. §227 et seq. Plaintiff seeks statutory damages of at least $500 for each violation. This action is at a very early stage.

Governmental and Regulatory Matters - Discontinued Operations

Credit Monitoring Product On April 13, 2016, the Office of the Comptroller of the Currency ("OCC") issued a consent order and an order for a civil money penalty (the "Orders") requiring restitution be made to certain customers who purchased a certain credit monitoring product and assessing a $35 million civil money penalty. Similar to previous actions taken against other credit card issuers, the OCC's findings relate to past billing practices with respect to these types of credit card enhancement services products. While these Orders were issued against our affiliate, HSBC Bank USA, the credit monitoring product was marketed and administered by our discontinued Cards and Retail Services business and primarily purchased by the credit card customers of our former credit card bank, HSBC Bank Nevada, N.A. Consequently, the entire civil money penalty and substantially all restitution will be paid by HSBC Finance Corporation. A small portion of the ordered restitution will be paid by HSBC Bank USA with respect to those HSBC Bank USA customers who purchased the product. Payment of the civil money penalty and customer refunds is not expected to result in any additional material charges to income beyond what has been recorded in prior years. Although we have settled this matter with the OCC, other regulators may continue their on-going reviews regarding enhancement services products and may order us to pay additional restitution to customers and/or impose civil money penalties or other relief arising from our prior offering and administration of such products. We ceased the marketing, distribution and servicing of these products by May 2012.

15. New Accounting Pronouncements

The following new accounting pronouncement was adopted effective January 1, 2016:

Ÿ Amendments to the Consolidation Analysis In February 2015, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") which rescinds the deferral of VIE consolidation guidance for reporting entities with interests in certain investment funds and provides a new scope exception to registered money market funds and similar unregistered money market funds. The ASU makes several other amendments including a) the elimination of certain criteria previously used for determining whether fees paid to a decision maker represent a variable interest; b) revising the consolidation model for limited partnerships and similar entities which could be variable interest entities or voting interest entities; c) excluding certain fees paid to a decision maker from the risk and benefit test in the primary beneficiary

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determination if certain conditions are met; and d) reduces the application of the related party guidance for VIEs. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have any impact on our financial position or results of operations.

The following are accounting pronouncements which will be adopted in future periods:

• Financial Instruments - Classification and Measurement In January 2016, the FASB issued an ASU which changes aspects of its guidance on classification and measurement of financial instruments. The ASU requires equity investments (except those accounted for under the equity method or those that result in consolidation) to be measured at fair value with changes in fair value recognized in net income. Under a practicability exception, entities may measure equity investments that do not have readily determinable fair values at cost adjusted for changes in observable prices minus impairment. Under this exception, a qualitative assessment for impairment will be required and, if impairment exists, the carrying amount of the investments must be adjusted to their fair value and an impairment loss recognized in net income. For financial liabilities measured under the fair value option, the ASU requires recognizing the change in fair value attributable to our own credit in other comprehensive income. Additionally, the ASU requires new disclosure related to equity investments and modifies certain disclosure requirements related to the fair value of financial instruments. The ASU is effective for all annual and interim periods beginning January 1, 2018 and the guidance should be applied by recording a cumulative effect adjustment to the balance sheet or, as it relates to equity investments without readily determinable fair values, prospectively. Early adoption of the amendment related to financial liabilities measured under the fair value option is permitted. We are currently evaluating the impact of adopting this ASU.

• Leases In February 2016, the FASB issued an ASU which requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. The ASU does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, the ASU makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. The ASU is effective for all annual and interim periods beginning January 1, 2019 and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. We are currently evaluating the impact of adopting this ASU.

• Compensation - Stock Compensation In March 2016, the FASB issued an ASU that requires all excess tax benefits and tax deficiencies for share-based payment awards to be recorded as income tax benefit or expense in the income statement and for excess tax benefits to be classified as an operating activity in the statement of cash flows. Under the ASU, entities elect whether to account for forfeitures of awards by either recognizing forfeitures as they occur or by estimating the number of awards expected to be forfeited. Additionally, the ASU allows entities to withhold up to the maximum individual statutory tax rate to cover income taxes on awards and classify the entire awards as equity. Cash paid to satisfy the statutory income tax withholding obligation must be classified as a financing activity in the statement of cash flows. The ASU is effective for all annual and interim periods beginning January 1, 2017, with early adoption permitted. The amendments in the ASU have various transition requirements with certain amendments required to be applied retrospectively. We are currently evaluating the impact of adopting this ASU.

There have been no additional accounting pronouncements issued during the first three months of 2016 that are expected to have a significant impact on our financial position or results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Certain matters discussed throughout this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make or approve certain statements in future filings with the United States Securities and Exchange Commission, in press releases, or oral or written presentations by representatives of HSBC Finance Corporation that are not statements of historical fact and may also constitute forward-looking statements. Words such as “may”, “will”, “should”, “would”, “could”, “appears”, “believe”, “intends”, “expects”, “estimates”, “targeted”, “plans”, “anticipates”, “goal”, and similar expressions are intended to identify forward-looking statements but should not be considered as the only means through which these statements may be made. These matters or statements will relate to our future financial condition, economic forecast, results of operations, plans, objectives, performance or business developments and will involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements.

All forward-looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond our control. Our actual future results may differ materially from those set forth in our forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those in the forward-looking statements:

• uncertain market and economic conditions, a decline in housing prices, unemployment levels, tighter credit conditions, changes in interest rates or a prolonged period of low or negative interest rates, the availability of liquidity, unexpected geopolitical events, changes in consumer confidence and consumer spending, and consumer perception as to the continuing availability of credit and price competition in the market segments we serve;

• changes in laws and regulatory requirements;

• the ability to deliver on our regulatory priorities;

• extraordinary government actions as a result of market turmoil;

• capital and liquidity requirements under Basel III, and Comprehensive Capital Analysis and Review ("CCAR");

• changes in central banks' policies with respect to the provision of liquidity support to financial markets;

• disruption in our operations from the external environment arising from events such as natural disasters, terrorist attacks, global pandemics, or essential utility outages;

• a failure in or a breach of our operation or security systems or infrastructure, or those of third party servicers or vendors, including as a result of cyberattacks;

• our ability to successfully manage our risks;

• the ability to successfully implement changes to our operational practices as needed and/or required from time to time;

• damage to our reputation;

• the ability to attract or retain key employees;

• losses suffered due to the negligence or misconduct of our employees or the negligence or misconduct on the part of employees of third parties;

• a failure in our internal controls;

• our ability to meet our funding requirements;

• adverse changes to our or our affiliates' credit ratings;

• increases in our allowance for credit losses and changes in our assessment of our receivable portfolios;

• changes in Financial Accounting Standards Board and International Accounting Standards Board accounting standards and their interpretation;

• changes to our mortgage servicing and foreclosure practices;

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• continued heightened regulatory scrutiny with respect to residential mortgage servicing practices, with particular focus on loss mitigation, foreclosure prevention and outsourcing;

• continued heightened regulatory scrutiny and enforcement actions with respect to credit card enhancement products offered in our discontinued U.S. credit card business;

• heightened regulatory and government enforcement scrutiny of financial institutions;

• changes in bankruptcy laws to allow for principal reductions or other modifications to mortgage loan terms;

• our inability to wind down our real estate secured receivable portfolio at an accelerated rate;

• adverse changes in factors which impact the fair value of receivables held for sale, such as home prices, default rates, estimated costs to obtain properties and investors' required returns;

• additional costs and expenses due to representations and warranties made in connection with receivable sale transactions that may require us to repurchase the loans and/or indemnify private investors for losses due to breaches of these representations and warranties;

• the possibility of incorrect assumptions or estimates in our financial statements, including reserves related to litigation, deferred tax assets and the fair value of certain assets and liabilities;

• the possibility of incorrect interpretations or application of tax laws to which we are subject;

• additional financial contribution requirements to the HSBC North America Holdings Inc. (“HSBC North America”) pension plan; and

• the other risk factors and uncertainties described under Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K").

Forward-looking statements are based on our current views and assumptions and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement to reflect subsequent circumstances or events. You should, however, consider any additional disclosures of a forward-looking nature that arise after the date hereof as may be discussed in any of our subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

Executive Overview

Organization and Basis of Reporting  HSBC Finance Corporation and its subsidiaries are indirect wholly owned subsidiaries of HSBC North America, which is an indirect, wholly owned subsidiary of HSBC Holdings plc (“HSBC” and, together with its subsidiaries, "HSBC Group"). HSBC Finance Corporation and its subsidiaries may also be referred to in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) as “we”, “us”, or “our”.

The following discussion of our financial condition and results of operations excludes the results of our discontinued operations unless otherwise noted. See Note 2, “Discontinued Operations,” in the accompanying consolidated financial statements for further discussion of these operations.

Economic Environment The U.S. economy continued its overall recovery during the first quarter of 2016 and average consumer sentiment during the first quarter of 2016 remained broadly unchanged from the fourth quarter of 2015. The stability in consumer confidence reflects consumers' increasingly more positive view of their personal finances which is being offset by an expectation that the slow pace of economic growth will likely put an end to further meaningful declines in the unemployment rate.

During the first quarter of 2016, the U.S. economy added approximately 630 thousand jobs, while total unemployment remained at 5.0 percent as of March 2016. Economic headwinds remain, however, as the number of long-term unemployed increased by 6 percent, wage growth remains weak, an elevated number of part-time workers continue to seek full-time work and the number of discouraged people who have stopped looking for work remains elevated, as evidenced by the U.S. Bureau of Labor Statistics' U-6 unemployment rate of 9.8 percent as of March 2016, only slightly improved from a rate of 9.9 percent at year-end. In addition, economic uncertainty remains high in many economies outside the U.S., where economic activity continues to be slow. The sustainability of the economic recovery will be determined by numerous variables including consumer sentiment, energy prices, credit market volatility, employment levels and housing market conditions which will impact corporate earnings and the capital markets. These conditions in combination with global economic conditions, fiscal policy, geo-political concerns and the impact of recent regulatory changes and the heightened regulatory and government scrutiny of financial institutions will continue to impact our results in 2016 and beyond.

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While the housing market in the U.S. continues to recover, the strength of recovery varies by market. Certain courts and state legislatures have issued rules or statutes relating to foreclosures and scrutiny of foreclosure documentation has increased in some courts. Also, in some areas, officials are requiring additional verification of information filed prior to the foreclosure proceeding. The combination of these factors has led to increased delays in several jurisdictions which will continue to take time to resolve.

Business Focus As discussed in prior filings, during 2013, we established an on-going receivable sales program under which we transfer to receivables held for sale first lien real estate secured receivables held for investment when a receivable meeting pre-determined criteria is written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). During the second quarter of 2015, we expanded this receivable sales program to include substantially all of our first lien real estate secured receivables held for investment which have been either re-aged, modified or became subject to a bankruptcy filing since 2007, along with any second lien balances associated with these receivables. Under our expanded receivable sales program, we continue to transfer substantially all real estate secured receivables to held for sale when any of the above criteria are met.

During the three months ended March 31, 2016 we transferred real estate secured receivables to held for sale with a total unpaid principal balance (excluding accrued interest) of approximately $282 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell, as applicable, was approximately $267 million, including accrued interest. As we plan to sell these receivables to third party investors, fair value represents the price we believe a third party investor would pay to acquire the receivable portfolios. During the three months ended March 31, 2016, we recorded an initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale totaling $17 million, of which $13 million was attributed to credit factors and recorded as a component of the provision for credit losses in the consolidated statement of income (loss) and $4 million was attributable to non-credit factors and recorded as a component of other revenues in the consolidated statement of income (loss).

We currently expect additional real estate secured receivables with a carrying amount between $400 million to $450 million could be transferred to held for sale during the remainder of 2016 as we anticipate that during the year they will meet the criteria of our expanded sales program or they will be legally released as collateral under the public trusts and as such become available for sale. We believe credit losses related to these receivables are substantially covered by our existing credit loss reserves. Based on the current fair value of our existing receivables held for sale portfolio, the lower of amortized cost or fair value adjustment for credit and non-credit related factors could be in the range of $10 million to $30 million. Our estimate of both the volume of receivables which will be transferred to held for sale as well as the fair value adjustment required is influenced by factors outside our control such as customer payment patterns, changes in default rates, estimated costs to obtain properties, home prices and investors' required returns amongst others. There is uncertainty inherent in these estimates making it reasonably possible that they could be significantly different as factors impacting the estimates continually evolve.

During the three months ended March 31, 2016, we recorded $68 million of additional lower of amortized cost or fair value adjustment on receivables held for sale as a component of total other revenues in the consolidated statement of income (loss) related to changes in fair value as a result of establishing separate pools for receivables being marketed. Removing these receivables from their risk-based grouping impacts the valuation of the receivables remaining in the risked-based pools. As noted in the preceding paragraph, fair value estimates are influenced by numerous factors outside of our control and these factors have been highly volatile in recent years. Accordingly, the changes in the fair value of receivables held for sale during the three months ended March 31, 2016 should not be considered indicative of fair value changes in future periods as deterioration in the factors noted above would likely require further increases to our valuation allowance in future periods.

At March 31, 2016, real estate secured receivables held for sale totaled $8,185 million. We expect that receivables held for sale at March 31, 2016 will be sold in multiple transactions through 2017, although the actual time to complete these sales and ultimate earnings impact depend on many factors, including future market conditions.

We continue to make progress in our strategy to accelerate the run-off and sale of our real estate secured receivable portfolio. In April 2016, we completed the sale of a pool of real estate secured receivables with an unpaid principal balance of $1,421 million (aggregate carrying value of $1,273 million) at the time of sale to a third-party investor. Aggregate cash consideration received totaled $1,440 million. We currently expect that during the second quarter of 2016 we will incur a gain on sale of approximately $155 million, which includes transaction costs.

See Note 5, “Receivables Held for Sale,” in the accompanying consolidated financial statements for additional information regarding receivables held for sale.

Excluding receivables held for sale as discussed above, our real estate secured receivable portfolio held for investment, which totaled $8,573 million at March 31, 2016, is currently running off. The timeframe in which this portfolio will liquidate is dependent upon the rate at which receivables pay off or charge-off prior to their maturity, which fluctuates for a variety of reasons such as interest rates, availability of refinancing, home values and individual borrowers' credit profile. In light of the current economic conditions and the age of our run-off receivable portfolio, our receivable prepayment rates remain slow even though interest rates

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remain low. While difficult to project receivable prepayment rates and default rates, based on current experience we expect our run-off real estate secured receivable portfolio (excluding receivables held for sale) to be approximately $6 billion by the end of 2017. We expect run-off to continue to be slow as the remaining real estate secured receivables held for investment stay on the balance sheet longer due to the lack of refinancing alternatives as well as the impact of a continued elongated foreclosure process. As our real estate secured receivable portfolio runs-off, we will see declines in net interest income. Decreases in operating expenses may not necessarily decline in line with the run-off of our receivable portfolio as a result of certain fixed costs. Accordingly, net income (loss) for the three months ended March 31, 2016 or any prior periods should not be considered indicative of the results for any future periods.

We continue to evaluate our operations as we seek to optimize our risk profile and cost efficiencies as well as our liquidity, capital and funding requirements. This could result in further strategic actions that may include changes to our legal structure, asset levels, outstanding debt levels or cost structure in support of HSBC's strategic priorities. We also continue to focus on cost optimization efforts to create a more sustainable cost structure. Over the past several years, we have taken various opportunities to reduce costs through organizational structure redesign, vendor spending, discretionary spending, outsourcing and other general efficiency initiatives which have resulted in workforce reductions. Our focus on cost optimization is continuing and, as a result, we may incur restructuring charges in future periods, the amount of which will depend upon the actions that ultimately are implemented.

Performance, Developments and Trends The following table sets forth selected financial highlights of HSBC Finance Corporation for the three months ended March 31, 2016 and 2015 and as of March 31, 2016 and December 31, 2015.

Three Months Ended March 31,	2016			2015
	(dollars are in millions)
Loss from continuing operations	$	(70	)	$	(5	)
Return on average assets, annualized	(1.3		)%	(.1		)%
Return on average common shareholder's equity, annualized	(8.4		)	(2.6		)
Net interest margin, annualized(1)	3.82			2.50
Consumer net charge-off ratio, annualized(2)	3.42			2.42
Efficiency ratio(1)(3)	281.6			104.2

	March 31, 2016			December 31, 2015
	(dollars are in millions)
Real estate secured receivables(4)	$	8,573		$	9,156
Credit loss reserves(2)	272			311
Two-months-and-over contractual delinquency ratio for real estate secured receivables held for investment(2)	3.28		%	4.00		%

⁽¹⁾  See "Results of Operations" for a detailed discussion of trends in our net interest margin and efficiency ratio.

⁽²⁾  See "Credit Quality" for a detailed discussion of the trends in our credit loss reserve levels as well as our delinquency and charge-off ratios.

⁽³⁾  Ratio of total costs and expenses from continuing operations to net interest income and other revenues from continuing operations.

⁽⁴⁾  See "Receivables Review" for a detailed discussion of changes in real estate secured receivable levels.

We reported a net loss of $74 million during the three months ended March 31, 2016 compared with net loss of $5 million during the year-ago period.

Loss from continuing operations was $70 million during the three months ended March 31, 2016 compared with a loss from continuing operations of $5 million during the year-ago period. We reported a loss from continuing operations before income tax of $126 million during the three months ended March 31, 2016 compared with a loss from continuing operations before income tax of $33 million during the year-ago period. The higher loss from continuing operations before income tax during the three months ended March 31, 2016 reflects lower other revenues, a higher provision for credit losses and lower net interest income, partially offset by lower operating expenses.

Our results in all periods were impacted by certain items management believes to be significant which distort comparability of the performance trends of our business between periods. The following table summarizes the impact of these significant items for all periods presented:

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Three Months Ended March 31,	2016			2015
	(in millions)
Loss from continuing operations before income tax, as reported	$	(126	)	$	(33	)
Fair value movement on own fair value option debt attributable to credit spread	(11		)	(26		)
Impact of non-qualifying hedge portfolio	119			95
Costs to achieve(1)	22			—
Adjusted performance from continuing operations(2)	$	4		$	36

⁽¹⁾  Costs to achieve reflects transformation costs to deliver the cost reduction and productivity outcomes outlined in the HSBC Investor Update as of June 2015. During the three months ended March 31, 2016, the amount largely reflects file review and other costs.

⁽²⁾  Represents a non-U.S. GAAP financial measure.

Excluding the impact of the items presented in the table above, adjusted performance from continuing operations during the three months ended March 31, 2016 declined $32 million compared with the year-ago period. The decline primarily reflects lower other revenues, partially offset by lower operating expenses. The decrease in other revenues reflects higher lower of amortized cost or fair value adjustment on receivables held for sale as well as a lower gain on debt designated at fair value and related derivatives excluding the impact of changes in credit spread. The decrease in other operating expenses reflects the impact of the continuing reduced scope of our business operations and the impact of entity-wide initiatives to reduce costs. To a lesser extent, the decrease also reflects higher provisions for credit losses and lower net interest income.

See "Results of Operations" for a more detailed discussion of our operating trends. In addition, see "Receivables Review" for further discussion on our receivable trends, "Liquidity and Capital Resources" for further discussion on funding and capital and "Credit Quality" for additional discussion on our credit trends.

Funding and Capital  During the three months ended March 31, 2016 and 2015, we did not receive any capital contributions from HSBC Investments (North America) Inc. ("HINO"). During the three months ended March 31, 2016 and 2015, we retired or called $2,113 million and $545 million, respectively, of term debt. These debt cash requirements in the first quarter of 2016 were met through funding from cash generated from operations, other balance sheet attrition and liquidation of short-term investments. The primary driver of our liquidity during the remainder of 2016 will be continued success in liquidating our receivable portfolio, the liquidation of short-term investments and borrowing from HSBC affiliates. However, lower cash flow as a result of declining receivable balances will not provide sufficient cash to fully repay maturing debt in future periods. As we continue to liquidate our receivable portfolios, HSBC's continued support will be required to properly manage our business operations and maintain appropriate levels of capital. HSBC has historically provided significant capital in support of our operations and has indicated that it is fully committed and has the capacity and willingness to continue that support.

As discussed above, a portion of our real estate secured receivable portfolio is currently classified as held for sale as we no longer have the intent to hold these receivables for the foreseeable future for capital or operational reasons. We have determined that we have the positive intent and ability to hold the remaining real estate secured receivables for the foreseeable future and, as such, continue to classify these real estate secured receivables as held for investment. However, if HSBC calls upon us to execute certain strategies in order to address capital and other considerations, it could result in the reclassification of additional real estate secured receivables to held for sale.

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Basis of Reporting

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Unless noted, the discussion of our financial condition and results of operations included in MD&A are presented on a continuing operations basis of reporting. Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

In addition to the U.S. GAAP financial results reported in our consolidated financial statements, we report financial information to HSBC in accordance with HSBC Group accounting and reporting policies which apply International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as endorsed by the European Union ("EU") and, as a result, our segment results are prepared and presented using financial information prepared on the basis of HSBC Group's accounting and reporting policies ("Group Reporting Basis"). For a reconciliation of Group Reporting Basis results to the comparable U.S. GAAP reported results, see Note 11, “Business Segments,” in the accompanying consolidated financial statements.

Because operating results on the Group Reporting Basis (a non-U.S. GAAP financial measure) are used in managing our businesses and rewarding performance of employees, our management also separately monitors net income under this basis of reporting. The following table reconciles our U.S. GAAP versus Group Reporting Basis net income (loss):

Three Months Ended March 31,	2016			2015
	(in millions)
Net loss – U.S. GAAP basis	$	(74	)	$	(5	)
Adjustments, net of tax:
Lower of amortized cost or fair value adjustments on receivables held for sale	25			(10		)
Loan impairment	(17		)	47
Tax valuation allowances	—			(7		)
Loan origination cost deferrals	3			3
Interest recognition	1			—
Pension and other postretirement benefit costs	2			1
Other	(2		)	3
Net income (loss) – Group Reporting Basis	(62		)	32
Tax (expense) benefit – Group Reporting Basis	47			(2		)
Income (loss) before tax – Group Reporting Basis	$	(109	)	$	34

Included in loan impairment charges for the three months ended March 31, 2016 is a loan impairment adjustment of approximately $100 million representing the cumulative impact of the correction of an error under the Group Reporting Basis of accounting and reporting policies (a non-U.S. GAAP financial measure). During the first quarter of 2016, management identified a calculation error in the loan impairment allowance model for the segment collectively evaluated for impairment. The cumulative impact of this item was an understatement of the loan impairment allowance of approximately $100 million at March 31, 2016. Loan impairment allowances under U.S. GAAP were unaffected.

A summary of differences between U.S. GAAP and the Group Reporting Basis as they impact our results is presented in our 2015 Form 10-K. There have been no significant changes since December 31, 2015 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

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Receivables Review

The following table summarizes receivables held for investment and receivables held for sale at March 31, 2016 and increases (decreases) since December 31, 2015:

			Increases (Decreases) From
			December 31, 2015
	March 31, 2016		$			%
	(dollars are in millions)
Receivables held for investment:
Real estate secured:
First lien	$	6,807	$	(495	)	(6.8	)%
Second lien	1,766		(88		)	(4.7	)
Total real estate secured receivables held for investment(1)	$	8,573	$	(583	)	(6.4	)%
Receivables held for sale:
Real estate secured:
First lien	$	8,026	$	(84	)	(1.0	)%
Second lien	159		4			2.6
Total real estate secured receivables held for sale(2)	$	8,185	$	(80	)	(1.0	)%

⁽¹⁾  At March 31, 2016 and December 31, 2015 real estate secured receivables held for investment includes $274 million and $326 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policy.

⁽²⁾  See Note 5, "Receivables Held for Sale," in the accompanying consolidated financial statements for detail information related to the movements in the real estate secured receivables held for sale balances between periods.

Real estate secured receivables held for investment The decrease since December 31, 2015 reflects the transfer of additional receivables to held for sale with a carrying value prior to transfer of $267 million during the three months ended March 31, 2016 as well as continued liquidation of the real estate secured receivable portfolio which will continue going forward. The liquidation rates in our real estate secured receivable portfolio continue to be impacted by low receivable prepayments as few refinancing opportunities for our customers exist.

Prior to 2013, real estate markets in a large portion of the United States had been affected by stagnation or declines in property values for a number of years. As a result, the loan-to-value (“LTV”) ratios for our real estate secured receivable portfolios have generally deteriorated since origination. Receivables that have an LTV greater than 100 percent have historically had a greater likelihood of becoming delinquent, resulting in higher loss severities which adversely impacts our provision for credit losses. The following table presents LTV ratios for our real estate secured receivable portfolio held for investment as of March 31, 2016 and December 31, 2015.

	LTV Ratios (1)(2)(3)
	March 31, 2016				December 31, 2015
	First Lien		Second Lien		First Lien		Second Lien
LTV < 80%	68	%	28	%	67	%	27	%
80% ≤ LTV < 90%	16		16		16		16
90% ≤ LTV < 100%	10		21		10		21
LTV ≥ 100%	6		35		7		36
Average LTV for portfolio	69		90		70		91
Average LTV for LTV>100%	109		113		109		113

⁽¹⁾  LTV ratios for first liens are calculated using the receivable balance as of the balance sheet date which reflects the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies but excludes any basis adjustments to the receivable such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on

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purchased receivables. LTV ratios for second liens are calculated using the receivable balance as of the reporting date as described above plus the senior lien amount at origination. For purposes of this disclosure, current estimated property values are derived from the property's appraised value at the time of receivable origination updated by the change in the Federal Housing Finance Agency's house pricing index (“HPI”) at either a Core Based Statistical Area or state level. The estimated value of the homes could differ from actual fair values due to changes in condition of the underlying property, variations in housing price changes within metropolitan statistical areas and other factors. As a result, actual property values associated with receivables that end in foreclosure may significantly differ from the estimated values used for purposes of this disclosure.

⁽²⁾  For purposes of this disclosure, current estimated property values are calculated using the most current HPIs available and applied on an individual receivable basis, which results in an approximate three month delay in the production of reportable statistics for the current period. Therefore, the March 31, 2016 and December 31, 2015 information in the table above reflects current estimated property values using HPIs as of December 31, 2015 and September 30, 2015, respectively.

⁽³⁾  Excludes the purchased receivable portfolios which totaled $469 million and $484 million at March 31, 2016 and December 31, 2015, respectively.

Receivables held for sale  Receivables held for sale totaled $8,185 million at March 31, 2016 compared with $8,265 million at December 31, 2015. The decrease as compared with December 31, 2015 reflects continued liquidation in this portfolio as well as the impact of an additional lower of amortized cost or fair value adjustment during the current quarter. This decrease was partially offset by the transfer of additional real estate secured receivables to held for sale during the three months ended March 31, 2016. See Note 5, "Receivables Held for Sale," for additional discussion of receivables held for sale.

Real Estate Owned

The following table provides quarterly information regarding our real estate owned ("REO") properties:

	Quarter Ended
	Mar. 31, 2016			Dec. 31, 2015			Sept. 30, 2015			June 30, 2015			Mar. 31, 2015
	(dollars are in millions)
Carrying value of REO properties held at end of period	$	68		$	88		$	101		$	123		$	150
Number of REO properties at end of period	919			1,226			1,489			1,644			1,975
Number of properties added to REO inventory in the period	221			329			369			451			519
Average loss (gain) on sale of REO properties(1)	4.3		%	4.6		%	.8		%	(.7		)%	(1.7		)%
Average total loss on foreclosed properties(2)	49.8		%	53.3		%	48.4		%	47.6		%	47.4		%
Average time to sell REO properties (in days)	260			296			268			269			249

⁽¹⁾  Property acquired through foreclosure is initially recognized at the lower of amortized cost or fair value of the collateral less estimated costs to sell (“Initial REO Carrying Amount”). The average loss (gain) on sale of REO properties is calculated as cash proceeds less the Initial REO Carrying Amount divided by the unpaid principal balance prior to write-down (excluding any accrued interest income) plus certain other ancillary disbursements that, by law, are reimbursable from the cash proceeds (e.g., real estate tax advances) and were incurred prior to our taking title to the property and does not include holding costs on REO properties. This ratio represents the portion of our total loss (gain) on foreclosed properties that occurred after we took title to the property.

⁽²⁾  The average total loss on foreclosed properties sold each quarter includes both the loss on sale of the REO property as discussed above and the cumulative write-downs recognized on the receivable up to the time we took title to the property. This calculation of the average total loss on foreclosed properties uses the unpaid principal balance prior to write-down (excluding any accrued interest income) plus certain other ancillary disbursements that, by law, are reimbursable from the cash proceeds (e.g., real estate tax advances) and were incurred prior to the date we took title to the property and does not include holding costs on REO properties.

The number of REO properties held at March 31, 2016 declined as compared with December 31, 2015 as we sold more REO properties during the first quarter of 2016 than were added to inventory. Our receivable sales program will continue to impact the number of REO properties added to inventory during the remainder of 2016.

The average loss (gain) on sale of REO properties and the average total loss on foreclosed properties improved during the first quarter of 2016 as compared with the prior quarter. Additionally, the average time to sell REO properties (in days) improved during the first quarter of 2016. We continue to monitor and enhance our REO liquidation strategy, which resulted in shorter times to sell and improved losses on sales during the first quarter of 2016. These efforts will continue into 2016.

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Results of Operations

Unless noted otherwise, the following discusses amounts from continuing operations as reported in our consolidated statement of income.

Net Interest Income  The following table summarizes net interest income and net interest margin for the three months ended March 31, 2016 and 2015.

Three Months Ended March 31,	2016		%(1)		2015		%(1)
	(dollars are in millions)
Interest income	$	342	7.18	%	$	432	5.88	%
Interest expense	160		3.36		248		3.38
Net interest income	$	182	3.82	%	$	184	2.50	%

⁽¹⁾  % Columns: comparison to average interest-earning assets.

Net interest income decreased during the three months ended March 31, 2016 due to the following:

Ÿ Average receivable levels decreased as a result of real estate secured receivable liquidation.

Ÿ During the three months ended March 31, 2016, the overall yields on total average interest earning assets increased primarily due to higher overall receivable yields reflecting the impact of lower levels of nonaccrual real estate secured receivables as compared with the year-ago period. The increase in the overall yield on total average interest earning assets also reflects a shift in mix of total average interest earning assets to a lower percentage of short-term investments which have significantly lower yields than our receivable portfolio.

Ÿ Interest expense decreased as a result of lower average borrowings, partially offset by the impact of higher average rates due to the maturing of certain lower rate long-term borrowings since March 31, 2015. Higher average rates also reflect the impact of increases in rates on certain variable rate debt during the first quarter of 2016.

Net interest margin was 3.82 percent for the three months ended March 31, 2016 as compared with 2.50 percent for the three months ended March 31, 2015. The increase in net interest margin during the three months ended March 31, 2016 reflects the impact of higher overall yields on total average interest earning assets due to higher receivable yields and a shift in the mix of total average interest earning assets to a lower percentage of short-term investments as discussed above. Cost of funds as a percentage of average interest earning assets for the three months ended was essentially flat as interest expense decreased at essentially the same pace as average interest earning assets. The following table summarizes the significant trends affecting the comparability of net interest income and net interest margin:

Three Months Ended March 31,	2016
	(dollars are in millions)
Net interest income/net interest margin from prior year period	$	184		2.50	%
Impact to net interest income resulting from:
Lower asset levels	(152		)
Receivable yields	20
Asset mix	40
Cost of funds (rate and volume)	88
Other	2
Net interest income/net interest margin for current year period	$	182		3.82	%

The varying maturities and repricing frequencies of both our assets and liabilities expose us to interest rate risk. When the various risks inherent in both the asset and the debt do not meet our desired risk profile, we use derivative financial instruments to manage these risks to acceptable interest rate risk levels. See “Risk Management” in this MD&A for additional information regarding interest rate risk and derivative financial instruments.

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Provision for Credit Losses  The following table summarizes provision for credit losses by product:

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured:
Lower of amortized cost or fair value adjustment related to credit factors	$	13	$	—
Remainder	24		27
Total provision for credit losses	$	37	$	27

The provision for credit losses for real estate secured receivables increased during the three months ended March 31, 2016 as compared with the year-ago period. The provision for credit losses during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio. Excluding the impact of this release, the provision for credit losses was lower during the first quarter of 2016 as compared to the year-ago period. The improvement reflects the expansion of our receivable sales program in June 2015 which resulted in the transfer of significant amount of real estate secured receivables to held for sale. Subsequent to the transfer to held for sale no further provision for credit losses are recorded on these receivables as receivables held for sale are carried at the lower of amortized cost or fair value. The first quarters of 2016 and 2015 were both positively impacted by lower loss estimates due to lower receivable levels and the impact of lower dollars of delinquency on accounts less than 180 days contractually delinquent, as well as lower reserve requirements on troubled debt restructurings ("TDR Loans"). The decrease was partially offset by the impact of recording a lower of amortized cost or fair value adjustment related to credit factors on receivables transferred to held for sale during the three months ended March 31, 2016. This adjustment reflects the difference between amortized cost and the amount we believe a third party investor would pay to acquire the receivables, which takes into consideration factors that are not relevant under the incurred loss model in establishing credit loss reserves for receivables held for investment, such as life time losses and the discounting of cash flows. No similar lower of amortized cost or fair value adjustment was recorded during the year-ago period.

Net charge-offs totaled $76 million during the three months ended March 31, 2016 compared with $134 million during the year-ago period. This decrease reflects lower levels of receivables held for investment and lower charge-off on accounts that reach 180 days contractual delinquency reflecting improved credit quality as a result of improvements in economic conditions and home prices since March 31, 2015. See “Credit Quality” for further discussion of our net charge-offs.

Other Revenues  The following table summarizes the components of other revenues:

							Increase (Decrease)
Three Months Ended March 31,	2016			2015			Amount			%
	(dollars are in millions)
Derivative related expense	$	(115	)	$	(97	)	$	(18	)	(18.6)%
Gain on debt designated at fair value and related derivatives	24			59			(35		)	(59.3)%
Servicing and other fees from HSBC affiliates	4			6			(2		)	(33.3)
Lower of amortized cost or fair value adjustment on receivables held for sale	(55		)	(17		)	(38		)	*
Other income	9			7			2			28.6
Total other revenues	$	(133	)	$	(42	)	$	(91	)	*

Derivative related expense includes realized and unrealized gains and losses on derivatives which do not qualify as effective hedges under hedge accounting principles and ineffectiveness on derivatives which are qualifying hedges. Designation of swaps as effective hedges reduces the volatility that would otherwise result from mark-to-market accounting. All derivatives are economic hedges of the underlying debt instruments regardless of the accounting treatment. The following table summarizes derivative related expense for the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,	2016			2015
	(in millions)
Net realized losses	$	(18	)	$	(26	)
Mark-to-market on derivatives which do not qualify as effective hedges	(101		)	(69		)
Hedge accounting ineffectiveness	4			(2		)
Total derivative related expense	$	(115	)	$	(97	)

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Derivative related expense increased during the three months ended March 31, 2016 as compared with the year-ago period. As discussed in prior filings, our real estate secured receivables are remaining on the balance sheet longer due to lower prepayment rates. At March 31, 2016, we had a notional amount of $2.6 billion of interest rate swaps outstanding for the purpose of offsetting the increase in the duration of these receivables and the corresponding increase in interest rate risk as measured by the present value of a basis point. While these positions act as economic hedges by lowering our overall interest rate risk and more closely matching both the structure and duration of our liabilities to the structure and duration of our assets, they do not qualify as effective hedges under hedge accounting principles. As a result, these positions are carried at fair value and are marked-to-market through income while the item being hedged is not carried at fair value and, therefore, no offsetting fair value adjustment is recorded. Our non-qualifying hedges at March 31, 2016 are primarily longer-dated pay fixed/receive variable interest rate swaps with an average life of 7.8 years. Market value movements for the longer-dated pay fixed/receive variable interest rate swaps may be volatile during periods in which long-term interest rates fluctuate, but they economically lock in fixed interest rates for a set period of time which results in funding that is better aligned with longer term assets when considered in conjunction with variable rate borrowings. As we continue to make progress in our strategy to accelerate the run-off and sales of our real estate receivable portfolio, the dynamics of the duration of our receivables due to lower prepayment rates and the corresponding increase in interest rate risk are changing. In connection with the receivable sale which was completed in April 2016, we terminated non-qualifying hedges with a notional value of $720 million. We intend to continue reducing the size and potentially eliminate this non-qualifying hedge portfolio corresponding with timing of receivable sales over the remainder of 2016. Falling long-term interest rates during both the three months ended March 31, 2016 and 2015 had a negative impact on the mark-to-market for this portfolio of swaps, although the impact was more pronounced in the current year period. Net realized losses improved during the three months ended March 31, 2016 as a result of fewer non-qualifying hedges outstanding since March 31, 2015. Ineffectiveness during the three months ended March 31, 2016 and 2015 was primarily related to our cross currency cash flow hedges that are approaching maturity.

Net income volatility, whether based on changes in interest rates for swaps which do not qualify for hedge accounting or ineffectiveness recorded on our qualifying hedges, impacts the comparability of our reported results between periods. Derivative related expense for the three months ended March 31, 2016 or any prior periods should not be considered indicative of the results for any future periods.

Gain on debt designated at fair value and related derivatives reflects fair value changes on our fixed rate debt accounted for under fair value option ("FVO") as well as the fair value changes and realized gains (losses) on the related derivatives associated with debt designated at fair value. Gain on debt designated at fair value and related derivatives decreased during the three months ended March 31, 2016 as compared with the year-ago period as a result of fewer derivative positions as our fair value option debt and related derivatives mature. See Note 6, “Fair Value Option,” in the accompanying consolidated financial statements for additional information, including a break out of the components of the gain on debt designated at fair value and related derivatives.

Net income volatility, whether based on changes in the interest rate or credit risk components of the mark-to-market on debt designated at fair value and the related derivatives, impacts the comparability of our reported results between periods. The gain on debt designated at fair value and related derivatives for the three months ended March 31, 2016 should not be considered indicative of the results for any future periods.

Servicing and other fees from HSBC affiliates represents revenue received under service level agreements under which we service real estate secured receivables as well as rental revenue from HSBC Technology & Services (USA) Inc. (“HTSU”) for certain office and administrative costs. Servicing and other fees from HSBC affiliates decreased modestly during the three months ended March 31, 2016 due to lower rental income as a result of the sale of a data center located in Vernon Hills, Illinois to HTSU during the third quarter of 2015.

Lower of amortized cost or fair value adjustment on receivables held for sale during the three months ended March 31, 2016 and 2015 is summarized in the following table:

Three Months Ended March 31,	2016			2015
	(in millions)
Income (expense)
Initial lower of amortized cost or fair value adjustment recorded on receivables transferred to held for sale during the period	$	(4	)	$	—
Lower of amortized cost or fair value adjustment subsequent to the initial transfer to held for sale	(51		)	(17		)
Lower of amortized cost or fair value adjustment	$	(55	)	$	(17	)

During the three months ended March 31, 2016, we recorded an initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale totaling $17 million, of which $4 million was attributable to non-credit factors and recorded as a component of other revenues in the consolidated statement of income (loss). The remainder of the total initial lower of amortized

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cost or fair value adjustment of $13 million was attributed to credit factors and recorded as a component of provision for credit losses as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value. For the three months ended March 31, 2015, no initial lower of amortized cost or fair value adjustment was required as the fair value of the receivables at the time of transfer exceeded the carrying value after consideration of credit loss reserves associated with these receivables.

During the three months ended March 31, 2016, we recorded an additional lower of amortized cost or fair value adjustment subsequent to the initial transfer to held for sale totaling $51 million. Of this amount, $68 million was attributable to fair value adjustments as a result of establishing separate pools for receivables being marketed. Removing these receivables from their risk-based grouping impacts the valuation of the receivables remaining in the risked-based pools. This was partially offset by the impact of recoveries on receivables held for sale for which we received full settlement during the quarter totaling $17 million. During the three months ended March 31, 2015, we recorded an additional lower of amortized cost or fair value adjustment on receivables held for sale as a result of settlements and short sales totaling $17 million. No additional lower of amortized cost or fair value was recorded related to changes in fair value during the year-ago quarter.

See Note 5, "Receivables Held for Sale," in the accompanying consolidated financial statements for additional discussion.

Other income totaled $9 million during the three months ended March 31, 2016 compared with $7 million during the year-ago period. The increase reflects primarily reflects the impact of changes in the provision for estimated repurchase liabilities during the first quarter of 2016 as discussed more fully below.

Our reserve for potential repurchase liability represents our best estimate of the loss that has been incurred resulting from various representations and warranties in the contractual provisions of our receivable sales. Because the level of receivable repurchase losses are dependent upon strategies for bringing claims or pursuing legal action for losses incurred, the level of the liability for receivables repurchase losses requires significant judgment. As such, there is uncertainty inherent in these estimates making it reasonably possible that they could change. The following table summarizes the changes in our reserve for potential repurchase liability related to our receivable sales:

Three Months Ended March 31,	2016			2015
	(in millions)
Balance at beginning of period	$	36		$	86
Increase (decrease) in liability recorded through earnings	(5		)	—
Balance at end of period	$	31		$	86

Operating Expenses  The following table summarizes the components of operating expenses. The cost trends in the table below include fixed allocated costs which will not necessarily decline in line with the run-off of our receivable portfolio in future periods.

					Increase (Decrease)
Three Months Ended March 31,	2016		2015		Amount			%
	(in millions)
Salaries and employee benefits	$	38	$	42	$	(4	)	(9.5)%
Occupancy and equipment expenses, net	6		8		(2		)	(25.0)
Real estate owned expenses	3		4		(1		)	(25.0)
Other expenses	49		40		9			22.5
Support services from HSBC affiliates	42		54		(12		)	(22.2)
Total operating expenses	$	138	$	148	$	(10	)	(6.8)%

Salaries and employee benefits decreased during the three months ended March 31, 2016 due to the impact of the continuing reduced scope of our business operations and the impact of entity-wide initiatives to reduce costs.

Occupancy and equipment expenses, net decreased marginally during the three months ended March 31, 2016 reflecting lower depreciation expense as a result of the sale of a data center during the third quarter of 2015 as discussed above as well as lower repair costs.

Real estate owned expenses decreased minimally during the three months ended March 31, 2016 as a result of lower holding costs due to fewer average numbers of REO properties held during the first quarter of 2016 and lower costs per property.

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Other expenses increased during the three months ended March 31, 2016 as a result of an increase in file review and other costs of approximately $19 million. These increases were partially offset by the impact of a continuing reduction in the scope of our business operations and the impact of entity-wide initiatives to reduce costs.

Support services from HSBC affiliates decreased during the three months ended March 31, 2016 as compared with the year-ago period primarily due to lower technology costs from an HSBC affiliate. To a lesser extent, the decrease also reflects lower fees for receivable servicing by HSBC affiliates as a result of the sale of receivables since March 31, 2015 as well as the impact of terminating the guarantee during the third quarter of 2015 related to the surety bond in the Jaffe litigation.

Efficiency Ratio from continuing operations was 281.6 percent for the three months ended March 31, 2016 compared with 104.2 percent for the year-ago period. Our efficiency ratio was impacted in both periods by the change in the fair value of our own debt attributable to credit spread for which we have elected fair value option accounting and the impact of our non-qualifying hedge portfolio, both of which are reported as a component of total other revenues in our consolidated statement of income (loss). Excluding the impact of these items, our efficiency ratio remained higher during the three months ended March 31, 2016 as compared with the year-ago period reflecting lower other revenues due to the lower of amortized cost or fair value adjustment on receivables held for sale and lower net interest income as previously discussed, partially offset by lower operating expenses.

Income taxes The following table provides an analysis of the difference between effective rates based on the total income tax provision attributable to pretax income and the statutory U.S. Federal income tax rate:

Three Months Ended March 31,	2016					2015
	(dollars are in millions)
Tax benefit at the U.S. Federal statutory income tax rate	$	(44	)	(35.0	)%	$	(12	)	(35.0	)%
Increase (decrease) in rate resulting from:
State and local taxes, net of Federal benefit	(3		)	(2.4	)	—			—
Adjustment with respect to tax for prior periods(1)	18			14.4		(5		)	(15.2	)
Change in valuation allowance	—			—		(9		)	(27.3	)
Uncertain tax positions(2)	(18		)	(14.4	)	(1		)	(3.0	)
Other non-deductible/non-taxable items	(2		)	(1.6	)	(2		)	(6.1	)
Other	(7		)	(5.4	)	1			1.8
Total income tax benefit	$	(56	)	(44.4	)%	$	(28	)	(84.8	)%

⁽¹⁾  For the three months ended March 31, 2016, income tax benefit was impacted by a reversal of approximately $15 million associated with an out of period adjustment to our deferred tax asset balance.

⁽²⁾  For the three months ended March 31, 2016, the amount primarily relates to the conclusion of certain State audits.

Segment Results – Group Reporting Basis

We have one reportable segment: Consumer. Our Consumer segment consists of our run-off Consumer Lending and Mortgage Services businesses. While these businesses are operating in run-off, they do not qualify to be reported as discontinued operations. Our segment results are reported on a continuing operations basis. There have been no changes in measurement or composition of our segment reporting as compared with the presentation in our 2015 Form 10-K.

We report financial information to our parent, HSBC, in accordance with HSBC Group accounting and reporting policies, which applies IFRSs as issued by the IASB and as endorsed by the EU, and, as a result, our segment results are prepared and presented using financial information prepared on the basis of HSBC Group's accounting and reporting policies (a non-U.S. GAAP financial measure) as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources such as employees are primarily made on this basis. However, we continue to monitor liquidity, capital adequacy and report to regulatory agencies on a U.S. GAAP basis. The significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 18, "Business Segments," and under the caption, "Basis of Reporting" in the MD&A section of our 2015 Form 10-K.

We are currently in the process of re-evaluating the financial information used to manage our businesses, including the scope and content of the U.S. GAAP financial data being reported to our Management and our Board. To the extent we make changes to this reporting in 2016, we will evaluate any impact such changes may have on our segment reporting.

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Consumer Segment  The following table summarizes the Group Reporting Basis results for our Consumer segment for the three months ended March 31, 2016 and 2015.

							Increase (Decrease)
Three Months Ended March 31,	2016			2015			Amount			%
	(dollars are in millions)
Net interest income	$	220		$	281		$	(61	)	(21.7)%
Other operating losses	(91		)	(78		)	(13		)	(16.7)
Total operating income	129			203			(74		)	(36.5)
Loan impairment charges	95			21			(74		)	*
Net interest income and other operating income after loan impairment charges	34			182			(148		)	(81.3)
Operating expenses	135			148			13			8.8
Income (loss) before income tax	$	(101	)	$	34		$	(135	)	*
Net interest margin	4.55		%	4.20		%
Efficiency ratio	104.7			72.9
Return (after-tax) on average assets ("ROA")	(1.0		)	.4
Balances at end of period:
Loans	$	12,981		$	22,492		$	(9,511	)	(42.3	)%
Loans held for sale	5,136			553			4,583			*
Assets	23,063			32,428			(9,365		)	(28.9	)

* Not meaningful

Our Consumer segment reported a loss before income tax during the three months ended March 31, 2016 as compared with income before income tax during the year ago period. The loss before income tax during the three months ended March 31, 2016 reflects higher loan impairment charges, lower net interest income and higher other operating losses, partially offset by lower operating expenses. Included in loan impairment charges for the three months ended March 31, 2016 is a loan impairment adjustment of approximately $100 million representing the cumulative impact of the correction of an error under the Group Reporting Basis of accounting and reporting policies (a non-U.S. GAAP financial measure). During the first quarter of 2016, management identified a calculation error in the loan impairment allowance model for the segment collectively evaluated for impairment. The cumulative impact of this item was an understatement of the loan impairment allowance of approximately $100 million at March 31, 2016. Loan impairment allowances under U.S. GAAP were unaffected.

Net interest income decreased during the three months ended March 31, 2016 due to the following:

Ÿ Average loan levels decreased as a result of real estate secured loan liquidation.

Ÿ During the three months ended March 31, 2016, the overall yields on total average interest earning assets increased due to higher loan yields as well as a shift in the mix of total average interest earning assets to a lower percentage of short-term investments which have significantly lower yields than our loan portfolio. The higher loan yields in our loan portfolio reflects the impact of lower levels of impaired real estate secured loans, partially offset by the impact of lower amortization of discount due to loan sales, liquidation and improvements in the timing of estimated cash flows to be received.

Ÿ Interest expense decreased during the three months ended March 31, 2016 as a result of lower average borrowings, partially offset by the impact of higher average rates due to the maturing of certain lower rate long-term borrowings since March 31, 2015 as well as an increase in rates on certain variable rate debt during the first quarter of 2016.

Net interest margin improved during the three months ended March 31, 2016 reflecting the impact of higher overall yields on average interest earning assets as discussed above, partially offset by a higher cost of funds as a percentage of average interest earning assets.

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The following table summarizes significant components of other operating losses for the periods presented:

Three Months Ended March 31,	2016			2015
	(in millions)
Trading loss(1)	$	(115	)	$	(97	)
Gain (loss) from debt designated at fair value	8			(2		)
Decrease in repurchase reserve liability	5			—
Other	11			21
Other operating losses	$	(91	)	$	(78	)

⁽¹⁾  Trading loss primarily reflects activity on our portfolio of non-qualifying hedges.

Other operating losses increased during the three months ended March 31, 2016. The components of other operating losses are discussed below:

Ÿ Trading loss increased during the three months ended March 31, 2016. While long-term rates fell during both the three months ended March 31, 2016 and 2015 which had a negative impact on the mark-to-market for this portfolio of swaps, the impact of falling long-term rates was more pronounced during the current year period.

Ÿ Gain (loss) from debt designated at fair value improved during the three months ended March 31, 2016 as a result of the impact of a widening of our credit spreads during the first quarter of 2016 as well as the impact of changes in market movements on certain debt and related derivatives that mature in the near term.

Ÿ Decrease in repurchase reserve liability reflects our best estimate of the loss that has been incurred resulting from various representations and warranties in the contractual provisions of all our receivable sales.

Ÿ Other reflects lower rental income as a result of the sale of a data center located in Vernon Hills, Illinois to HTSU during the third quarter of 2015. Additionally, the year-ago period includes a yield adjustment on loans purchased during 2006.

As discussed above, loan impairment charges during the three months ended March 31, 2016 include a loan impairment adjustment of approximately $100 million representing the cumulative impact of the correction of an error under the Group Reporting Basis of accounting and reporting policies (a non-U.S. GAAP financial measure). Excluding this item, loan impairment charges decreased during the three months ended March 31, 2016 reflecting lower loss estimates due to lower receivable levels and the impact of lower dollars of delinquency on accounts less than 180 days contractually delinquent. The decrease was partially offset by a lower impact of discounting estimated future amounts to be received on real estate secured loans which have been written down to fair value less cost to obtain and sell the collateral due to lower volumes. Both periods were positively impacted by market value adjustments on loan collateral, although the impact was more pronounced in the year-ago period. Additionally, for the three months ended March 31, 2015, loan impairment charges were impacted by a release of approximately $23 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

Loan impairment charges were $30 million higher than net charge-offs during the three months ended March 31, 2016 compared with loan impairment charges that were lower than net charge-offs by $118 million during the year-ago period. Loan impairment allowances decreased to $695 million at March 31, 2016 compared with $958 million at December 31, 2015 primarily as a result of transfers of real estate secured loans to held for sale. During the three months ended March 31, 2016, real estate secured loans transferred to held for sale had loan impairment allowances totaling $313 million at the time of transfer. Loans held for sale and the associated loan impairment allowances are reported as a component of other assets. However, these loans continue to be accounted for and impairment continues to be measured through loan impairment charges in accordance with IAS 39, "Financial Instruments: recognition and Measurement," with any gain or loss recorded at the time of sale. The decrease in loan impairment allowances also reflects lower levels of new impaired loans due to lower loan levels, improved economic conditions and lower delinquency levels as well as the impact of discounting estimated future amounts to be received on real estate secured loans which have been written down to fair value less cost to obtain and sell the collateral which resulted in lower reserve requirements at March 31, 2016 as discussed above. The decrease in loan impairment allowances was partially offset by the loan impairment adjustment of approximately $100 million as discussed above.

Operating expenses decreased during the three months ended March 31, 2016 reflecting the continuing reduction in the scope of our business operations and the impact of entity-wide initiatives to reduce costs, partially offset by an increase in file review and other costs of approximately $19 million.

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The efficiency ratio deteriorated during the three months ended March 31, 2016 driven by lower net interest income and higher other operating losses, partially offset by lower operating expenses.

ROA declined during the three months ended March 31, 2016 reflecting a loss before income taxes during the three months ended March 31, 2016 compared with income before income taxes during the year-ago period and the impact of lower average assets.

Real estate secured loans Real estate secured loans for our Consumer segment consisted of the following:

	March 31, 2016		Increases (Decreases) From
				December 31, 2015
				$			%
	(dollars are in millions)
Real estate secured loans	$	12,981		$	(5,537	)	(29.9	)%
Real estate secured loans held for sale(1)	5,136			5,136			*
Total	$	18,117		$	(401	)	(2.2	)%

* Not meaningful

⁽¹⁾  Represents real estate secured loans which met the Group Reporting Basis criteria to be classified as held for sale for the periods presented.

Real estate secured loans decreased to $12,981 million at March 31, 2016 as compared with $18,518 million at December 31, 2015. The decrease reflects the transfer of real estate secured loans to held for sale during the three months ended March 31, 2016 with a carrying value of $5,175 million. The decrease also reflects the continued liquidation of this portfolio which will continue going forward. The liquidation rates in our real estate secured loan portfolio continue to be impacted by declines in loan prepayments as fewer refinancing opportunities for our customers exist.

Real estate secured loans which met the Group Reporting Basis criteria to be classified as held for sale at March 31, 2016 totaled $5,136 million. At December 31, 2015, there were no real estate secured loans which met the Group Reporting Basis criteria to be classified as held for sale.

In April 2016, we sold a pool of real estate secured loans with an aggregate unpaid principal balance of $1,421 million (carrying value of $1,376 million after the effect of any write-downs) at the time of sale to a third-party investor for aggregate cash consideration of $1,440 million. We anticipate recording a gain on this transaction in the second quarter of 2016 of approximately $60 million, net of transaction costs.

As previously discussed, we have identified a pool of real estate secured loans we intend to sell, although only a portion of this pool of real estate secured loans qualified for classification as held for sale under the Group Reporting Basis at March 31, 2016. Assuming we had completed the sale of the entire pool of real estate secured loans classified as held for sale under U.S. GAAP on March 31, 2016, based on market values at that time, we would have recorded a loss of approximately $570 million.

Credit Quality

Credit Loss Reserves  We maintain credit loss reserves to cover probable incurred losses of principal, interest and fees. Credit loss reserves are based on a range of estimates and are intended to be adequate but not excessive. For receivables which have been identified as TDR Loans, credit loss reserves are maintained based on the present value of expected future cash flows discounted at the receivables' original effective interest rates. We estimate probable losses for consumer receivables which do not qualify as TDR Loans using a roll rate migration analysis that estimates the likelihood that a receivable will progress through the various stages of delinquency, or buckets, and ultimately charge-off based upon recent historical performance experience of other receivables in our portfolio. This migration analysis incorporates estimates of the period of time between a loss occurring and the confirming event of its charge-off. Receivables with different risk characteristics are typically segregated into separate models and may utilize different periods of time for estimating the period of a loss occurring and its confirmation. This analysis also considers delinquency status, loss experience and severity and takes into account whether borrowers have filed for bankruptcy, receivables have been re-aged or are subject to modification. Our credit loss reserves also take into consideration the loss severity expected based on the underlying collateral, if any, for the receivable in the event of default based on historical and recent trends, which are updated monthly based on a rolling average of several months' data using the most recently available information. Delinquency status may be affected by customer account management policies and practices, such as the re-age of accounts or modification arrangements. When customer account management policies or changes thereto shift receivables that do not qualify as a TDR Loan from a “higher” delinquency bucket to a “lower” delinquency bucket, this will be reflected in our roll rate statistics.

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To the extent that re-aged accounts that do not qualify as a TDR Loan have a greater propensity to roll to higher delinquency buckets, this will be captured in the roll rates. Since the loss reserve is computed based on the composite of all of these calculations, this increase in roll rate will be applied to receivables in all respective delinquency buckets, which will increase the overall reserve level. In addition, loss reserves on consumer receivables are maintained to reflect our judgment of portfolio risk factors that may not be fully reflected in the statistical roll rate calculation or when historical trends are not reflective of current inherent losses in the portfolio. Portfolio risk factors considered in establishing loss reserves on consumer receivables include product mix, unemployment rates, the credit performance of modified receivables, loan product features such as adjustable rate loans, the credit performance of second lien receivables where the first lien receivable that we own or service is 90 or more days contractually delinquent, economic conditions, such as national and local trends in housing markets and interest rates, portfolio seasoning, account management policies and practices, changes in laws and regulations and other factors which can affect consumer payment patterns on outstanding receivables, such as natural disasters.

In setting our credit loss reserves, we specifically consider the credit quality and other risk factors for each of our products. We recognize the different inherent loss characteristics in each of our products as well as customer account management policies and practices and risk management/collection practices. We also consider key ratios, including reserves as a percentage of nonaccrual receivables and reserves as a percentage of receivables. Loss reserve estimates are reviewed periodically and adjustments are reported in earnings when they become known. As these estimates are influenced by factors outside our control, such as consumer payment patterns and economic conditions, there is uncertainty inherent in these estimates, making it likely that they will change.

Real estate secured receivable carrying amounts in excess of fair value less cost to sell are generally charged-off no later than the end of the month in which the account becomes six months contractually delinquent. Values are determined based upon broker price opinions or appraisals which are updated at least every 180 days. During the quarterly period between updates, real estate price trends are reviewed on a geographic basis and additional adjustments are recorded as necessary. Typically, receivables written down to fair value of the collateral less cost to sell do not require credit loss reserves.

In response to the financial crisis, lenders have significantly tightened underwriting standards, substantially limiting the availability of alternative and subprime mortgages. As fewer financing options currently exist in the marketplace for home buyers, properties in certain markets are remaining on the market for longer periods of time which contributes to home price depreciation. For many of our customers, the ability to refinance and access equity in their homes is no longer an option. These industry trends continue to impact our portfolio and we have considered these factors in establishing our credit loss reserve levels, as appropriate.

The table below sets forth credit loss reserves and credit loss reserve ratios for the periods indicated. The transfer of real estate secured receivables to held for sale for the three months ended March 31, 2016 has resulted in these receivables being carried at the lower of amortized cost or fair value and no longer have any associated credit loss reserves, as previously discussed, which impacts comparability between credit loss reserves and the related reserve ratios between periods.

	March 31, 2016			December 31, 2015
	(dollars are in millions)
Credit loss reserves(1)(2)	$	272		$	311
Credit loss reserve ratios:(2)(3)(4)
Reserves as a percentage of receivables held for investment	2.6		%	2.8		%
Reserves as a percentage of nonaccrual receivables held for investment	101.4			91.9

⁽¹⁾  At March 31, 2016 and December 31, 2015, credit loss reserves includes $10 million and $12 million, respectively, related to receivables held for investment which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell primarily reflecting an estimate of additional loss following an interior appraisal of the property.

⁽²⁾  Reserves associated with accrued finance charges, which totaled $47 million and $51 million at March 31, 2016 and December 31, 2015, respectively, are reported within our total credit loss reserve balances noted above, although receivables and nonaccrual receivables as reported generally exclude accrued finance charges. The credit loss reserve ratios presented in the tables above exclude any reserves associated with accrued finance charges.

⁽³⁾  Credit loss reserve ratios exclude receivables and nonaccrual receivables associated with receivable portfolios which are considered held for sale as these receivables are carried at the lower of amortized cost or fair value with no corresponding credit loss reserves.

⁽⁴⁾  These ratios are impacted by changes in the level of real estate secured receivables held for investment which have been written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies and are not classified as held for sale. The following table shows these ratios excluding these receivables and any associated credit loss reserves for all periods presented.

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	March 31, 2016		December 31, 2015
Credit loss reserve ratios:
Reserves as a percentage of receivables held for investment	2.6	%	2.8	%
Reserves as a percentage of nonaccrual receivables held for investment	294.5		258.3

Credit loss reserves at March 31, 2016 decreased as compared with December 31, 2015 primarily due to the transfer of additional receivables to held for sale during the first quarter of 2016. Credit loss reserves associated with these receivables prior to their transfer to held for sale totaled $20 million during the three months ended March 31, 2016 and were recognized as additional charge-off at the time of transfer to held for sale. The majority of the receivables transferred to held for sale consisted of receivables which previously were not saleable as they were part of a collateralized funding transaction which was legally released as collateral under the public trust during the first quarter of 2016 and, as such, became available for sale. The majority of these receivables were classified as TDR Loans which carry higher reserve requirements. The decrease also reflects the impact of lower receivable levels and lower levels of two-months-and-over contractual delinquency on accounts less than 180 days contractually delinquent. See Note 4, "Credit Loss Reserves," in the accompanying consolidated financial statements for additional analysis of loss reserves.

At March 31, 2016, 72 percent of our credit loss reserves are associated with TDR Loans held for investment totaling $1,152 million which are reserved for using a discounted cash flow analysis which, in addition to considering all expected future cash flows, also takes into consideration the time value of money and the difference between the current interest rate and the original effective interest rate on the receivable. This methodology generally results in a higher reserve requirement for TDR Loans than the remainder of our receivable portfolio which are carried at amortized cost for which credit loss reserves are established using a roll rate migration analysis that only considers 12 months of losses. The discounted cash flow methodology is highly sensitive to changes in volumes of TDR Loans as well as changes in estimates of the timing and amount of cash flows for TDR Loans. As a result, credit loss reserves at March 31, 2016 and provisions for credit losses for TDR Loans for the three months ended March 31, 2016 should not be considered indicative of the results for any future periods.

In addition to TDR Loans, a portion of our real estate secured receivable portfolio held for investment is carried at the lower of amortized cost or fair value of the collateral less cost to sell. The following table summarizes these receivable components along with receivables collectively evaluated for impairment and receivables acquired with deteriorated credit quality and the associated credit loss reserves associated with each component:

	March 31, 2016				December 31, 2015
	Credit Loss Reserves		Receivables		Credit Loss Reserves		Receivables
	(in millions)
Collectively evaluated for impairment	$	66	$	7,147	$	79	$	7,558
Individually evaluated for impairment(1)	196		1,152		220		1,272
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	10		274		12		326
Total(2)	$	272	$	8,573	$	311	$	9,156

⁽¹⁾  The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $211 million and $250 million at March 31, 2016 and December 31, 2015, respectively. The reserve component above excludes credit loss reserves for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $9 million and $10 million at March 31, 2016 and December 31, 2015, respectively. These receivables and credit loss reserves are reflected within receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

⁽²⁾  Reserves associated with accrued finance charges, which totaled $47 million and $51 million at March 31, 2016 and December 31, 2015, respectively, are reported within our total credit loss reserve balances, although receivable balances generally exclude accrued finance charges.

The following table summarizes our TDR Loans and receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell in comparison to the real estate secured receivable portfolio held for investment.

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	March 31, 2016			December 31, 2015
	(dollars are in millions)
Total real estate secured receivables held for investment	$	8,573		$	9,156
Real estate secured receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	$	274		$	326
Real estate secured TDR Loans(1)	1,152			1,272
Real estate secured receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell or reserved for using a discounted cash flow methodology	$	1,426		$	1,598
Real estate secured receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell or reserved for using a discounted cash flow methodology as a percentage of real estate secured receivables	16.6		%	17.5		%

⁽¹⁾   Excludes TDR Loans totaling $211 million and $250 million at March 31, 2016 and December 31, 2015, respectively, which are recorded at the lower of amortized cost or fair value of the collateral less cost to sell and included separately in the table.

Credit loss reserve ratios Following is a discussion of changes in the reserve ratios we consider in establishing reserve levels.

Reserves as a percentage of receivables held for investment at March 31, 2016 decreased as compared with December 31, 2015 as the decrease in credit loss reserves outpaced the decrease in receivables as a substantial portion of the receivables transferred to held for sale were classified as TDR Loans which carry higher reserve requirements.

Reserves as a percentage of nonaccrual receivables held for investment were impacted by nonaccrual real estate secured receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell. Excluding receivables carried at fair value of the collateral less cost to sell and any associated credit loss reserves from these ratios, reserves as a percentage of nonaccrual receivables at March 31, 2016 increased as compared with December 31, 2015 as the decrease in nonaccrual receivables outpaced the decrease in credit loss reserves.

See Note 4, "Credit Loss Reserves," in the accompanying consolidated financial statements for a rollforward of credit loss reserves by product for the three months ended March 31, 2016 and 2015.

Delinquency  Our policies and practices for the collection of consumer receivables, including our customer account management policies and practices, permit us to modify the terms of receivables, either temporarily or permanently (a “modification”), and/or to reset the contractual delinquency status of an account that is contractually delinquent to current (a “re-age”), based on indicators or criteria which, in our judgment, evidence continued payment probability. Such policies and practices differ by product and are designed to manage customer relationships, improve collection opportunities and avoid foreclosure or repossession as determined to be appropriate. If a re-aged account subsequently experiences payment defaults, it will again become contractually delinquent and be included in our delinquency ratios.

The following table summarizes dollars of two-months-and-over contractual delinquency for receivables and receivables held for sale and two-months-and-over contractual delinquency as a percent of consumer receivables and receivables held for sale (“delinquency ratio”).

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	March 31, 2016			December 31, 2015
	(dollars are in millions)
Dollars of contractual delinquency(1):
Receivables held for investment:
Real estate secured:
Late stage delinquency(2)(3)	$	157		$	195
Individually evaluated for impairment(4)	76			102
Collectively evaluated for impairment(5)	48			69
Total real estate secured receivables held for investment	281			366
Real estate secured receivables held for sale(6)	596			569
Total	$	877		$	935
Delinquency ratio:
Receivables held for investment:
Real estate secured:
Late stage delinquency	57.30		%	59.82		%
Individually evaluated for impairment	6.60			8.02
Collectively evaluated for impairment	.67			.91
Total real estate secured receivables held for investment	3.28			4.00
Real estate secured receivables held for sale	7.28			6.88
Total	5.23		%	5.37		%

⁽¹⁾  The receivables held for investment balances included in this table reflect the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the receivable such as unearned income, unamortized deferred fees and costs on originated receivables, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  Two-months-and-over contractually delinquent receivables are classified as "late stage delinquency" if at any point in its life cycle it has been written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). However, as a result of account management actions or other account activity, these receivables may no longer be greater than 180 days past due. At March 31, 2016 and December 31, 2015, the amounts above include $17 million and $23 million, respectively, of receivables that at some point in their life cycle were written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies, but are currently between 60 and 180 days past due.

⁽³⁾  Amount includes TDR Loans which totaled $106 million and $131 million at March 31, 2016 and December 31, 2015, respectively.

⁽⁴⁾  This amount represents delinquent receivables which have been classified as TDR Loans and carried at amortized cost and which at no point in its life cycle have ever been greater than 180 days contractually delinquent. For TDR Loans we evaluate reserves using a discounted cash flow methodology. Each receivable is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. This amount excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies as they are reflected in the late stage delinquency totals.

⁽⁵⁾  This amount represents delinquent receivables which at no point in its life cycle have ever been greater than 180 days contractually delinquent and are not classified as TDR Loans. As discussed more fully above, for these receivables we establish credit loss reserves using a roll rate migration analysis that estimates the likelihood that a receivable will progress through the various stages of delinquency and ultimately charge-off based upon recent historical performance experience of other receivables in our portfolio.

⁽⁶⁾  At March 31, 2016 and December 31, 2015, dollars of contractual delinquency for receivable held for sale includes $458 million and $443 million, respectively, of real estate secured receivables which are also classified as TDR Loans.

Dollars of delinquency for real estate secured receivables held for investment at March 31, 2016decreased$85 million since December 31, 2015 as discussed below.

Ÿ Late stage delinquency Dollars of late stage delinquency decreased as compared with December 31, 2015 as a result of the transfer of certain late stage delinquency receivables to receivables held for sale, which previously were not saleable as they were part of a collateralized funding transaction. These late stage delinquent receivables were legally released as collateral under the public trust during the first quarter of 2016 and, as such, became available for sale. Excluding the impact of this transfer to receivables held for sale, dollars of late stage delinquency would have increased reflecting the impact of accounts progressing to late stage delinquency.

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Ÿ Individually evaluated for impairment The decrease as compared with December 31, 2015 reflects the impact of accounts progressing to late stage delinquency and the continued liquidation of the real estate secured receivable portfolio during the first quarter of 2016. The decrease also reflects the transfer of receivables to held for sale primarily consisting of certain receivables which had previously been part of a collateralized funding transaction but during the first quarter of 2016 became available for sale, as discussed above.

Ÿ Collectively evaluated for impairment Dollars of delinquency for accounts collectively evaluated for impairment decreased as compared with December 31, 2015 reflecting lower receivables levels due to receivable run-off and the progression of accounts to either late stage delinquency or individually evaluated for impairment during the first quarter of 2016.

Dollars of delinquency for receivables held for sale at March 31, 2016 increased as compared with December 31, 2015 reflecting the impact of the transfer of additional real estate secured receivables to held for sale during the three months ended March 31, 2016 primarily consisting of certain receivables which had previously been part of a collateralized funding transaction but during the first quarter of 2016 became available for sale, as discussed above.

Delinquency ratio The delinquency ratio for real estate secured receivables held for investment was 3.28 percent at March 31, 2016 compared with 4.00 percent at December 31, 2015. The decrease reflects the lower dollars of delinquency as discussed above, partially offset by the impact of lower receivable levels.

See “Customer Account Management Policies and Practices” regarding the delinquency treatment of re-aged and modified accounts.

Net Charge-offs of Consumer Receivables  The following table summarizes net charge-off of receivables both in dollars and as a percent of average receivables (“net charge-off ratio”). During a quarter in which receivables are transferred to receivables held for sale, those receivables continue to be included in the average consumer receivable balances prior to such transfer and any charge-off related to those receivables prior to such transfer, including the recognition of existing credit loss reserves at the time of transfer and the credit portion of the lower of amortized cost or fair value adjustment, if any, remain in our net charge-off totals. However, in the quarter following the transfer to held for sale classification, the receivables are no longer included in average consumer receivables as such receivables are carried at the lower of amortized cost or fair value and, accordingly, there are no further charge-offs associated with these receivables. As a result, the amounts and ratios presented below are not comparable between periods.

Three Months Ended(1)	March 31, 2016			December 31, 2015			March 31, 2015
	(dollars are in millions)
Net charge-off dollars - Real estate secured receivables	$	76		$	42		$	134
Net charge-off ratio - Real estate secured receivables	3.42		%	1.80		%	2.42		%
Real estate charge-offs and REO expense as a percent of average real estate secured receivables	3.53		%	2.14		%	2.49		%

⁽¹⁾  The net charge-off ratio for all quarterly periods is net charge-offs for the quarter, annualized, as a percentage of average receivables for the quarter.

Net real estate secured receivable charge-offs dollars for all periods are impacted by the transfer of receivables to held for sale during the period as credit loss reserves existing at the time of transfer are recorded as additional charge-offs. For the quarterly periods ending March 31, 2016, December 31, 2015 and March 31, 2015, additional charge-off related to credit loss reserves existing at the time of transfer to held for sale totaled $20 million, $5 million and $15 million, respectively. Additionally, the credit portion of the lower of amortized cost or fair value adjustment recorded at the time of transfer to receivables held for sale is recorded as additional charge-off and totaled $13 million and $2 million during the quarterly periods ending March 31, 2016 and December 31, 2015, respectively. During the quarterly period ended March 31, 2015, none of the lower of amortized cost or fair value adjustment recorded was attributed to credit. Excluding the impact of dollars of charge-offs related to the transfer of receivables to held for sale, net charge-offs dollars remained higher as compared with the prior quarter reflecting an increase in accounts progressing to late stage delinquency and being written down to the lower of amortized cost or fair value of the collateral less cost to sell as well as higher charge-offs on certain other ancillary disbursements that we incurred on behalf of customers. The increase as compared to the prior quarter was partially offset by the impact of lower receivable levels. Excluding the impact of dollars of charge-offs related to the transfer of receivables to held for sale, net charge-offs dollars remained lower as compared with the prior year quarter reflecting lower levels of receivables held for investment and lower charge-off on accounts that reach 180 days contractual delinquency reflecting improved credit quality as a result of improvements in economic conditions and home prices since March 31, 2015.

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The net real estate secured receivable charge-off ratio for the three months ended March 31, 2016 increased as compared with the prior quarter and prior year quarter due to higher dollars of net charge-offs as discussed above and the impact of lower average receivable levels.

Real estate charge-offs and REO expenses as a percentage of average real estate secured receivables for the three months ended March 31, 2016 increased as compared with the prior quarter due to higher dollars of net charge-offs and the impact of lower average receivable levels, partially offset by lower REO expense. As compared with the prior year quarter, the increase in real estate charge-offs and REO expense as a percentage of average real estate secured receivables reflects the impact of lower average receivable levels, partially offset by lower dollars of net charge-offs and lower REO expenses. See “Results of Operations” for further discussion of REO expense.

Nonperforming Assets  Nonperforming assets consisted of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Nonaccrual real estate secured receivables held for investment:(1)
Late stage delinquency(2)(3)	$	149	$	187
Individually evaluated for impairment(4)	40		54
Collectively evaluated for impairment(5)	33		42
Total nonaccrual real estate secured receivables held for investment(6)	222		283
Real estate owned	68		88
Nonaccrual receivables held for sale(1)(7)	444		386
Total nonperforming assets	$	734	$	757

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the receivable such as unearned income, unamortized deferred fees and costs on originated receivables, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer. Nonaccrual receivables reflect all receivables which are 90 or more days contractually delinquent as well as second lien receivables (regardless of delinquency status) where the first lien receivable that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables held for investment and held for sale do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest. In addition, nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged and the contractual delinquency status reset to current as such activity, in our judgment, evidences continued payment probability. If a re-aged receivable subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual.

⁽²⁾  Nonaccrual receivables are classified as "late stage delinquency" if at any point in its life cycle it has been written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). However, as a result of account management actions or other account activity, these receivables may no longer be greater than 180 days past due. At March 31, 2016 and December 31, 2015, the amounts above include $9 million and $15 million, respectively, of receivables that at some point in their life cycle were evaluated for write-down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies, but are currently between 90 and 180 days past due.

⁽³⁾  This amount includes TDR Loans which are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $99 million at March 31, 2016 compared with $124 million at December 31, 2015.

⁽⁴⁾  This amount represents nonaccrual receivables which have been classified as TDR Loans and carried at amortized cost and which at no point in its life cycle have ever been greater than 180 days contractually delinquent. This amount represents TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each receivable is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. This amount excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell as they are reflected in the late stage delinquency totals.

⁽⁵⁾  This amount represents nonaccrual receivables which at no point in its life cycle have ever been greater than 180 days contractually delinquent and are not classified as TDR Loans. As discussed more fully above, for these receivables we establish credit loss reserves using a roll rate migration analysis that estimates the likelihood that a receivable will progress through the various stages of delinquency and ultimately charge-off based upon recent historical performance experience of other receivables in our portfolio.

⁽⁶⁾  At March 31, 2016 and December 31, 2015, nonaccrual second lien real estate secured receivables totaled $51 million and $63 million, respectively.

⁽⁷⁾  At March 31, 2016 and December 31, 2015, nonaccrual receivables held for sale include $323 million and $285 million, respectively, of real estate secured receivables held for sale which are also classified as TDR Loans.

Nonaccrual real estate secured receivables held for investment at March 31, 2016 decreased as compared with December 31, 2015 as discussed below.

Ÿ Late stage delinquency Nonaccrual late stage delinquency decreased as compared with December 31, 2015 as a result of the transfer of certain late stage delinquency receivables to receivables held for sale, which previously were not saleable as they

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were part of a collateralized funding transaction. These late stage nonaccrual receivables were legally released as collateral under the public trust during the first quarter of 2016 and, as such, became available for sale. Excluding the impact of this transfer to receivables held for sale, dollars of nonaccrual late stage delinquency would have increased reflecting the impact of accounts progressing to late stage delinquency.

Ÿ Individually evaluated for impairment The decrease in nonaccrual receivables individually evaluated for impairment as compared with December 31, 2015 reflects the impact of accounts progressing to late stage delinquency and the continued liquidation of the real estate secured receivable portfolio during the first quarter of 2016. The decrease also reflects the transfer of receivables to held for sale primarily consisting of certain receivables which had previously been part of a collateralized funding transaction but during the first quarter of 2016 became available for sale, as discussed above.

Ÿ Collectively evaluated for impairment Nonaccrual receivables for accounts collectively evaluated for impairment decreased as compared with December 31, 2015 reflecting lower receivables levels due to receivable run-off and the progression of accounts to either late stage delinquency or individually evaluated for impairment during the first quarter of 2016.

Nonaccrual receivables held for sale at March 31, 2016 increased as compared with December 31, 2015 reflecting the impact of the transfer of additional real estate secured receivables to held for sale during the three months ended March 31, 2016 primarily consisting of certain receivables which had previously been part of a collateralized funding transaction but during the first quarter of 2016 became available for sale, as discussed above.

At March 31, 2016 and December 31, 2015, nonaccrual receivables in the table above include TDR Loans and TDR Loans that are held for sale totaling $462 million and $463 million, respectively, some of which are carried at the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies. See Note 3, “Receivables, net,” in the accompanying consolidated financial statements for further details regarding TDR Loan balances.

Customer Account Management Policies and Practices  Our policies and practices for the collection of consumer receivables, including our customer account management policies and practices, permit us to take action with respect to delinquent or troubled accounts based on criteria which, in our judgment, evidence continued payment probability, as well as a continuing desire for borrowers to stay in their homes. The policies and practices are designed to manage customer relationships, improve collection opportunities and avoid foreclosure as determined to be appropriate. From time to time we re-evaluate these policies and procedures and make changes as deemed appropriate.

Currently, we utilize the following account management actions:

• Modification – Management action that results in a change to the terms and conditions of the receivable either temporarily or permanently without changing the delinquency status of the receivable. Modifications may include changes to one or more terms of the receivable including, but not limited to, a change in interest rate, extension of the amortization period, reduction in payment amount and partial forgiveness or deferment of principal.

• Collection Re-age – Management action that results in the resetting of the contractual delinquency status of an account to current but does not involve any changes to the original terms and conditions of the receivable. If an account which has been re-aged subsequently experiences a payment default, it will again become contractually delinquent. We use collection re-aging as an account and customer management tool in an effort to increase the cash flow from our account relationships, and accordingly, the application of this tool is subject to complexities, variations and changes from time to time.

• Modification Re-age – Management action that results in a change to the terms and conditions of the receivable, either temporarily or permanently, and also resets the contractual delinquency status of an account to current as discussed above. If an account which has been re-aged subsequently experiences a payment default, it will again become contractually delinquent.

Generally, in our experience, we have found that the earlier in the default cycle we have been able to utilize account management actions, the lower the rate of recidivism. Additionally, we have found that for receivable modification, modifications with significant amounts of payment reduction experience lower levels of recidivism. Some customers receive multiple account management actions. In this regard, multiple account management actions as a percentage of total account management actions are in a range of 70 percent to 75 percent.

Our policies and practices for managing accounts are continually reviewed and assessed to assure that they meet the goals outlined above, and accordingly, we make exceptions to these general policies and practices from time to time. In addition, exceptions to these policies and practices may be made in specific situations in response to legal agreements, regulatory agreements or orders.

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The following table shows the number of real estate secured accounts remaining in our portfolio (including receivables held for sale) as well as the outstanding receivable balance of these accounts as of the period indicated for receivables for which we have taken an account management action by the type of action taken, some of which may have received multiple account management actions.

	Number of Accounts	Outstanding Receivable Balance(1)
	(accounts are in thousands)	(dollars are in millions)
March 31, 2016:(2)
Collection re-age only	62.0	$	4,218
Modification only	6.1	439
Modification re-age	53.8	4,567
Total receivables modified and/or re-aged(1)	121.9	$	9,224
December 31, 2015:(2)
Collection re-age only	63.9	$	4,429
Modification only	5.9	451
Modification re-age	53.9	4,631
Total receivables modified and/or re-aged(1)	123.7	$	9,511

⁽¹⁾  The outstanding receivable balance included in this table reflects the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies but excludes any basis adjustments to the receivable such as unearned income, unamortized deferred fees and costs on originated receivables, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balance in this table related to receivables which have been classified as held for sale has been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, the outstanding receivable balance includes the following amounts related to receivables classified as held for sale.

	March 31, 2016		December 31, 2015
	(in millions)
Collection re-age only	$	3,700	$	3,765
Modifications only	361		368
Modification re-age	3,414		3,415
Total receivables modified and/or re-aged	$	7,475	$	7,548

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The following table provides information regarding the delinquency status of receivables remaining in the portfolio that were granted modifications of loan terms and/or re-aged as of March 31, 2016 and December 31, 2015 in the categories shown above:

	Number of Accounts						Outstanding Receivable Balance
	Current or less than 30-days delinquent		30- to 59-days delinquent		60-days or more delinquent		Current or less than 30-days delinquent		30- to 59-days delinquent		60-days or more delinquent
March 31, 2016:
Collection re-age only	85	%	6	%	9	%	86	%	6	%	8	%
Modification only	94		1		5		95		1		4
Modification re-age	86		5		9		86		5		9
Total receivables modified and/or re-aged	86	%	5	%	9	%	87	%	5	%	8	%
December 31, 2015:
Collection re-age only	84	%	7	%	9	%	85	%	7	%	8	%
Modification only	92		2		6		95		2		3
Modification re-age	84		6		10		85		6		9
Total receivables modified and/or re-aged	84	%	6	%	10	%	85	%	6	%	9	%

The following table provides information regarding real estate secured modified and/or re-aged receivables during the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,	2016			2015
	(in millions)
Balance at beginning of period	$	9,511		$	13,663
Additions due to an account management action(1)	75			107
Payments(2)	(268		)	(239		)
Net charge-offs(3)	(44		)	(96		)
Transfer to real estate owned	(16		)	(34		)
Change in lower of amortized cost or fair value on receivables held for sale	(34		)	(12		)
Balance at end of period	$	9,224		$	13,389

⁽¹⁾  Includes collection re-age only, modification only, and modification re-ages.

⁽²⁾  Includes amounts received under a short sale whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation.

⁽³⁾  Amounts include the credit loss reserves existing at the time of transfer of receivables to held for sale which are recognized as charge-off. Amounts also include the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 4, "Credit Loss Reserves," in the accompanying consolidated financial statements for further discussion.

In addition to the account management techniques discussed above, we also use deed-in-lieu and short sales to assist our real estate secured receivable customers. In a deed-in-lieu, the borrower agrees to surrender the deed to the property without going through foreclosure proceedings and we release the borrower from further obligation. In a short sale, the property is offered for sale to potential buyers at a price which has been pre-negotiated between us and the borrower. This pre-negotiated price is based on updated property valuations and overall loss exposure given liquidation through foreclosure. Short sales also release the borrower from further obligation. From our perspective, total losses on deed-in-lieu and short sales are lower than expected total losses from foreclosed receivables, or receivables where we have previously decided not to pursue foreclosure, and provide resolution to the delinquent receivable over a shorter period of time. While deed-in-lieu and short sales were used more extensively in prior years, during the three months ended March 31, 2016 we have used fewer of these account management techniques as compared with the three months ended March 31, 2015 as many of the receivables which in the past would have been resolved through a deed-in-lieu or short-sale have been sold as part of our receivable sale program.

Modification programs We actively use account modifications to reduce the rate and/or payment on a number of qualifying loans and generally re-age certain of these accounts upon receipt of two or more modified payments and other criteria being met. This account management practice is designed to improve cash collections and avoid foreclosure as determined to be appropriate. A significant portion of our real estate secured receivable portfolio has received multiple modifications.

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We continually review our policies and practices for managing accounts to leverage industry best practices and to assist us in identifying customers who are willing to pay, but are expected to have longer term disruptions in their ability to pay. In the second half of 2013, we expanded our current modification program to include principal write downs to customers meeting certain criteria. For qualifying customers, we determine the full amount contractually due, including unpaid principal balance, outstanding deferred interest and other ancillary disbursements that, by law, are reimbursable, and reduce the outstanding amount to a lower amount. However, in many cases this principal forgiveness does not change the carrying value of the receivable as many of these receivables had previously been written down to the lower of amortized cost or fair value of the collateral in accordance with our existing charge-off policies.

During the first quarter of 2014, we revised our modification programs resulting in a minimum modification term of 24 months. As a result, the receivables remaining in our portfolio are comprised of a growing composition of longer dated modifications.

As economic conditions, including unemployment, have continued to improve and the level of delinquency has decreased, customer requests for assistance through receivable modification programs has declined in recent years. Although we made enhancements to our modification programs during 2013 to provide longer term modifications and larger payment relief on short term modifications, fewer customers are requesting these account modifications. We expect the volume of new modifications to continue to decrease as a result of the continued seasoning of a liquidating portfolio.

We will continue to evaluate our consumer relief programs as well as all aspects of our account management practices to ensure our programs benefit our customers in accordance with their financial needs in ways that are economically viable for both our customers and our stakeholders. Receivables modified under these programs are only included in the re-aging statistics table (“Re-age Table”) that is included in our discussion of our re-age programs if the delinquency status of a receivable was reset as a part of the modification or was re-aged in the past for other reasons. Not all receivables modified under these programs have the delinquency status reset and, therefore, are not considered to have been re-aged.

The following table summarizes receivables modified during the three months ended March 31, 2016 and 2015, some of which may have also been re-aged:

	Number of Accounts Modified	Outstanding Receivable Balance at Time of Modification
	(accounts are in thousands, dollars are in billions)
Foreclosure avoidance programs(1)(2):
Three months ended March 31, 2016	2.2	$	.2
Three months ended March 31, 2015	2.2	.3

⁽¹⁾  Includes all receivables modified during the three months ended March 31, 2016 and 2015 regardless of whether the receivable was also re-aged.

⁽²⁾  If qualification criteria are met, receivable modification may occur on more than one occasion for the same account. For purposes of the table above, an account is only included in the modification totals once in an annual period and not for each separate modification in an annual period.

A primary tool used during account modification involves modifying the monthly payment through lowering the rate on the receivable on either a temporary or permanent basis. The following table summarizes the weighted-average contractual rate reductions and the average amount of payment relief provided to customers that entered an account modification (including receivables currently classified as held for sale) for the first time during the quarter indicated.

	Quarter Ended
	Mar. 31, 2016		Dec. 31, 2015		Sept. 30, 2015		June 30, 2015		Mar. 31, 2015
Weighted-average contractual rate reduction in basis points on account modifications during the period(1)(2)	293		342		396		404		407
Average payment relief provided on account modifications as a percentage of total payment prior to modification(2)	27.1	%	29.4	%	32.9	%	34.7	%	36.4	%

⁽¹⁾  The weighted-average rate reduction was determined based on the rate in effect immediately prior to the modification, which may be lower than the rate on the receivable at the time of origination.

⁽²⁾  Excludes any modifications on purchased receivable portfolios which had a carrying value of $457 million and $472 million at March 31, 2016 and December 31, 2015, respectively.

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The weighted-average contractual rate reduction in basis points reflects changes in our program strategy during the fourth quarter of 2015 which limits the amount of payment relief which can be achieved through rate reduction and shifts the additional payment relief to other types of modification, such as term extension, principal deferral or principal-write down. The decrease in the average payment relief during the first quarter of 2016 primarily relates to improved financial conditions of borrowers applying for hardship, which translates to less required payment relief to achieve an affordable and sustainable mortgage payment. To a lesser extent, the average payment relief decreased as a result of changes in the mix of the types of modifications provided as discussed above.

Re-age programs  Our policies and practices include various criteria for an account to qualify for re-aging, but do not, however, require us to re-age the account. The extent to which we re-age accounts that are eligible under our existing policies will differ depending upon our view of prevailing economic conditions and other factors which may change from period to period. In addition, exceptions to our policies and practices may be made in specific situations in response to legal or regulatory agreements or orders. It is our practice to defer past due interest on re-aged accounts to the end of the loan period. We do not accrue interest on these past due interest payments consistent with our 2002 settlement agreement with the State Attorneys General.

We continue to monitor and track information related to accounts that have been re-aged. First lien real estate secured products generally have less loss severity exposure than other products because of the underlying collateral. Credit loss reserves, including reserves on TDR Loans, take into account whether receivables have been re-aged or are subject to modification, extension or deferment. Our credit loss reserves, including reserves on TDR Loans, also take into consideration the expected loss severity based on the underlying collateral for the receivable. TDR Loans are typically reserved for using a discounted cash flow methodology.

We used certain assumptions and estimates to compile our re-aging statistics. The systemic counters used to compile the information presented below exclude from the reported statistics receivables that have been reported as contractually delinquent but have been reset to a current status because we have determined that the receivables should not have been considered delinquent (e.g., payment application processing errors). When comparing re-aging statistics from different periods, the fact that our re-age policies and practices will change over time, that exceptions are made to those policies and practices, and that our data capture methodologies have been enhanced, should be taken into account.

The following tables provide information about re-aged real estate secured receivables and real estate secured receivables held for sale and includes both Collection Re-ages and Modification Re-ages, as discussed above.

Re-age Table(1)(2)	March 31, 2016			December 31, 2015
	(dollars are in millions)
Total real estate secured receivables ever re-aged	$	8,583		$	8,806
Real estate secured receivables ever re-aged as a percentage of total receivables and receivables held for sale
Re-aged in the last 6 months(3)	6.7		%	5.5		%
Re-aged in the last 7-12 months	4.1			5.0
Previously re-aged beyond 12 months	40.5			40.1
Total real estate secured receivables ever re-aged as a percentage of total receivables and receivables held for sale	51.3		%	50.6		%

⁽¹⁾  The receivable balance included in this table reflects the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the receivable such as unearned income, unamortized deferred fees and costs on originated receivables, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balance in this table related to receivables which have been classified as held for sale has been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer. The receivable balances exclude accrued interest income.

⁽²⁾  The tables above exclude any accounts re-aged without receipt of a payment which only occurs under special circumstances, such as re-ages associated with disaster or in connection with a bankruptcy filing. At March 31, 2016 and December 31, 2015, the unpaid principal balance of re-ages without receipt of a payment totaled $243 million and $250 million, respectively.

⁽³⁾  At March 31, 2016 and December 31, 2015, approximately 66 percent and 61 percent, respectively, of real estate secured receivable re-ages occurred on accounts that were less than 60 days contractually delinquent based on the account's most recent re-age.

At March 31, 2016 and December 31, 2015, $687 million (8 percent of total re-aged receivables in the Re-Age table) and $737 million (8 percent of total re-aged receivables in the Re-Age Table), respectively, of re-aged accounts have subsequently experienced payment defaults and are included in our two-months-and-over contractual delinquency at the period indicated.

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We continue to work with advocacy groups in select markets to assist in encouraging our customers with financial needs to contact us. We consider the feedback from advocacy groups as we make changes in our modification programs. We have also implemented training programs to ensure that our customer service representatives are focused on helping the customer through difficulties, are knowledgeable about the available re-aging and modification programs and are able to advise each customer of the best solutions for their individual circumstance.

We also support a variety of national and local efforts in homeownership preservation and foreclosure avoidance.

Concentration of Credit Risk A concentration of credit risk is defined as a significant credit exposure with an individual or group engaged in similar activities or having similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Our receivable portfolio is comprised of loans to non-prime consumers. Such customers are individuals who have limited credit histories, modest incomes, high debt-to-income ratios or have experienced credit problems evidenced by occasional delinquencies, prior charge-offs, bankruptcy or other credit related actions. The majority of our secured receivables have high loan-to-value ratios.

Because our lending activities were primarily to individual consumers, we do not have receivables (including receivables held for sale) from any industry group that equal or exceed 10 percent of total receivables at March 31, 2016 or December 31, 2015. The following table reflects the percentage of consumer receivables (including receivables held for sale) by state which individually account for 5 percent or greater of our portfolio.

	Percent of Total Real Estate Secured Receivables (including Receivables Held for Sale)
	March 31, 2016		December 31, 2015
California	9.3	%	9.4	%
New York	6.9		6.8
Florida	6.2		6.0
Pennsylvania	6.2		6.2
Ohio	6.2		6.2
Virginia	5.1		5.1

Liquidity and Capital Resources

HSBC Related Funding  We work with our affiliates under the oversight of HSBC North America to maximize funding opportunities and efficiencies in HSBC's operations in the United States. All of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans and our funding requirements are sourced primarily through HSBC USA Inc. ("HSBC USA") or HSBC North America.

Due to affiliates totaled $5,774 million and $5,925 million at March 31, 2016 and December 31, 2015, respectively. The interest rates on funding from HSBC subsidiaries are market-based and comparable to those available from unaffiliated parties.

The following table summarizes maturities of amounts due to affiliates at March 31, 2016:

	(in millions)
2016	$	350
2017	1,512
2018	2,500
2019	—
2020	—
Thereafter	1,412
Total	$	5,774

See Note 10, "Related Party Transactions," in the accompanying consolidated financial statements for further discussion about our funding arrangements with HSBC affiliates, including derivatives.

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Short-Term Investments  Securities purchased under agreements to resell totaled $779 million and $2,724 million at March 31, 2016 and December 31, 2015, respectively. Short-term investments decreased as compared with December 31, 2015 as a result of the retirement of debt, partially offset by the run-off of our liquidating receivable portfolios and the sale of REO properties.

Long-Term Debt (excluding amounts due to affiliates) decreased to $7,502 million at March 31, 2016 from $9,510 million at December 31, 2015. There were no issuances of long-term debt during the three months ended March 31, 2016 or 2015. Repayments of long-term debt totaled $2,113 million and $545 million during the three months ended March 31, 2016 and 2015, respectively. The following table summarizes maturities of long-term debt at March 31, 2016, including secured financings:

	(in millions)
2016	$	3,003
2017	1,574
2018	281
2019	181
2020	—
Thereafter	2,463
Total	$	7,502

Secured financings previously issued under public trusts of $694 million at March 31, 2016 are secured by $1,305 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts of $879 million at December 31, 2015 were secured by $1,654 million of closed-end real estate secured receivables.

In order to eliminate future foreign exchange risk, currency swaps were used at the time of issuance of all foreign-denominated notes to fix the notes in U.S. dollars.

We use derivatives for managing interest rate and currency risk and have received loan commitments from affiliates, but we do not otherwise enter into off-balance sheet transactions.

Common Equity  During the three months ended March 31, 2016 and 2015, we did not receive any capital contributions from HINO. However, as we continue to liquidate our receivable portfolios, HSBC's continued support will be required to properly manage our business and maintain appropriate levels of capital. HSBC has historically provided significant capital in support of our operations and has indicated that they remain fully committed and have the capacity to continue that support.

Capital ratio  Common and preferred equity to total assets totaled 30.16 percent at March 31, 2016 compared with 27.48 percent at December 31, 2015.

HSBC North America continues to review the composition of its capital structure following the adoption by the U.S. banking regulators of the final rules implementing the Basel III regulatory capital and liquidity reforms from the Basel Committee on Banking Supervision, which were effective as of January 1, 2014. We continue to review the composition of our capital structure and, subject to receipt of regulatory approval, as necessary, we anticipate replacing instruments whose treatment is less favorable under the new rules with Basel III compliant instruments. Any required funding has been integrated into the overall HSBC North America funding plans and we expect it to be sourced through HSBC USA, HSBC North America, or through direct support from HSBC or its affiliates.

HSBC North America participates in the Federal Reserve Board's ("Federal Reserve") CCAR programs and submitted its latest CCAR capital plan and annual company-run stress test results in April 2016. In July 2015, HSBC North America submitted its latest mid-cycle company-run stress test results. Stress testing results are based solely on hypothetical adverse scenarios and should not be viewed or interpreted as forecasts of expected outcomes or capital adequacy or of the actual financial condition of HSBC North America. Capital planning and stress testing for HSBC North America may impact our future capital and liquidity.

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2016 Funding Strategy  The following table summarizes our current range of estimates for funding needs and sources for 2016:

	Actual Jan. 1 through Mar. 31, 2016			Estimated April 1 through December 31, 2016 (Minimum-Maximum)					Estimated Full Year 2016 (Minimum-Maximum)
	(in billions)
Funding needs:
Unsecured debt maturities	$	2		$	3	-	$	4	$	5	-	$	6
Secured financing maturities	—			—		-	1		—		-	1
Short term investments	(2		)	3		-	3		1		-	1
Other	1			—		-	—		1		-	1
Total funding needs	$	1		$	6	-	$	8	$	7	-	$	9
Funding sources:
Net asset attrition(1)	$	1		$	1	-	$	2	$	2	-	$	3
Asset sales and transfers	—			5		-	6		5		-	6
Total funding sources	$	1		$	6	-	$	8	$	7	-	$	9

⁽¹⁾  Net of receivable charge-offs.

For the remainder of 2016, the combination of cash generated from operations including balance sheet attrition and asset sales will generate the liquidity necessary to meet our maturing debt obligations.

Fair Value

Net income volatility arising from changes in either interest rate or credit components of the mark-to-market on debt designated at fair value and related derivatives or changes in the fair value of receivables held for sale, REO or receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell affects the comparability of reported results between periods. Accordingly, our results for the three months ended March 31, 2016 should not be considered indicative of the results for any future period.

Fair Value Hierarchy  Accounting principles related to fair value measurements establish a fair value hierarchy structure that prioritizes the inputs to valuation techniques used to determine the fair value of an asset or liability (the “Fair Value Framework”). The Fair Value Framework distinguishes between inputs that are based on observed market data and unobservable inputs that reflect market participants' assumptions. It emphasizes the use of valuation methodologies that maximize market inputs. For financial instruments carried at fair value, the best evidence of fair value is a quoted price in an actively traded market (Level 1). Where the market for a financial instrument is not active, valuation techniques are used. The majority of valuation techniques use market inputs that are either observable or indirectly derived from and corroborated by observable market data for substantially the full term of the financial instrument (Level 2). Because Level 1 and Level 2 instruments are determined by observable inputs, less judgment is applied in determining their fair values. In the absence of observable market inputs, the financial instrument is valued based on valuation techniques that feature one or more significant unobservable inputs (Level 3). The determination of the level of fair value hierarchy within which the fair value measurement of an asset or a liability is classified often requires judgment. We consider the following factors in developing the fair value hierarchy:

Ÿ whether the pricing quotations differ substantially among independent pricing services;

Ÿ whether the instrument is transacted in an active market with a quoted market price that is readily available;

Ÿ the size of transactions occurring in an active market;

Ÿ the level of bid-ask spreads;

Ÿ a lack of pricing transparency due to, among other things, market liquidity;

Ÿ whether only a few transactions are observed over a significant period of time;

Ÿ whether the inputs to the valuation techniques can be derived from or corroborated with market data; and

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Ÿ whether significant adjustments are made to the observed pricing information or model output to determine the fair value.

Level 1 inputs are unadjusted quoted prices in active markets that the reporting entity has the ability to access for the identical assets or liabilities. A financial instrument is classified as a Level 1 measurement if it is listed on an exchange or is an instrument actively traded in the over-the-counter market where transactions occur with sufficient frequency and volume.

Level 2 inputs are inputs that are observable either directly or indirectly but do not qualify as Level 1 inputs. We generally classify derivative contracts as well as our own debt issuance for which we have elected fair value option which are not traded in active markets, as Level 2 measurements. These valuations are typically obtained from a third party valuation source which, in the case of derivatives, includes valuations provided by an affiliate, HSBC Bank USA, National Association (together with its subsidiaries "HSBC Bank USA").

Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. Level 3 inputs incorporate market participants' assumptions about risk and the risk premium required by market participants in order to bear that risk. We develop Level 3 inputs based on the best information available in the circumstances. At March 31, 2016 and December 31, 2015, our Level 3 assets recorded at fair value on a non-recurring basis totaling $6,886 million (32 percent of total assets) and $8,265 million (34 percent of total assets), respectively. The decrease at March 31, 2016 reflects a reclassification of the receivables sold in April 2016 to Level 2. At March 31, 2016 and December 31, 2015, we had no Level 3 assets recorded at fair value on a recurring basis.

Classification within the fair value hierarchy is based on whether the lowest level input that is significant to the fair value measurement is observable. As such, the classification within the fair value hierarchy is dynamic and can be transferred to other hierarchy levels in each reporting period. Transfers between leveling categories are assessed, determined and recognized at the end of each reporting period.

See Note 13, “Fair Value Measurements,” in the accompanying consolidated financial statements for further details including our valuation techniques as well as the classification hierarchy associated with assets and liabilities measured at fair value. Additionally, see Note 13, "Fair Value Measurements," in the accompanying consolidated financial statements for information about transfers between Level 1 and Level 2 measurements and transfers between Level 2 and Level 3 measurements during the three months ended March 31, 2016 and 2015.

Risk Management

Overview  Managing risk effectively is fundamental to the delivery of our strategic priorities. To do so, we employ a risk management framework at all levels and across all risk types. It fosters the continuous monitoring of the risk environment and an integrated evaluation of risks and their interactions. It is designed to ensure that we have a robust and consistent approach to risk management across all of our activities. While we are subject to a number of legal and regulatory actions and investigations, our risk management framework has been designed to provide robust controls and ongoing monitoring of our principal risks. We strive to continuously improve our risk management processes through ongoing employee training and development.

The principal risks associated with our operations include the following:

• Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract;

• Liquidity risk is the potential that an institution will be unable to meet its obligations as they become due because of inadequate cash flow or the inability to liquidate assets or obtain funding itself;

• Market risk is the risk that movements in market factors, including interest rates and foreign currency exchange rates, will reduce our income or the value of our portfolios;

• Interest rate risk is the potential impairment of net interest income due to mismatched pricing between assets and liabilities as well as losses in value due to rate movements;

• Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events (including legal risk);

• Compliance risk is the risk that we fail to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice causing us to incur fines, penalties and damage to our business and reputation;

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• Reputational risk is the risk arising from failure to meet stakeholder expectations as a result of any event, behavior, action or inaction, either by us, our employees, the HSBC Group or those with whom we are associated that may cause stakeholders to form a negative view of us. This might also result in financial or non-financial impacts, loss of confidence or other consequences;

• Strategic risk is the risk that the business will fail to identify, execute and react appropriately to opportunities and/or threats arising from changes in the market, some of which may emerge over a number of years such as changing economic and political circumstances, customer requirements, demographic trends, regulatory developments or competitor action;

• Security and Fraud risk is the risk to the business from terrorism, crime, fraud, information security, incidents/disasters, cyber-attacks and groups hostile to HSBC interests;

• Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. This occurs primarily for two reasons: 1) the model may produce inaccurate outputs when compared to the intended business use and design objective; and 2) the model could be used incorrectly; and

• Pension risk is the risk that the cash flows associated with pension assets will not be enough to cover the pension benefit obligations required to be paid and includes the risk that assumptions used by our actuaries may differ from actual experience.

See "Risk Management" in MD&A in our 2015 Form 10-K for a more complete discussion of the objectives of our risk management system as well as our risk management policies and practices. Our risk management process involves the use of various simulation models. We believe that the assumptions used in these models are reasonable, but actual events may unfold differently than what is assumed in the models. Consequently, model results may be considered reasonable estimates, with the understanding that actual results may vary significantly from model projections.

Credit Risk Management  Day-to-day management of credit risk is administered by our Retail Chief Risk Officer with ultimate reporting responsibility to the HSBC North America Chief Risk Officer. The HSBC North America Chief Risk Officer reports to the HSBC North America Chief Executive Officer, to the Risk Committee of the HSBC North America Board of Directors and to the HSBC Group Chief Risk Officer. Our credit and portfolio management procedures currently focus on effective collections and customer account management efforts, in addition to supporting disciplined execution of the receivable sales program. We also have specific policies to ensure the establishment of appropriate credit loss reserves on a timely basis to cover probable losses of principal, interest and fees. Our customer account management policies and practices are described under the caption “Credit Quality - Customer Account Management Policies and Practices” in this MD&A. Also see Note 2, “Summary of Significant Accounting Policies and New Accounting Pronouncements,” in our 2015 Form 10-K for further discussion of our policies surrounding credit loss reserves. Our policies and procedures are consistent with HSBC Group standards and are regularly reviewed and updated both on an HSBC Finance Corporation and HSBC level. The credit risk function continues to refine “early warning” indicators and reporting, including stress testing scenarios on the basis of current experience. These risk management tools are embedded within our business planning process.

Counterparty credit risk is our primary exposure on our interest rate swap portfolio. Counterparty credit risk is the risk that the counterparty to a transaction fails to perform according to the terms of the contract. At March 31, 2016 and December 31, 2015, all of our existing derivative contracts are with HSBC Bank USA, making them our sole counterparty in derivative transactions. The fair value of our agreements with HSBC Bank USA required us to provide collateral to the affiliate of $537 million at March 31, 2016 and $491 million at December 31, 2015, all of which was provided in cash. See Note 7, “Derivative Financial Instruments,” in the accompanying consolidated financial statements for additional information about our derivative portfolio.

There have been no material changes to our approach to credit risk management since December 31, 2015.

Liquidity Risk Management  Continued success in reducing the size of our run-off real estate secured receivable portfolio, including the proceeds of receivables held for sale, will be the primary driver of our liquidity management process going forward. However, lower operating cash flow as a result of declining receivable balances will not provide sufficient cash to fully cover maturing debt in future periods. We currently do not expect third-party long-term debt to be a source of funding for us in the future given the run-off nature of our business. Any required incremental funding has been integrated into the overall HSBC North America funding plan and we expect it to be sourced through HSBC USA, HSBC North America, or will be obtained through direct support from HSBC or its affiliates. HSBC has indicated it remains fully committed and has the capacity to continue to provide such support. Should HSBC North America call upon us to execute certain strategies in order to address capital and other considerations, our intent may change and a portion of this required funding could be generated through additional sales of selected receivables from our receivables held for investment portfolio.

HSBC North America maintains a liquidity management and contingency funding plan, which identifies certain potential early indicators of liquidity problems, and actions that can be taken both initially and in the event of a liquidity crisis, to minimize the long-term impact on our businesses. The liquidity contingency funding plan is reviewed annually and approved by the Risk

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Committee of the Board of Directors. We recognize a liquidity crisis can either be specific to us, relating to our ability to meet our obligations in a timely manner, or market-wide, caused by a macro risk event in the broader financial system. A range of indicators is monitored to attain an early warning of any liquidity issues. These include widening of key spreads or indices used to track market volatility, widening of our credit spreads and higher borrowing costs. In the event of a cash flow crisis, our objective is to fund cash requirements without HSBC affiliate access to the wholesale unsecured funding market for at least 90 days. Contingency funding needs will be satisfied primarily through liquidation of short term investments, sale of receivables or secured borrowing using the mortgage portfolio as collateral. We maintain a liquid asset buffer consisting of cash and short-term liquid assets.

Prior to 2016, we employed stressed coverage ratios to define, monitor and control our liquidity and funding risk in accordance with HSBC policy. Stressed coverage ratios, incorporating HSBC-specific stress scenarios, were used to monitor the resilience to severe liquidity stresses. Beginning in 2016, HSBC replaced these stressed coverage ratios with the Basel Committee based Liquidity Coverage Ratio ("LCR") as discussed further below. As a result, we now employ this ratio as part of our approach to liquidity risk management. There have been no other material changes to our approach towards liquidity risk management since December 31, 2015. See “Risk Management” in MD&A in our 2015 Form 10-K for a more complete discussion of our approach to liquidity risk.

The Basel Committee based LCR is designed to be a short-term liquidity measure to ensure banks have sufficient High Quality Liquid Assets ("HQLA") to cover net stressed cash outflows over the next 30 days. Under European Commission Delegated Regulation 2015/61, the Basel Committee based LCR became a minimum regulatory standard beginning in 2015. At March 31, 2016 and December 31, 2015, our LCR ratio under the EU LCR rule was 825 percent and 499 percent, respectively. A LCR ratio of 100 percent or higher reflects an unencumbered HQLA balance that is equal to or exceeds liquidity needs for a 30 calendar day liquidity stress scenario. HQLA consists of cash or assets that can be converted into cash at little or no loss of value in private markets.

HSBC North America has adjusted its liquidity profile to support compliance with these rules. HSBC North America may need to make further changes to its liquidity profile to support compliance with any future final rules. HSBC Finance Corporation may need to adjust its liquidity profile to support HSBC North America's compliance with these rules, but it is not anticipated to significantly impact our operations.

In November 2015, the Financial Stability Board ("FSB") issued its final standards for Total Loss-Absorbing Capacity (“TLAC”) requirements for global systemically important banks ("G-SIBs"), In October 2015, the Federal Reserve issued its proposal to impose TLAC requirements on U.S. G-SIBs and the U.S. IHCs owned by non-U.S. G-SIBs ("TLAC Proposal"). The TLAC Proposal represents an extension of the current regulatory capital framework, which is aimed at ensuring that a banking organization can absorb losses without falling into resolution. The TLAC Proposal would require the U.S. intermediate holding companies ("IHCs") of G-SIBs ("Covered IHCs"), including HSBC North America, to maintain minimum amounts of internal TLAC, which would include minimum levels of TLAC and long-term debt satisfying certain eligibility criteria, and a related TLAC buffer commencing January 1, 2019. Additionally, the TLAC Proposal would include "clean holding company" requirements that impose stringent limitations on the ability of Covered IHCs to incur common types of non-TLAC-related liabilities. The Federal Reserve requested comments on all aspects of the proposal by February 19, 2016. We provided a comment letter to the Federal Reserve in February.

As indicated by the major rating agencies, our credit ratings are directly dependent upon the continued support of HSBC. A credit rating downgrade would increase future borrowing costs only for new debt obligations, if any. As discussed above, we do not currently expect to need to raise funds from the issuance of third party debt going forward, but instead any required funding has been integrated into HSBC North America's funding plans and we expect it to be sourced through HSBC USA, HSBC North America or through direct support from HSBC or its affiliates. HSBC has historically provided significant capital in support of our operations and has indicated that they remain fully committed and have the capacity to continue that support.

The following table summarizes our credit ratings at both March 31, 2016 and December 31, 2015:

	Standard & Poor’s Corporation	Moody’s Investors Service	Fitch, Inc.
Senior debt	A	Baa1	A+
Senior subordinated debt	A-	Baa2	A
Series B preferred stock	BBB-	Baa3	-

Rating agencies continue to evaluate economic and geopolitical trends, regulatory developments, future profitability, risk management practices and litigation matters, all of which could lead to adverse ratings actions. In March 2016, Moody's changed the rating outlook for HSBC Finance Corporation to negative from stable following a similar change in outlook to negative from

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stable for HSBC. The outlook change for HSBC signifies Moody's concerns about a weakening in intrinsic financial strength due to deteriorating operating conditions in Hong Kong, one of HSBC's key markets. In spite of their concerns, Moody's stated that HSBC's willingness to provide support to its U.S. subsidiaries remains very high. While the outlook changed, Moody's affirmed its ratings for HSBC Finance Corporation. Although we closely monitor and strive to manage factors influencing our credit ratings, there is no assurance that our credit ratings will not change in the future. As of March 31, 2016, there were no other pending actions from these rating agencies in terms of changes to the ratings presented in the table above for HSBC Finance Corporation.

Other conditions that could negatively affect our liquidity include unforeseen capital requirements, a strengthening of the U.S. dollar which would require us to post additional collateral for our cross currency swaps, a slowdown in the rate of attrition of our balance sheet and an inability to obtain expected funding from HSBC and its subsidiaries.

See “Liquidity and Capital Resources” for further discussion of our liquidity position.

There have been no material changes to our approach to liquidity risk management since December 31, 2015.

Market Risk Management  We maintain an overall risk management strategy that primarily uses standard, over-the-counter interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates. We manage our exposure to interest rate risk primarily through the use of interest rate swaps.

We manage our exposure to foreign currency exchange risk primarily through the use of currency swaps. Our financial statements are affected by movements in exchange rates on our foreign currency denominated debt.

There have been no material changes to our approach to market risk management since December 31, 2015.

Interest Rate Risk Management  A principal part of our management of interest rate risk is to monitor the sensitivity of projected net interest income under varying interest rate scenarios (simulation modeling). We aim, through our management of interest rate risk, to mitigate the effect of prospective interest rate movements which could reduce future net interest income, while weighing the cost of such hedging activities on the current net revenue stream.

Net interest income simulation modeling techniques are utilized to monitor a number of interest rate scenarios for their impact on projected net interest income. These techniques simulate the impact on projected net interest income under various rate shock scenarios, such as scenarios in which rates rise or fall by 100 basis points over a twelve month period as well as the impact of an immediate 50 basis point decrease in the yield curve. The following table reflects the impact on projected net interest income of the scenarios utilized by these modeling techniques:

	March 31, 2016					December 31, 2015
	Amount			%		Amount			%
	(dollars are in millions)
Estimated increase (decrease) in projected net interest income:
Resulting from a gradual 100 basis point increase in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter)	$	15		2.4	%	$	14		1.9	%
Resulting from a gradual 100 basis point decrease in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter)	$	(14	)	(2.2	)%	$	(10	)	(1.3	)%
Resulting from an immediate 50 basis point decrease in the yield curve	$	(8	)	(1.2	)%	$	(3	)	(0.4	)%

As compared with December 31, 2015, the estimated increase in projected net interest income following a hypothetical rate rise and the estimated decrease in projected net interest income following a hypothetical rate reduction reflects updates of economic stress scenarios including housing price index assumptions, regular adjustments of asset and liability behavior assumptions, run-off of the balance sheet and model enhancements.

A principal consideration underlying the projected net interest income at risk analysis is the projected prepayment of receivable balances for a given economic scenario. Individual loan underwriting standards in combination with housing valuations, receivable modification programs, changes to our foreclosure processes and macroeconomic factors related to available mortgage credit are the key assumptions driving these prepayment projections. While we have utilized a number of sources to refine these projections, we cannot currently project precise prepayment rates with a high degree of certainty in all economic environments given post crisis, significant changes in both subprime mortgage underwriting standards and property valuations across the country.

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The projections do not take into consideration possible complicating factors such as the effect of changes in interest rates on the credit quality, size and composition of the balance sheet. Therefore, although this provides a reasonable estimate of interest rate sensitivity, actual results will differ from these estimates, possibly by significant amounts.

There have been no material changes to our approach to interest rate risk management since December 31, 2015.

Operational RiskManagement  There have been no material changes to our approach to operational risk management since December 31, 2015.

Compliance Risk Management  There have been no material changes to our approach to compliance risk management since December 31, 2015.

Reputational Risk Management  There have been no material changes to our approach to reputational risk management since December 31, 2015.

Strategic Risk Management  There have been no material changes to our approach to strategic risk management since December 31, 2015.

Security and Fraud Risk Management  There have been no material changes to our approach to security and fraud risk management since December 31, 2015.

Model Risk Management There have been no material changes to our approach to model risk management since December 31, 2015.

Pension Risk ManagementThere have been no material changes to our approach to pension risk management since December 31, 2015.

72

HSBC Finance Corporation

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Information required by this Item is included in the following sections of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations: “Liquidity and Capital Resources” and “Risk Management.”

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures We maintain a system of internal and disclosure controls and procedures designed to ensure that information required to be disclosed by HSBC Finance Corporation in the reports we file or submit under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), is recorded, processed, summarized and reported on a timely basis. Our Board of Directors, operating through its Audit Committee, which is composed entirely of independent non-executive directors, provides oversight to our financial reporting process.

We conducted an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report so as to alert them in a timely fashion to material information required to be disclosed in reports we file under the Exchange Act.

Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

See Note 14, “Litigation and Regulatory Matters,” in the accompanying consolidated financial statements for our legal proceedings disclosure, which is incorporated herein by reference.

Item 5.    Other Information.

Disclosures pursuant to Section 13(r) of the Securities Exchange ActSection 13(r) of the Securities Exchange Act requires each issuer registered with the SEC to disclose in its annual or quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions with persons or entities targeted by U.S. sanctions programs relating to Iran, terrorism, or the proliferation of weapons of mass destruction, even if those activities are not prohibited by U.S. law and are conducted outside the U.S. by non-U.S. affiliates in compliance with local laws and regulations.

To comply with this requirement, HSBC has requested relevant information from its affiliates globally. During the period covered by this Form 10-Q, HSBC Finance Corporation did not engage in any activities or transactions requiring disclosure pursuant to Section 13(r). The following activities conducted by our affiliates are disclosed in response to Section 13(r):

Loans in repayment Between 2001 and 2005, the Project and Export Finance division of the HSBC Group arranged or participated in a portfolio of loans to Iranian energy companies and banks. All of these loans were guaranteed by European and Asian export credit agencies and have varied maturity dates with final maturity in 2018. For those loans that remain outstanding, the HSBC Group continues to seek repayment in accordance with its obligations to the supporting export credit agencies. Details of these loans follow.

At March 31, 2016, the HSBC Group had 9 loans outstanding to an Iranian petrochemical company. These loans are supported by the official export credit agencies of the following countries: the United Kingdom, France, Germany, South Korea and Japan. The HSBC Group continues to seek repayments from the Iranian company under the outstanding loans in accordance with their original maturity profiles. Bank Melli acted as a sub-participant in one of the aforementioned outstanding loans to the Iranian petrochemical company.

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HSBC Finance Corporation

Bank Melli acted as a sub-participant in a loan, supported by the German export credit agency, which matured and was fully repaid during the first quarter of 2016.

Estimated gross revenue to the HSBC Group generated by the loans in repayment for the first quarter of 2016, which includes interest and fees, was approximately $69,000, and net estimated profit was approximately $66,000. While the HSBC Group intends to continue to seek repayment under the existing loans, all of which were entered into before the petrochemical sector of Iran became a target of U.S. sanctions, it does not currently intend to extend any new loans.

Legacy contractual obligations related to guarantees Between 1996 and 2007, the HSBC Group provided guarantees to a number of its non-Iranian customers in Europe and the Middle East for various business activities in Iran. In a number of cases, the HSBC Group issued counter indemnities in support of guarantees issued by Iranian banks as the Iranian beneficiaries of the guarantees required that they be backed directly by Iranian banks. The Iranian banks to which the HSBC Group provided counter indemnities included Bank Tejarat, Bank Melli, and the Bank of Industry and Mine.

The HSBC Group has worked with relevant regulatory authorities ensure compliance in accordance with applicable law.

There was no measurable gross revenue in the first quarter of 2016 under those guarantees and counter indemnities. The HSBC Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate net profit measure. The HSBC Group is seeking to cancel all relevant guarantees and counter indemnities and does not currently intend to provide any new guarantees or counter indemnities involving Iran. None were canceled in the first quarter of 2016 and approximately 20 remain outstanding.

Other relationships with Iranian banks Activity related to U.S.-sanctioned Iranian banks not covered elsewhere in this disclosure includes the following:

Ÿ The HSBC Group maintains several frozen accounts in the United Kingdom for an Iranian-owned, U.K.-regulated financial institution. Certain transactions relating to these accounts have been carried out under U.K. government license (or, particularly following Implementation Day under the Joint Comprehensive Plan of Action relating to the Iranian nuclear program, are generally permissible under applicable law). Estimated counter revenue in the first quarter of 2016 for this financial institution, which includes fees and/or commissions, was approximately $39,500.

Ÿ The HSBC Group acts as the trustee and administrator for a pension scheme involving two employees of a U.S.-sanctioned Iranian bank in Hong Kong. Under the rules of this scheme, the HSBC Group accepts contributions from the Iranian bank each month and allocates the funds into the pension accounts of the Iranian bank’s employees. The HSBC Group runs and operates this pension scheme in accordance with Hong Kong laws and regulations. Estimated gross revenue, which includes fees and/or commissions, generated by this pension scheme in the first quarter of 2016 was approximately $720.

For the Iranian bank related-activity discussed in this section, the HSBC Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate net profit measure. The HSBC Group currently intends to continue to wind down this activity, to the extent legally permissible, and not enter into any new such activity.

Activity related to U.S. Executive Order 13224 The HSBC Group maintained a frozen personal account for an individual customer who was sanctioned under U.S. Executive Order 13224. The HSBC Group issued a check to the customer and processed the check deposit to close the account. The HSBC Group exited the customer relationship in the first quarter of 2016.

The HSBC Group maintains a credit card account for an individual who was sanctioned under U.S. Executive Order 13224 during the first quarter of 2016. The account was frozen during the first quarter of 2016.

The HSBC Group maintains accounts for a corporate customer that was sanctioned under U.S. Executive Order 13224 during the first quarter of 2016. The accounts were frozen during the first quarter of 2016.

The HSBC Group maintains a non-USD account for a corporate customer that was sanctioned under U.S. Executive Order 13224 during the first quarter of 2016. The account was frozen during the first quarter of 2016.

For activity related to U.S. Executive Order 13224, there was no measurable gross revenue or net profit generated to the HSBC Group in the first quarter of 2016.

Other activity The HSBC Group maintains an account for a customer that received and deposited a check issued by the Iranian embassy in Brunei for payment of monthly rental property fees in the first quarter of 2016.

For the activity in this section, there was no measurable gross revenue or net profit to HSBC in the first quarter of 2016.

Frozen accounts and transactionsThe HSBC Group maintains several accounts that are frozen under relevant sanctions programs and on which no activity, except as licensed or otherwise authorized, took place during the first quarter of 2016. In the first quarter

74

HSBC Finance Corporation

of 2016, the HSBC Group also froze payments where required under relevant sanctions programs. There was no measurable gross revenue or net profit to the HSBC Group in the first quarter of 2016 relating to these frozen accounts.

Item 6. Exhibits and Financial Statement Schedules.

Exhibits included in this Report:

3(i)	Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation’s Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation’s Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation’s Current Report on Form 8-K filed November 30, 2010).
3(ii)	Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 28, 2016 (incorporated by reference to Exhibit 3.2 to HSBC Finance Corporation's Current Report on Form 8-K filed May 2, 2016).
12	Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document(1)
101.SCH	XBRL Taxonomy Extension Schema Document(1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document(1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document(1)

⁽¹⁾  Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2016, formatted in eXtensible Business Reporting Language (“XBRL”) interactive data files: (i) the Consolidated Statement of Income (Loss) for the three months ended March 31, 2016 and 2015, (ii) the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015, (iii) the Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015, (iv) the Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2016 and 2015, (iv) the Consolidated Statement of Cash Flows for the three months ended March 31, 2016 and 2015, and (v) the Notes to Consolidated Financial Statements.

75

HSBC Finance Corporation

Index

Account management policies and practices 60	Executive overview 39
Assets:	Fair value measurements:
by business segment 28	assets and liabilities recorded at fair value on a non-recurring basis 33
fair value of financial assets 31	assets and liabilities recorded at fair value on a recurring basis 32
fair value measurements 30	fair value adjustments 30
nonperforming 14, 59	financial instruments 31
Balance sheet (consolidated) 5	hierarchy 67
Basel III 38, 66	transfers into/out of Level 1 and Level 2 33
Basis of reporting 43	transfers into/out of Level 2 and Level 3 33
Business:	valuation control framework 30
consolidated performance review 41	valuation techniques 34
focus 40	Financial highlights metrics 41
Capital:	Financial liabilities:
2016 funding strategy 67	designated at fair value 19
capital ratio 66	fair value of financial liabilities 31
common equity movements 66	Forward looking statements 38
consolidated statement of changes 6	Funding 42, 65
Cash flow (consolidated) 7	Gain (loss) from debt designated at fair value and related derivatives 19
Cautionary statement regarding forward-looking statements 38	Geographic concentration of receivables 65
Compliance risk 72	Impairment:
Consumer business segment 27, 50	credit losses 15, 47
Contingent liabilities 35	nonaccrual receivables 10, 59
Controls and procedures 73	nonperforming receivables 14, 59
Credit quality 53	Income taxes 50
Credit risk:	Internal control 73
concentration 65	Interest income:
management 69	net interest income 46
Derivatives:	sensitivity 71
cash flow hedges 22	Interest rate risk 71
fair value hedges 22	Key performance indicators 41
income (expense) 47	Legal proceedings 35, 73
non-qualifying hedges 23	Liabilities:
notional value 24	financial liabilities designated at fair value 19
Discontinued operations 9	lines of credit 26
Economic environment 39	long-term debt 66
Equity:	Liquidity and capital resources 65
consolidated statement of changes 6	Liquidity risk 69
ratio 66	Litigation and regulatory matters 35, 73
Estimates and assumptions 9	LTV Ratios 44

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HSBC Finance Corporation

Loans and advances - see Receivables, net	Reconciliation of U.S. GAAP results to Group Reporting Basis 43
Loan impairment charges - see Provision for credit losses	Related party transactions 25
Market risk 71	Repurchase liability 49
Market turmoil - see Economic environment	Reputational risk 72
Model risk 72	Results of operations 46
Mortgage Lending products 10, 44	Risk management:
Net interest income 46	compliance 72
New accounting pronouncements 36	credit 69
Operating expenses 49	interest rate 71
Operational risk 72	liquidity 69
Other revenues 47	market 71
Pension and other postretirement benefits 25	model 72
Pension risk 72	operational 72
Performance, developments and trends 41	overview 68
Profit (loss) before tax:	pension 72
by segment - Group Reporting Basis 28, 51	reputational 72
consolidated 28	security and fraud 72
Provision for credit losses 47	strategic 72
Ratios:	Security and fraud risk 72
capital 66	Segment results - Group Reporting Basis:
charge-off (net) 58	consumer 27, 50
credit loss reserve related 54	overall summary 27, 50
delinquency 56	Selected financial data 41
earnings to fixed charges - Exhibit 12	Sensitivity:
efficiency 50	projected net interest income 71
financial 41	Statement of cash flows 7
Re-aged receivables 64	Statement of changes in shareholders' equity 6
Real estate owned 45	Statement of comprehensive income (loss) 4
Receivables:	Statement of income (loss) 3
by category 10, 44	Strategic initiatives and focus 40
by charge-off (net) 58	Strategic risk 72
by delinquency 56	Surety bond 26, 50
geographic concentration 65	Table of contents 2
held for sale 16	Tax expense 50
in process of foreclosure 13	Troubled debt restructures 11, 55
modified and/or re-aged 61	Variable interest entities 29
nonaccrual 10, 59
overall review 44
risk concentration 65
troubled debt restructures 11, 55

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HSBC Finance Corporation

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, HSBC Finance Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 3, 2016

HSBC FINANCE CORPORATION
By:	/s/ MICHAEL A. REEVES
	Michael A. Reeves
	Executive Vice President

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HSBC Finance Corporation

Exhibit Index

3(i)	Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation’s Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation’s Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation’s Current Report on Form 8-K filed November 30, 2010).
3(ii)	Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 28, 2016 (incorporated by reference to Exhibit 3.2 to HSBC Finance Corporation's Current Report on Form 8-K filed May 2, 2016).
12	Statement of Computation of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends.
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document(1)
101.SCH	XBRL Taxonomy Extension Schema Document(1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document(1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document(1)

⁽¹⁾  Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Quarterly Report on Form 10-Q for the three months ended March 31, 2016, formatted in eXtensible Business Reporting Language (“XBRL”) interactive data files: (i) the Consolidated Statement of Income (Loss) for the three months ended March 31, 2016 and 2015, (ii) the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015, (iii) the Consolidated Balance Sheet as of March 31, 2016 and December 31, 2015, (iv) the Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2016 and 2015, (iv) the Consolidated Statement of Cash Flows for the three months ended March 31, 2016 and 2015, and (v) the Notes to Consolidated Financial Statements.

79

EX-12

EXHIBIT 12

HSBC FINANCE CORPORATION

COMPUTATION OF RATIO OF EARNINGS (LOSS) TO FIXED CHARGES AND TO

COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

Three Months Ended March 31,	2016			2015
	(dollars are in millions)
Loss from continuing operations	$	(70	)	$	(5	)
Income tax benefit	(56		)	(28		)
Loss from continuing operations before income tax expense	(126		)	(33		)
Fixed charges:
Interest expense	160			248
Interest portion of rentals(1)	1			1
Total fixed charges	161			249
Total earnings from continuing operations as defined	$	35		$	216
Ratio of earnings to fixed charges	.22			.87
Preferred stock dividends(2)	$	49		$	49
Ratio of earnings to combined fixed charges and preferred stock dividends	.17			.72

⁽¹⁾  Represents one-third of rentals, which approximates the portion representing interest.

⁽²⁾  Preferred stock dividends are grossed up to their pretax equivalents.

EX-31

EXHIBIT 31

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification of Chief Executive Officer

I, Kathryn Madison, certify that:

1. I have reviewed this report on Form 10-Q of HSBC Finance Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2016

/s/ KATHRYN MADISON

Kathryn Madison
Chief Executive Officer

Certification of Chief Financial Officer

I, Michael A. Reeves, certify that:

1. I have reviewed this report on Form 10-Q of HSBC Finance Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2016

/s/ MICHAEL A. REEVES

Michael A. Reeves

Executive Vice President

and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The certification set forth below is being submitted in connection with the HSBC Finance Corporation (the “Company”) Quarterly Report on Form 10-Q for the period ending March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Kathryn Madison, certify that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation.

Date: May 3, 2016

/s/ KATHRYN MADISON

Kathryn Madison

Chief Executive Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by HSBC Finance Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to HSBC Finance Corporation and will be retained by HSBC Finance Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The certification set forth below is being submitted in connection with the HSBC Finance Corporation (the “Company”) Quarterly Report on Form 10-Q for the period ending March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Michael A. Reeves, certify that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation.

Date: May 3, 2016

/s/ MICHAEL A. REEVES

Michael A. Reeves

Executive Vice President

and Chief Financial Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by HSBC Finance Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

The signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to HSBC Finance Corporation and will be retained by HSBC Finance Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	HSBCFC
Entity Registrant Name	HSBC Finance Corp
Entity Central Index Key	0000354964
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		68

XML

CONSOLIDATED STATEMENT OF INCOME (LOSS) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Interest income		$ 342	$ 432
Interest expense on debt held by:
Interest expense		160	248
Net interest income		182	184
Provision for credit losses	[1]	37	27
Net interest income after provision for credit losses		145	157
Other revenues:
Derivative related expense		(115)	(97)
Gain on debt designated at fair value and related derivatives		24	59
Servicing and other fees from HSBC affiliates		4	6
Lower of amortized cost or fair value adjustment on receivables held for sale		(55)	(17)
Other income		9	7
Total other revenues		(133)	(42)
Operating expenses:
Salaries and employee benefits		38	42
Occupancy and equipment expenses, net		6	8
Real estate owned expenses		3	4
Other expenses		49	40
Support services from HSBC affiliates		42	54
Total operating expenses		138	148
Loss from continuing operations before income tax		(126)	(33)
Income tax benefit		(56)	(28)
Loss from continuing operations		(70)	(5)
Discontinued operations:
Loss from discontinued operations before income tax		(7)	0
Income tax benefit		3	0
Loss from discontinued operations		(4)	0
Net loss		(74)	(5)
Debt issued to non-affiliates [Member]
Interest expense on debt held by:
Interest expense		107	195
Debt issued to HSBC affiliates [Member]
Interest expense on debt held by:
Interest expense		$ 53	$ 53

[1] The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

XML

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net loss	$ (74)	$ (5)
Net change in unrealized gains (losses), net of tax, on:
Derivatives designated as cash flow hedges	8	11
Pension and postretirement benefit plan adjustments	(1)	0
Other comprehensive income, net of tax	7	11
Total comprehensive income (loss)	$ (67)	$ 6

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CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Assets
Cash		$ 106	$ 124
Securities purchased under agreements to resell		779	2,724
Receivables, net (including $1.3 billion and $1.7 billion at March 31, 2016 and December 31, 2015, respectively, collateralizing long-term debt and net of credit loss reserves of $272 million and $311 million at March 31, 2016 and December 31, 2015, respectively)		8,433	8,987
Receivables held for sale	[1]	8,185	8,265
Properties and equipment, net		2	4
Real estate owned		68	88
Deferred income taxes, net		2,959	2,923
Other assets		1,132	1,017
Assets of discontinued operations		16	13
Total assets		21,680	24,145
Debt:
Due to affiliates (including $495 million and $496 million at March 31, 2016 and December 31, 2015, respectively, carried at fair value)		5,774	5,925
Long-term debt (including $1.4 billion and $3.3 billion at March 31, 2016 and December 31, 2015, respectively, carried at fair value and $694 million and $879 million at March 31, 2016 and December 31, 2015, respectively, collateralized by receivables)		7,502	9,510
Total debt		13,276	15,435
Derivative related liabilities		0	57
Liability for postretirement benefits		142	143
Other liabilities		1,611	1,773
Liabilities of discontinued operations		113	102
Total liabilities		15,142	17,510
Common shareholder’s equity:
Common stock ($0.01 par value, 100 shares authorized; 68 shares issued and outstanding at both March 31, 2016 and December 31, 2015)		0	0
Additional paid-in-capital		23,215	23,245
Accumulated deficit		(18,273)	(18,199)
Accumulated other comprehensive income		21	14
Total common shareholder’s equity		4,963	5,060
Total shareholders’ equity		6,538	6,635
Total liabilities and shareholders’ equity		21,680	24,145
Series B Preferred Stock [Member]
Redeemable preferred stock:
Redeemable preferred stock		575	575
Series C Preferred Stock [Member]
Redeemable preferred stock:
Redeemable preferred stock		$ 1,000	$ 1,000

[1] The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

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CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Receivables, collateralizing long-term debt	$ 1,305	$ 1,654
Credit loss reserves	(272)	(311)
Due to affiliate, carried at fair value	495	496
Long-term debt carried at fair value	1,447	3,257
Long-term debt collateralized by receivables	$ 694	$ 879
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	100	100
Common stock, shares issued (shares)	68	68
Common stock, shares outstanding (shares)	68	68
Series B Preferred Stock [Member]
Redeemable preferred stock, shares authorized (shares)	1,501,100	1,501,100
Redeemable preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Redeemable preferred stock, shares issued (shares)	575,000	575,000
Redeemable preferred stock, shares outstanding (shares)	575,000	575,000
Series C Preferred Stock [Member]
Redeemable preferred stock, shares authorized (shares)	1,000	1,000
Redeemable preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Redeemable preferred stock, shares issued (shares)	1,000	1,000
Redeemable preferred stock, shares outstanding (shares)	1,000	1,000

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Millions	Total	Preferred stock	Common stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive income (loss)
Balance at beginning of period at Dec. 31, 2014		$ 1,575	$ 0	$ 23,381	$ (17,768)	$ (65)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends on preferred stock				(32)
Employee benefit plans, including transfers and other				(1)
Net loss	$ (5)				(5)
Other comprehensive income	11					11
Total shareholders' equity at end of period at Mar. 31, 2015	7,096	1,575	0	23,348	(17,773)	(54)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total common shareholder's equity at end of period	5,521
Total common shareholder's equity at end of period	5,060
Balance at beginning of period at Dec. 31, 2015	6,635	1,575	0	23,245	(18,199)	14
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends on preferred stock				(32)
Employee benefit plans, including transfers and other				2
Net loss	(74)				(74)
Other comprehensive income	7					7
Total shareholders' equity at end of period at Mar. 31, 2016	6,538	$ 1,575	$ 0	$ 23,215	$ (18,273)	$ 21
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total common shareholder's equity at end of period	$ 4,963

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CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities
Net loss		$ (74)	$ (5)
Loss from discontinued operations		(4)	0
Loss from continuing operations		(70)	(5)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:
Provision for credit losses	[1]	37	27
Lower of amortized cost or fair value adjustment on receivables held for sale		55	17
(Gain) loss on sale of real estate owned, including lower of amortized cost or fair value adjustments		(1)	0
Depreciation and amortization		1	2
Mark-to-market on debt designated at fair value and related derivatives		(8)	2
Foreign exchange and derivative movements on long-term debt and net change in non-fair value option related derivative assets and liabilities		65	(447)
Net change in other assets		(145)	(187)
Net change in other liabilities		(162)	20
Other, net		6	42
Cash provided by (used in) operating activities – continuing operations		(222)	(529)
Cash provided by (used in) operating activities – discontinued operations		3	27
Cash provided by (used in) operating activities		(219)	(502)
Cash flows from investing activities
Net change in securities purchased under agreements to resell		1,945	536
Net change in interest bearing deposits with banks		0	(1)
Receivables:
Net collections		510	484
Proceeds from sales of real estate owned		39	48
Sales (purchases) of properties and equipment		2	0
Cash provided by investing activities – continuing operations		2,496	1,067
Cash provided by investing activities – discontinued operations		0	0
Cash provided by investing activities		2,496	1,067
Debt:
Net change in due to affiliates		(151)	0
Long-term debt retired		(2,113)	(545)
Shareholders’ dividends		(32)	(32)
Cash used in financing activities – continuing operations		(2,296)	(577)
Cash used in financing activities – discontinued operations		0	0
Cash used in financing activities		(2,296)	(577)
Net change in cash		(19)	(12)
Cash at beginning of period	[2]	136	175
Cash at end of period	[3]	117	163
Supplemental Noncash Investing and Capital Activities:
Fair value of properties added to real estate owned		19	39
Transfer of receivables to held for sale		$ 230	$ 296

[1] The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

[2] Cash at beginning of period includes $12 million and $18 million for discontinued operations as of January 1, 2016 and 2015, respectively.

[3] Cash at end of period includes $11 million and $16 million for discontinued operations as of March 31, 2016 and 2015, respectively.

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CONSOLIDATED STATEMENT OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Statement of Cash Flows [Abstract]
Cash at beginning/end of period, discontinued operations	$ 11	$ 12	$ 16	$ 18

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Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

HSBC Finance Corporation is an indirect wholly owned subsidiary of HSBC North America Holdings Inc. (“HSBC North America”), which is an indirect wholly-owned subsidiary of HSBC Holdings plc (“HSBC” and, together with its subsidiaries, "HSBC Group"). The accompanying unaudited interim consolidated financial statements of HSBC Finance Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. HSBC Finance Corporation and its subsidiaries may also be referred to in this Form 10-Q as “we,” “us” or “our.” These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K"). Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

For the three months ended March 31, 2016, our income tax benefit was impacted by a reversal of approximately $15 million associated with an out of period adjustment to our deferred tax asset balance.

During the third quarter of 2015, we reclassified preferred dividends within common shareholder's equity in order to properly present dividends as a reduction to additional paid-in-capital rather than as an increase to accumulated deficit for all periods. Total common shareholder's equity, total shareholders' equity and reported net income for March 31, 2015 was unaffected. The following table reflects the impact of this reclassification for the prior year quarter below:

	March 31, 2015
Additional Paid-in-Capital:
As previously reported	$	23,986
After reclassification	23,348
Accumulated Deficit:
As previously reported	$	(18,411	)
After reclassification	(17,773		)
Cumulative dividends reclassified	$	638

The consolidated financial statements have been prepared on the basis that we will continue as a going concern. Such assertion contemplates the significant losses recognized and the challenges we anticipate with respect to a sustained return to profitability under prevailing and forecasted economic and business conditions. HSBC continues to be fully committed and has the capacity to continue to provide the necessary capital and liquidity to fund continuing operations.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Unless otherwise noted, information included in these notes to the consolidated financial statements relates to continuing operations for all periods presented. See Note 2, "Discontinued Operations," for further details. Interim results should not be considered indicative of results in future periods.

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Discontinued Operations

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

2012 Discontinued Operations:

Commercial In 2012, we began reporting our Commercial business in discontinued operations as there were no longer any outstanding receivable balances or any remaining significant cash flows generated from this business. At March 31, 2016 and December 31, 2015, assets of our Commercial business totaled $4 million and $5 million, respectively. There were no liabilities in our Commercial business at either March 31, 2016 or December 31, 2015. The following table summarizes the operating results of our discontinued Commercial business for the periods presented:

Three Months Ended March 31,	2016		2015
	(in millions)
Net interest income and other revenues	$	4	$	7
Income from discontinued operations before income tax	2		4

2011 Discontinued Operations:

Card and Retail Services In 2012, HSBC, through its wholly-owned subsidiaries HSBC Finance Corporation, HSBC USA Inc. ("HSBC USA") and other wholly-owned affiliates, sold its Card and Retail Services business to Capital One Financial Corporation (“Capital One”). In addition to receivables, the sale included real estate and certain other assets and liabilities which were sold at book value or, in the case of real estate, appraised value.

The following table summarizes the operating results of our discontinued Card and Retail Services business for the periods presented:

Three Months Ended March 31,	2016			2015
	(in millions)
Net interest income and other revenues	$	—		$	—
Loss from discontinued operations before income tax(1)	(9		)	(4		)

⁽¹⁾  The three months ended March 31, 2016 includes incremental expenses of $7 million for legal matters. For the three months ended March 31, 2015, the amount includes expenses related to activities to complete the separation of the credit card operational infrastructure between us and Capital One.

At March 31, 2016 and December 31, 2015, assets of our discontinued Card and Retail Services business totaled $12 million and $8 million, respectively. Liabilities of our Card and Retail Services business totaled $113 million and $102 million at March 31, 2016 and December 31, 2015, respectively, which primarily consists of certain legal accruals.

See Note 14, "Litigation and Regulatory Matters," for discussion regarding a consent order issued by the Office of the Comptroller of the Currency ("OCC") on April 13, 2016 related to customers who purchased a certain credit monitoring product which was previously marketed and administered by our discontinued Card and Retail Services business.

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Receivables, net

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Receivables

Receivables, net

Receivables consisted of the following:

	March 31, 2016			December 31, 2015
	(in millions)
Real estate secured:
First lien	$	6,807		$	7,302
Second lien	1,766			1,854
Total real estate secured receivables	8,573			9,156
Accrued interest income and other	132			142
Credit loss reserve for receivables	(272		)	(311		)
Total receivables, net	$	8,433		$	8,987

Deferred origination fees, net of costs, totaled $68 million and $71 million at March 31, 2016 and December 31, 2015, respectively, and are included in the receivables balance. Net unamortized premium on our receivables totaled $31 million and $35 million at March 31, 2016 and December 31, 2015, respectively, and are also included in the receivables balance.

Collateralized funding transactions  Secured financings previously issued under public trusts with a balance of $694 million at March 31, 2016 are secured by $1,305 million of closed-end real estate secured receivables. Secured financings previously issued under public trusts with a balance of $879 million at December 31, 2015 were secured by $1,654 million of closed-end real estate secured receivables.

Aging Analysis of Past Due Receivables The following tables summarize the past due status of our receivables (excluding receivables held for sale) at March 31, 2016 and December 31, 2015. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the terms of the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-aging.

	Past Due				Total Past Due				Total Receivables(2)
March 31, 2016	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	141	$	168	$	309	$	6,498	$	6,807
Second lien	78		48		126		1,640		1,766
Total real estate secured receivables	$	219	$	216	$	435	$	8,138	$	8,573

	Past Due				Total Past Due				Total Receivables(2)
December 31, 2015	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	179	$	219	$	398	$	6,904	$	7,302
Second lien	98		62		160		1,694		1,854
Total real estate secured receivables	$	277	$	281	$	558	$	8,598	$	9,156

⁽¹⁾  Receivables less than 30 days past due are presented as current.

⁽²⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and include certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

Nonaccrual receivables Nonaccrual receivables and nonaccrual receivables held for sale are all receivables which are 90 or more days contractually delinquent as well as second lien receivables (regardless of delinquency status) where the first lien receivable that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged receivable subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual.

Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Nonaccrual receivable portfolios(1):
Real estate secured(2)	$	222	$	283
Receivables held for sale	444		386
Total nonaccrual receivables(3)	$	666	$	669

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonaccrual real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  Nonaccrual receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

The following table provides additional information on our total nonaccrual receivables:

Three Months Ended March 31,	2016		2015
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$	18	$	39
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual receivables during the period	2		5

Troubled Debt Restructurings  We report as troubled debt restructurings ("TDR Loans") substantially all receivables modified as a result of a financial difficulty, regardless of whether the modification was permanent or temporary, including all modifications with trial periods. Additionally, we report as TDR Loans all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification. TDR Loans also include receivables discharged under Chapter 7 bankruptcy and not re-affirmed. TDR Loans are considered to be impaired loans. The TDR Loan balances in the tables below reflect the principal amount outstanding on the receivable net of any charge-off recorded in accordance with our existing charge-off policies and include all basis adjustments on the receivable, such as unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased receivables. Additionally, the carrying amount of TDR Loans classified as held for sale has been reduced by both the lower of amortized cost or fair value adjustment as well as the credit loss reserves associated with these receivables prior to the transfer. TDR Loans are considered to be impaired loans regardless of their accrual status.

Modifications for real estate secured receivables may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount, partial forgiveness or deferment of principal or other loan covenants. A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate and making other changes to the loan terms, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. TDR Loans are reserved for based on the present value of expected future cash flows discounted at the loans' original effective interest rate which generally results in a higher reserve requirement for these loans. The portion of the credit loss reserves on TDR Loans that is associated with the discounting of cash flows is released from credit loss reserves over the life of the TDR Loan. There are no credit loss reserves associated with TDR Loans classified as held for sale as they are carried at the lower of amortized cost or fair value.

The following table presents information about receivables held for investment and receivables held for sale which as a result of any account management action taken during the three months ended March 31, 2016 and 2015 became classified as TDR Loans as well as a summary of the type of account management action taken.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured receivables classified as TDR Loans during the period:
First lien held for investment	$	18	$	125
Second lien held for investment	23		16
Real estate secured receivables held for sale	71		10
Total	$	112	$	151
Types of account management actions taken during the period:
Modifications, primarily interest rate modifications	$	56	$	60
Re-age of past due account	56		91
Total	$	112	$	151

The tables below present information about our TDR Loans and TDR Loans held for sale, including the related allowance for credit losses.

	March 31, 2016				December 31, 2015
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans:(1)
Real estate secured:
First lien(2)	$	722	$	834	$	870	$	1,003
Second lien(2)	641		712		652		732
Real estate secured receivables held for sale(3)	6,105		7,381		6,044		7,317
Total real estate secured TDR Loans	$	7,468	$	8,927	$	7,566	$	9,052
Credit loss reserves for TDR Loans:(4)
Real estate secured:
First lien	$	72			$	95
Second lien	133				135
Total credit loss reserves for real estate secured TDR Loans(3)	$	205			$	230

⁽¹⁾  At March 31, 2016 and December 31, 2015, the unpaid principal balance reflected above includes $757 million and $740 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action.

⁽²⁾  At March 31, 2016 and December 31, 2015, the carrying value of TDR Loans held for investment totaling $211 million and $250 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.

⁽⁴⁾  Included in credit loss reserves.

The following table provides additional information about the average balance and interest income recognized on TDR Loans and TDR Loans held for sale.

Three Months Ended March 31,	2016		2015
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien	$	6,775	$	10,207
Second lien	750		900
Total average balance of TDR Loans	$	7,525	$	11,107
Interest income recognized on TDR Loans:
Real estate secured:
First lien	$	137	$	180
Second lien	20		22
Total interest income recognized on TDR Loans	$	157	$	202

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the three months ended March 31, 2016 and 2015.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured:
First lien	$	4	$	55
Second lien	4		9
Real estate secured receivables held for sale	20		2
Total	$	28	$	66

Consumer Receivable Credit Quality Indicators  Credit quality indicators used for consumer receivables include a loan’s delinquency status, whether the loan is performing and whether the loan is a TDR Loan.

Delinquency The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale (“delinquency ratio”) for our receivable portfolio.

	March 31, 2016				December 31, 2015
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured receivables(1):
First lien	$	209	3.07	%	$	272	3.73	%
Second lien	72		4.08		94		5.07
Real estate secured receivables held for sale	596		7.28		569		6.88
Total real estate secured receivables(2)	$	877	5.23	%	$	935	5.37	%

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, total real estate secured receivables include $382 million and $363 million, respectively, that are in the process of foreclosure.

Nonperforming The following table summarizes the status of receivables and receivables held for sale.

	Accruing Loans		Nonaccrual Loans(4)		Total
	(in millions)
At March 31, 2016(1)
Real estate secured(2)(3)	$	8,351	$	222	$	8,573
Real estate secured receivables held for sale	7,741		444		8,185
Total	$	16,092	$	666	$	16,758
At December 31, 2015(1)
Real estate secured(2)(3)	$	8,873	$	283	$	9,156
Real estate secured receivables held for sale	7,879		386		8,265
Total	$	16,752	$	669	$	17,421

⁽¹⁾  The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $139 million and $178 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.

⁽⁴⁾  Nonperforming receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

Troubled debt restructurings  See discussion of TDR Loans above for further details on this credit quality indicator.

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Credit Loss Reserves

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Credit Loss Reserves

Credit Loss Reserves

The following table summarizes the changes in credit loss reserves for real estate secured receivables by product and the related receivable balance by product during the three months ended March 31, 2016 and 2015:

	First Lien			Second Lien			Total
	(in millions)
Three Months Ended March 31, 2016:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	137		$	174		$	311
Provision for credit losses(1)	23			14			37
Net charge-offs:
Charge-offs(1)(2)	(53		)	(26		)	(79		)
Recoveries	2			1			3
Total net charge-offs	(51		)	(25		)	(76		)
Credit loss reserve balance at end of period	$	109		$	163		$	272
Reserve components:
Collectively evaluated for impairment	$	36		$	30		$	66
Individually evaluated for impairment(3)	63			133			196
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	10			—			10
Total credit loss reserves	$	109		$	163		$	272
Receivables:
Collectively evaluated for impairment	$	6,028		$	1,119		$	7,147
Individually evaluated for impairment(3)	532			620			1,152
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	247			27			274
Total receivables	$	6,807		$	1,766		$	8,573
Three Months Ended March 31, 2015:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	1,898		$	319		$	2,217
Provision for credit losses(1)	37			(10		)	27
Net charge-offs:
Charge-offs(2)	(108		)	(39		)	(147		)
Recoveries	12			1			13
Total net charge-offs	(96		)	(38		)	(134		)
Credit loss reserve balance at end of period	$	1,839		$	271		$	2,110
Reserve components:
Collectively evaluated for impairment	$	155		$	53		$	208
Individually evaluated for impairment(3)	1,657			218			1,875
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	27			—			27
Total credit loss reserves	$	1,839		$	271		$	2,110
Receivables:
Collectively evaluated for impairment	$	9,872		$	1,526		$	11,398
Individually evaluated for impairment(3)	8,936			866			9,802
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	500			29			529
Total receivables	$	19,308		$	2,421		$	21,729

⁽¹⁾  The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

⁽²⁾  For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three months ended March 31, 2016 and 2015 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $20 million during the three months ended March 31, 2016 compared with $15 million during the three months ended March 31, 2015.

⁽³⁾  These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $211 million and $399 million at March 31, 2016 and 2015, respectively. The reserve component above excludes credit loss reserves totaling $9 million and $22 million at March 31, 2016 and 2015, respectively, for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell. These receivables and credit loss reserves are reflected within receivables and credit loss reserves carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

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Receivables Held for Sale

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Receivables Held for Sale

Receivables Held for Sale

Real Estate Secured Receivables Real estate secured receivables held for sale which are carried at the lower of amortized cost or fair value are comprised of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Real estate secured receivables held for sale:
First lien	$	8,026	$	8,110
Second lien	159		155
Total real estate secured receivables held for sale	$	8,185	$	8,265

We have been engaged in an on-going evaluation of our balance sheet taking into consideration our liquidity, capital and funding requirements as well as capital requirements of HSBC. During 2013, we established an on-going receivable sales program under which we intend to sell first lien real estate secured receivables held for investment meeting pre-determined criteria when they are written down to the lower of amortized cost or fair value of the collateral less cost to sell in accordance with our existing charge-off policies (generally 180 days past due). During the second quarter of 2015, we expanded our receivable sales program to also include substantially all of our first lien real estate secured receivables held for investment which have been either re-aged, modified or became subject to a bankruptcy filing since 2007, along with any second lien balances associated with these receivables. Under our expanded receivable sales program, we intend to sell substantially all real estate secured receivables when any of the above criteria are met.

During the three months ended March 31, 2016 we transferred real estate secured receivables to held for sale with a total unpaid principal balance (excluding accrued interest) of approximately $282 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell, as applicable, was approximately $267 million, including accrued interest. As we plan to sell these receivables to third party investors, fair value represents the price we believe a third party investor would pay to acquire the receivable portfolios. During the three months ended March 31, 2016, we recorded an initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale totaling $17 million, of which $13 million was attributed to credit factors and recorded as a component of the provision for credit losses in the consolidated statement of income (loss) and $4 million was attributable to non-credit factors and recorded as a component of other revenues in the consolidated statement of income (loss).

During the three months ended March 31, 2016, we recorded $68 million of additional lower of amortized cost or fair value adjustment on receivables held for sale as a component of total other revenues in the consolidated statement of income (loss) related to changes in fair value as a result of establishing separate pools for receivables being marketed. Removing these receivables from their risk-based grouping impacts the valuation of the receivables remaining in the risked-based pools.

During the three months ended March 31, 2015, we transferred real estate secured receivables to held for sale with an unpaid principal balance (excluding accrued interest) of approximately $431 million at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell was approximately $311 million including accrued interest. During the three months ended March 31, 2015, no initial lower of amortized cost or fair value adjustment was required for these receivables transferred to held for sale as the fair value of the receivables at the time of transfer exceeded the carrying value after consideration of credit loss reserves associated with these receivables.

During the three months ended March 31, 2015, no additional lower of amortized cost or fair value was recorded related to changes in fair value.

We continue to make progress in our strategy to accelerate the run-off and sale of our real estate secured receivable portfolio. In April 2016, we completed the sale of a pool of real estate secured receivables with an unpaid principal balance of $1,421 million (aggregate carrying value of $1,273 million) at the time of sale to a third-party investor. Aggregate cash consideration received totaled $1,440 million. We currently expect that during the second quarter of 2016 we will incur a gain on sale of approximately $155 million, which includes transaction costs.

Historically, receivables held for sale have been sold to investors or, if the foreclosure process is completed prior to sale, the underlying properties acquired in satisfaction of the receivables have been classified as real estate owned ("REO") and sold. As we continue to work with borrowers, we have also historically agreed to short sales whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation. Accordingly, based on the projected timing of receivable sales and the expected flow of foreclosure volume into REO or settled through a short sale, a portion of the real estate secured receivables classified as held for sale will ultimately become REO or settled through a short sale. As a result, a portion of the non-credit fair value adjustment on receivables held for sale may be reversed in earnings over time.

Receivable Held for Sale Activity During the Period The following table summarizes the activity in receivables held for sale during the three months ended March 31, 2016 and 2015:

	Receivables Held for Sale
	(in millions)
Three Months Ended March 31, 2016:
Real estate secured receivables held for sale at beginning of period	$	8,265
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	230
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(51		)
Carrying value of real estate secured receivables held for sale transferred to REO	(14		)
Carrying value of real estate secured receivables held for sale settled through short sale	(8		)
Change in real estate secured receivable balance, including collections	(237		)
Real estate secured receivables held for sale at end of period(3)	$	8,185
Three Months Ended March 31, 2015:
Real estate secured receivables held for sale at beginning of period	$	860
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	296
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(17		)
Carrying value of real estate secured receivables held for sale transferred to REO	(24		)
Carrying value of real estate secured receivables held for sale settled through short sale	(11		)
Change in real estate secured receivable balance, including collections	(7		)
Real estate secured receivables held for sale at end of period(3)	$	1,097

⁽¹⁾  The initial lower of amortized cost or fair value adjustment on receivables transferred into held for sale during the three months ended March 31, 2016 totaled $17 million. During the three months ended March 31, 2015, there was no initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale.

⁽²⁾  Amount includes any accrued interest associated with the receivable.

⁽³⁾  Real estate secured receivables held for sale in the table above are presented net of the valuation allowance.

The following table provides a rollforward of our valuation allowance for the three months ended March 31, 2016 and 2015. See Note 13, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.

Three Months Ended March 31,	2016		2015
	(in millions)
Balance at beginning of period	$	13	$	—
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period	4		—
Increase in valuation allowance resulting from changes in fair value	68		—
Change in valuation allowance for collections, charged-off, transferred to REO or short sale	1		—
Balance at end of period	$	86	$	—

The following table summarizes the components of the lower of amortized cost or fair value adjustment during the three months ended March 31, 2016 and 2015:

	Lower of Amortized Cost or Fair Value Adjustments Associated With
	Fair Value		Settlements (Including Short Sales)			Total
	(in millions)
(Income)/Expense:
Three Months Ended March 31, 2016:
Lower of amortized cost or fair value adjustments recorded as a component of:
Provision for credit losses(1)	$	13	$	—		$	13
Other revenues:
Initial lower of amortized cost or fair value adjustment(2)	4		—			4
Subsequent to initial transfer to held for sale	68		(17		)	51
Lower of amortized cost or fair value adjustment recorded through other revenues	72		(17		)	55
Lower of amortized cost or fair value adjustment	$	85	$	(17	)	$	68
Three Months Ended March 31, 2015:
Lower of amortized cost or fair value adjustments recorded as a component of other revenues:
Subsequent to initial transfer to held for sale	$	—	$	17		$	17
Lower of amortized cost or fair value adjustment recorded through other revenues(3)	$	—	$	17		$	17

⁽¹⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which was recorded as provision for credit losses in the consolidated statement of income (loss) as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.

⁽²⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which was recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates.

⁽³⁾  During the three months ended March 31, 2015, no lower of amortized cost or fair value adjustment was recorded as a provision for credit losses.

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Fair Value Option

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Option

Fair Value Option

We report our results to HSBC in accordance with HSBC Group accounting and reporting policies (the "Group Reporting Basis"), which apply International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as endorsed by the European Union ("EU"). We have elected to apply fair value option ("FVO") reporting to certain of our fixed rate debt issuances which also qualify for FVO reporting under the Group Reporting Basis. The following table summarizes fixed rate debt issuances accounted for under FVO:

	March 31, 2016		December 31, 2015
	(in millions)
Fixed rate debt accounted for under FVO reported in:
Long-term debt	$	1,447	$	3,257
Due to affiliates	495		496
Total fixed rate debt accounted for under FVO	$	1,942	$	3,753
Unpaid principal balance of fixed rate debt accounted for under FVO(1)	$	1,804	$	3,598
Fixed rate long-term debt not accounted for under FVO	$	4,061	$	4,074

⁽¹⁾  Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which decreased the debt balance by $217 million at March 31, 2016 and decreased the debt balance by $283 million at December 31, 2015.

We determine the fair value of the fixed rate debt accounted for under FVO through the use of a third party pricing service. Such fair value represents the full market price (including credit and interest rate impacts) based on observable market data for the same or similar debt instruments. See Note 13, "Fair Value Measurements,” for a description of the methods and significant assumptions used to estimate the fair value of our fixed rate debt accounted for under FVO.

The following table summarizes the components of the gain on debt designated at fair value and related derivatives for the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,	2016			2015
	(in millions)
Mark-to-market on debt designated at fair value(1):
Interest rate component	$	6		$	49
Credit risk component	11			26
Total mark-to-market on debt designated at fair value	17			75
Mark-to-market on the related derivatives(1)(2)	(9		)	(77		)
Net realized gains on the related derivatives(1)	16			61
Gain on debt designated at fair value and related derivatives	$	24		$	59

⁽¹⁾  The derivatives associated with debt designated at fair value are economic hedges but do not qualify for hedge accounting. See Note 7, "Derivative Financial Instruments," for additional discussion of these non-qualifying hedges.

⁽²⁾  Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related expense associated with debt designated at fair value was a loss of $66 million and a gain of $291 million for the three months ended March 31, 2016 and 2015, respectively. Offsetting gains (losses) recorded in derivative related expense associated with the related derivatives was a gain of $66 million and a loss of $291 million for the three months ended March 31, 2016 and 2015, respectively.

The movement in the fair value reflected in gain on debt designated at fair value and related derivatives includes the effect of our own credit spread changes and interest rate changes, including any economic ineffectiveness in the relationship between the related derivatives and our debt and any realized gains or losses on those derivatives. With respect to the credit component, as our credit spreads narrow accounting losses are booked and the reverse is true if credit spreads widen. Differences arise between the movement in the fair value of our debt and the fair value of the related derivative due to the different credit characteristics and differences in the calculation of fair value for debt and derivatives. The size and direction of the accounting consequences of such changes can be volatile from period to period but do not alter the cash flows intended as part of our interest rate management strategy. On a cumulative basis, we have recorded fair value option adjustments which increased the value of our debt by $138 million and $155 million at March 31, 2016 and December 31, 2015, respectively.

The change in the fair value of the debt and the change in value of the related derivatives during the three months ended March 31, 2016 and 2015 reflects the following:

• Interest rate curve – During the three months ended March 31, 2016 and 2015, changes in market movements on certain debt and related derivatives that mature in the near term resulted in a gain in the interest rate component on the mark-to-market of the debt and a loss on the mark-to-market of the related derivative. As these items near maturity, their values are less sensitive to interest rate movements. Changes in the value of the interest rate component of the debt as compared with the related derivative are also affected by differences in cash flows and valuation methodologies for the debt and the derivatives. Cash flows on debt are discounted using a single discount rate from the bond yield curve for each bond’s applicable maturity while derivative cash flows are discounted using rates at multiple points along an interest rate yield curve. The impacts of these differences vary as short-term and long-term interest rates shift and time passes. Furthermore, certain FVO debt no longer has any corresponding derivatives.

• Credit – Our secondary market credit spreads widened during both the three months ended March 31, 2016 and 2015. The gain in the credit risk component was lower during the current year period as a result of lower levels of fair value option debt outstanding as a significant amount of our fair value option debt and related derivatives matured subsequent to March 31, 2015.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Our business activities involve analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Accordingly, we have comprehensive risk management policies to address potential financial risks, which include credit risk, liquidity risk, market risk, and operational risks. Our risk management policy is designed to identify and analyze these risks, to set appropriate limits and controls, and to monitor the risks and limits continually by means of reliable and up-to-date administrative and information systems. Our risk management policies are primarily carried out in accordance with practice and limits set by the HSBC Group Management Board. The HSBC North America Asset Liability Committee (“HSBC North America ALCO”) meets regularly to review risks and approve appropriate risk management strategies within the limits established by the HSBC Group Management Board. Additionally, our Risk Management Committee receives regular reports on our interest rate and liquidity risk positions in relation to the established limits. In accordance with the policies and strategies established by HSBC North America ALCO, in the normal course of business, we enter into various transactions involving derivative financial instruments. These derivative financial instruments primarily are used as economic hedges to manage risk.

Objectives for Holding Derivative Financial Instruments  Market risk (which includes interest rate and foreign currency exchange risks) is the possibility that a change in underlying market rate inputs will cause a financial instrument to decrease in value or become more costly to settle. Prior to our ceasing originations in our Consumer Lending business and ceasing loan purchase activities in our Mortgage Services business, customer demand for our loan products shifted between fixed rate and floating rate products, based on market conditions and preferences. These shifts in loan products resulted in different funding strategies and produced different interest rate risk exposures. Additionally, the mix of receivables on our balance sheet and the corresponding market risk is changing as we manage the liquidation of all of our receivable portfolios. We maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to our debt liabilities. We manage our exposure to interest rate risk primarily through the use of interest rate swaps with the main objective of managing the interest rate volatility due to a mismatch in the duration of our assets and liabilities. We manage our exposure to foreign currency exchange risk primarily through the use of cross currency interest rate swaps.

Interest rate swaps are contractual agreements between two counterparties for the exchange of periodic interest payments generally based on a notional principal amount and agreed-upon fixed or floating rates. The majority of our interest rate swaps are used to manage our exposure to changes in interest rates by converting floating rate debt to fixed rate or by converting fixed rate debt to floating rate. We have also entered into currency swaps to convert both principal and interest payments on debt issued in one currency to the appropriate functional currency.

To manage our exposure to changes in interest rates, we entered into interest rate swap agreements and currency swaps which have been designated as cash flow hedges under derivative accounting principles, or are treated as non-qualifying hedges. We currently utilize the long-haul method to assess effectiveness of all derivatives designated as hedges.

We do not manage credit risk or the changes in fair value due to the changes in credit risk by entering into derivative financial instruments such as credit derivatives or credit default swaps.

Control Over Valuation Process and Procedures  A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for derivatives are measured by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Markets Independent Model Review Team of an HSBC affiliate. These valuation models utilize discounted cash flows or an option pricing model adjusted for counterparty credit risk and market liquidity. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indices and therefore demonstrate a similar response to market factors.

Credit Risk of Derivatives  By utilizing derivative financial instruments, we are exposed to counterparty credit risk. Counterparty credit risk is the risk that the counterparty to a transaction fails to perform according to the terms of the contract. We manage the counterparty credit (or repayment) risk in derivative instruments through established credit approvals, risk control limits, collateral, and ongoing monitoring procedures. We utilize an affiliate, HSBC Bank USA, National Association (together with its subsidiaries, "HSBC Bank USA") as the sole provider of derivatives. We have never suffered a loss due to counterparty credit failure.

At March 31, 2016 and December 31, 2015, we had derivative contracts with a notional amount of $7.1 billion and $8.9 billion, respectively, all of which is outstanding with HSBC Bank USA making them our sole counterparty in derivative transactions. Derivative financial instruments are generally expressed in terms of notional principal or contract amounts which are much larger than the amounts potentially at risk for nonpayment by counterparties. Derivative agreements require that payments be made to, or received from, the counterparty when the fair value of the agreement reaches a certain level. When the fair value of our agreements with the affiliate counterparty requires the posting of collateral, it is provided in either the form of cash and recorded on the balance sheet, consistent with third party arrangements, or in the form of securities which are not recorded on our balance sheet. The fair value of our agreements with the affiliate counterparty required us to provide collateral to the affiliate of $537 million at March 31, 2016 and $491 million at December 31, 2015, all of which was provided in cash. These amounts are offset against the fair value amount recognized for derivative instruments that have been offset under the same master netting arrangement and recorded in our balance sheet as derivative financial assets or derivative related liabilities which are included as a component of other assets and other liabilities, respectively.

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.

	March 31, 2016						December 31, 2015
	Derivative Financial Assets			Derivative Financial Liabilities			Derivative Financial Assets			Derivative Financial Liabilities
	(in millions)
Derivatives(1)
Derivatives accounted for as cash flow hedges associated with debt:
Interest rate swaps	$	—		$	(7	)	$	—		$	(18	)
Currency swaps	119			(140		)	97			(178		)
Cash flow hedges	119			(147		)	97			(196		)
Non-qualifying hedge activities:
Derivatives not designated as hedging instruments:
Interest rate swaps	24			(392		)	20			(286		)
Derivatives not designated as hedging instruments	24			(392		)	20			(286		)
Derivatives associated with debt carried at fair value:
Interest rate swaps	—			—			4			—
Currency swaps	25			(152		)	14			(201		)
Derivatives associated with debt carried at fair value	25			(152		)	18			(201		)
Total derivatives	168			(691		)	135			(683		)
Less: Gross amounts offset in the balance sheet(2)	(168		)	691			(135		)	626
Net amounts of derivative financial assets and liabilities presented in the balance sheet(3)	$	—		$	—		$	—		$	(57	)

⁽¹⁾  All of our derivatives are bilateral over-the-counter derivatives.

⁽²⁾  Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes cash collateral paid of $537 million at March 31, 2016 and $491 million at December 31, 2015. At March 31, 2016 and December 31, 2015, we did not have any financial instrument collateral received/posted.

⁽³⁾  At March 31, 2016 and December 31, 2015, we had not received any cash not subject to an enforceable master netting agreement.

Fair Value Hedges  At March 31, 2016 and December 31, 2015, we do not have any active fair value hedges. We recorded fair value adjustments to the carrying value of our debt for terminated fair value hedges which decreased the debt balance by $15 million at March 31, 2016 and $15 million at December 31, 2015.

Cash Flow Hedges Cash flow hedges include interest rate swaps to convert our variable rate debt to fixed rate debt by fixing future interest rate resets of floating rate debt as well as currency swaps to convert debt issued from one currency into U.S. dollar fixed rate debt. Gains and losses on derivative instruments designated as cash flow hedges are reported in other comprehensive income (loss) net of tax and totaled losses of $7 million and $15 million at March 31, 2016 and December 31, 2015, respectively. We expect $6 million ($4 million after-tax) of currently unrealized net losses will be reclassified to earnings within one year. However, these reclassified unrealized losses will be offset by decreased interest expense associated with the variable cash flows of the hedged items and will result in no significant impact to our earnings.

The following table provides the gain or loss recorded on our cash flow hedging relationships.

	Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassed From AOCI into Income (Effective Portion)						Location of Gain (Loss) Recognized in Income on the Derivative(Ineffective Portion)	Gain (Loss) Recognized In Income on Derivative (Ineffective Portion)
	2016		2015			2016			2015				2016		2015
	(in millions)
Three Months Ended March 31,
Interest rate swaps	$	11	$	9	Interest expense	$	—		$	—		Derivative related expense	$	—	$	—
Currency swaps	—		5		Interest expense	(3		)	(3		)	Derivative related expense	4		(2		)
Total	$	11	$	14		$	(3	)	$	(3	)		$	4	$	(2	)

Non-Qualifying Hedging Activities  We have entered into interest rate swaps which are not designated as hedges under derivative accounting principles. These financial instruments are economic hedges but do not qualify for hedge accounting and are primarily used to minimize our exposure to changes in interest rates through more closely matching both the structure and duration of our liabilities to the structure and duration of our assets.

The following table provides detail of the realized and unrealized gain or loss recorded on our non-qualifying hedges:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016			2015
		(in millions)
Interest rate contracts	Derivative related expense	$	(119	)	$	(95	)
Total		$	(119	)	$	(95	)

As we continue to make progress in our strategy to accelerate the run-off and sales of our real estate secured receivable portfolio, the dynamics of the duration of our receivables due to lower prepayment rates and the corresponding increase in interest rate risk are changing. In connection with the receivable sale which was completed in April 2016, we terminated non-qualifying hedges with a notional value of $720 million. We intend to continue reducing the size and potentially eliminate this non-qualifying hedge portfolio corresponding with timing of receivable sales over the course of 2016.

We have elected the fair value option for certain issuances of our fixed rate debt and have entered into interest rate and currency swaps related to debt carried at fair value. The interest rate and currency swaps associated with this debt are non-qualifying hedges but are considered economic hedges and realized gains and losses are reported as “Gain on debt designated at fair value and related derivatives” within other revenues. The derivatives related to fair value option debt are included in the tables below.

The following table provides the gain or loss recorded on the derivatives related to fair value option debt. See Note 6, “Fair Value Option,” for further discussion.

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016		2015
		(in millions)
Interest rate contracts	Gain (loss) on debt designated at fair value and related derivatives	$	—	$	2
Currency contracts	Gain (loss) on debt designated at fair value and related derivatives	7		(18		)
Total		$	7	$	(16	)

Notional Amount of Derivative Contracts The following table provides the notional amounts of derivative contracts.

	March 31, 2016		December 31, 2015
	(in millions)
Derivatives designated as hedging instruments:
Interest rate swaps	$	1,300	$	1,300
Currency swaps	1,588		1,588
	2,888		2,888
Non-qualifying hedges:
Derivatives not designated as hedging instruments:
Interest rate swaps	2,624		2,624
	2,624		2,624
Derivatives associated with debt carried at fair value:
Interest rate swaps	—		1,859
Currency swaps	1,562		1,562
	1,562		3,421
Total	$	7,074	$	8,933

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCI”) includes certain items that are reported directly within a separate component of shareholders’ equity. The following table presents changes in accumulated other comprehensive loss balances.

Three Months Ended March 31,	2016			2015
	(in millions)
Unrealized gains (losses) on cash flow hedging instruments:
Balance at beginning of period	$	(15	)	$	(52	)
Other comprehensive income for period:
Net gains arising during period, net of tax of $4 million and $5 million, respectively	7			9
Reclassification adjustment for losses realized in net income, net of tax of $2 million and $1 million, respectively(1)	1			2
Total other comprehensive income for period	8			11
Balance at end of period	(7		)	(41		)
Pension and postretirement benefit plan liability:
Balance at beginning of period	29			(13		)
Other comprehensive income for period:
Reclassification adjustment for (gains) losses realized in net income, net of tax of $(1) million and $- million, respectively	(1		)	—
Total other comprehensive loss for period	(1		)	—
Balance at end of period	28			(13		)
Total accumulated other comprehensive gain (loss) at end of period	$	21		$	(54	)

⁽¹⁾  The amounts reclassified during the three months ended March 31, 2016 and 2015 relate to interest rate and currency swaps and are included as a component of interest expense in our consolidated statement of income.

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Pension and Other Postretirement Benefits

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

Defined Benefit Pension Plan The components of pension expense for the defined benefit pension plan recorded in our consolidated statement of income and shown in the table below reflect the portion of pension expense of the combined HSBC North America Pension Plan (either the "HSBC North America Pension Plan" or the "Plan") which has been allocated to us.

Three Months Ended March 31,	2016			2015
	(in millions)
Service cost – benefits earned during the period	$	1		$	1
Interest cost on projected benefit obligation	12			12
Expected return on assets	(14		)	(16		)
Amortization of net actuarial loss	7			7
Pension expense	$	6		$	4

Higher pension expense during the three months ended March 31, 2016 was primarily due to lower expected return on plan assets which reflects market conditions and a shift to more fixed income securities in the investment portfolio to better match pension liabilities.

Postretirement Plans Other Than Pensions The components of our net postretirement benefit cost are as follows:

Three Months Ended March 31,	2016			2015
	(in millions)
Interest cost	$	1		$	1
Amortization of reduction in liability resulting from plan amendment	(2		)	—
Net periodic postretirement benefit cost	$	(1	)	$	1

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

In the normal course of business, we conduct transactions with HSBC and its subsidiaries. HSBC policy requires that these transactions occur at prevailing market rates and terms and include funding arrangements, derivatives, servicing arrangements, information technology, centralized support services, item and statement processing services, banking and other miscellaneous services. The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:

	March 31, 2016		December 31, 2015
	(in millions)
Assets:
Cash	$	106	$	124
Securities purchased under agreements to resell(1)	779		2,724
Other assets	201		128
Total assets	$	1,086	$	2,976
Liabilities:
Due to affiliates(2)	$	5,774	$	5,925
Other liabilities	33		62
Total liabilities	$	5,807	$	5,987

⁽¹⁾  Securities under an agreement to resell are purchased from HSBC Securities (USA) Inc. and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below.

⁽²⁾  Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock.

Three Months Ended March 31,	2016			2015
	(in millions)
Income/(Expense):
Interest income from HSBC affiliates	$	1		$	2
Interest expense paid to HSBC affiliates(1)	(75		)	(77		)
Net interest income (expense)	$	(74	)	$	(75	)
Servicing and other fees from HSBC affiliates	$	4		$	6
Support services from HSBC affiliates	(42		)	(54		)
Stock based compensation income (expense) with HSBC(2)	1			(1		)

⁽¹⁾  Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt.

⁽²⁾  Certain employees participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salary and employee benefits in our consolidated statement of income (loss). Certain employees also participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 9, “Pension and Other Postretirement Benefits.”

Funding Arrangements with HSBC Affiliates:

All of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans and our funding requirements are now sourced primarily through HSBC USA or HSBC North America. Due to affiliates consists of the following:

	March 31, 2016		December 31, 2015
	(in millions)
HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries	$	350	$	500
HSBC USA Inc.	3,012		3,012
HSBC Holdings plc (includes $495 million and $496 million at March 31, 2016 and December 31, 2015 carried at fair value, respectively)	812		813
HSBC North America Holdings Inc.	1,600		1,600
Due to affiliates	$	5,774	$	5,925

HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries - We have various debt agreements with maturities in 2016.

HSBC USA Inc. - We have a $5.0 billion, 364-day uncommitted unsecured revolving credit agreement with HSBC USA, which expires during the fourth quarter of 2016. The credit agreement allows for borrowings with maturities of up to 5 years. At both March 31, 2016 and December 31, 2015, $3,012 million was outstanding under this credit agreement with $512 million maturing in September 2017, $1.5 billion maturing in January 2018 and $1.0 billion maturing in September 2018.

HSBC Holdings plc - We have a public subordinated debt issue with a carrying amount of $3.0 billion which matures in 2021. Of this amount, HSBC Holdings plc holds $812 million at March 31, 2016 and $813 million at December 31, 2015.

HSBC North AmericaHoldings Inc. -We have a $600 million loan agreement with HSBC North America which provides for three$200 million borrowings with maturities between 2034 and 2035. In October 2015, we entered into a $1.0 billion loan agreement with HSBC North America which has a maturity date in October 2017.

We have the following funding arrangements available with HSBC affiliates, although there are no outstanding balances at either March 31, 2016 or December 31, 2015:

• $1.0 billion, 364-day committed revolving credit facility with HSBC USA. This credit facility expires in May 2017; and

• $1.0 billion, 364-day uncommitted revolving credit facility with HSBC North America. This credit facility expires January 2017.

In November 2013, we obtained a surety bond for $2.5 billion to secure a stay of execution of the partial judgment in the Jaffe litigation while we appealed the judgment. This surety bond was guaranteed by HSBC North America and we paid HSBC North America an annual fee for providing the guarantee which was included as a component of interest expense. Given the mandate of the Court of Appeals for the Seventh Circuit reversing the judgment, during the third quarter of 2015 we terminated the surety bond and related guarantee by HSBC North America. During the three months ended March 31, 2015, we recorded $2 million related to the guarantee provided by HSBC North America prior to its termination.

As previously discussed, we maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to affiliate and third-party debt liabilities. HSBC Bank USA is our sole counterparty in derivative transactions. The notional amount of derivative contracts outstanding with HSBC Bank USA totaled $7.1 billion and $8.9 billion at March 31, 2016 and December 31, 2015, respectively. The fair value of our agreements with HSBC Bank USA required us to provide collateral to HSBC Bank USA of $537 million at March 31, 2016 and $491 million at December 31, 2015, all of which was provided in cash. See Note 7, “Derivative Financial Instruments,” for additional information about our derivative portfolio.

In addition to the lending arrangements discussed above, in 2010, we issued 1,000 shares of Series C Preferred Stock to HSBC Investments (North America) Inc. for $1.0 billion. Dividends paid on the Series C Preferred Stock totaled $22 million and $22 million during the three months ended March 31, 2016 and 2015, respectively. During periods in which there is an accumulated deficit, dividends on the Series C preferred stock are paid from additional paid-in-capital.

During the three months ended March 31, 2015, we had a deposit totaling $2,001 million with HSBC Bank USA at current market rates. At March 31, 2016 and December 31, 2015, we no longer maintained this deposit with HSBC Bank USA. Interest income earned on this deposit was included in interest income from HSBC affiliates in the table above and was insignificant during the three months ended March 31, 2015. As the deposit was terminated prior to December 31, 2015, there was no interest income during three months ended March 31, 2016.

Services Provided Between HSBC Affiliates:

Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. The following summarizes these activities:

• Servicing activities for real estate secured receivables across North America are performed both by us and HSBC Bank USA. As a result, we receive servicing fees from HSBC Bank USA for services performed on their behalf and pay servicing fees to HSBC Bank USA for services performed on our behalf. The fees we receive from HSBC Bank USA are reported in Servicing and other fees from HSBC affiliates. This includes fees received for servicing real estate secured receivables (with a carrying amount of $666 million and $696 million at March 31, 2016 and December 31, 2015, respectively) that we sold to HSBC Bank USA in 2003 and 2004. Fees we pay to HSBC Bank USA are reported in Support services from HSBC affiliates.

• We also provide various services to HSBC Bank USA, including processing activities and other operational and administrative support. Fees received for these services are included in Servicing and other fees from HSBC affiliates.

• HSBC North America's technology and certain centralized support services including human resources, corporate affairs, risk management, legal, compliance, tax, finance and other shared services are centralized within HSBC Technology & Services (USA) Inc. ("HTSU") also provides certain item processing and statement processing activities for us. The fees we pay HTSU for the centralized support services and processing activities are included in Support services from HSBC affiliates. We also receive fees from HTSU for providing certain administrative services to them as well as receiving rental revenue from HTSU for certain office space. The fees and rental revenue we receive from HTSU are included in Servicing and other fees from HSBC affiliates.

• We use HSBC Global Services Limited, an HSBC affiliate located outside of the United States, to provide various support services to our operations including among other areas, customer service, systems, collection and accounting functions. The expenses related to these services are included in Support services from HSBC affiliates.

• Banking services and other miscellaneous services are provided by other subsidiaries of HSBC, including HSBC Bank USA, which are included in Support services from HSBC affiliates.

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Business Segments

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Business Segments

Business Segments

We have one reportable segment: Consumer. Our Consumer segment consists of our run-off Consumer Lending and Mortgage Services businesses. While these businesses are operating in run-off, they do not qualify to be reported as discontinued operations. There have been no changes in measurement or composition of our segment reporting as compared with the presentation in our 2015 Form 10-K.

Our segment results are presented in accordance with the Group Reporting Basis which apply IFRSs as issued by the IASB and endorsed by the EU, and, as a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis (a non-U.S. GAAP financial measure) as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources such as employees are primarily made on this basis. However, we continue to monitor liquidity, capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

We are currently in the process of re-evaluating the financial information used to manage our businesses, including the scope and content of the U.S. GAAP financial data being reported to our Management and our Board. To the extent we make changes to this reporting in 2016, we will evaluate any impact such changes may have on our segment reporting.

A summary of differences between U.S. GAAP and the Group Reporting Basis as they impact our results are presented in Note 18, "Business Segments," in our 2015 Form 10-K. There have been no significant changes since December 31, 2015 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

The following table reconciles our segment results on the Group Reporting Basis to the U.S. GAAP consolidated totals:

	Group Reporting Basis Consumer Segment Totals			Group Reporting Basis Adjustments(1)			Group  Reporting Basis Reclassifications(2)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2016:
Net interest income	$	220		$	(25	)	$	(13	)	$	182
Other operating income (Total other revenues)	(91		)	(55		)	13			(133		)
Total operating income (loss)	129			(80		)	—			49
Loan impairment charges (Provision for credit losses)	95			(58		)	—			37
Net interest income and other operating income less loan impairment charges	34			(22		)	—			12
Operating expenses	135			3			—			138
Profit (loss) before tax	$	(101	)	$	(25	)	$	—		$	(126	)
Balances at end of period:
Customer loans (Receivables)	$	12,981		$	(4,386	)	$	(22	)	$	8,573
Assets	23,063			(1,399		)	—			21,664
Three Months Ended March 31, 2015
Net interest income	$	281		$	(40	)	$	(57	)	$	184
Other operating income (Total other revenues)	(78		)	(21		)	57			(42		)
Total operating income (loss)	203			(61		)	—			142
Loan impairment charges (Provision for credit losses)	21			6			—			27
Net interest income and other operating income less loan impairment charges	182			(67		)	—			115
Operating expenses	148			—			—			148
Profit (loss) before tax	$	34		$	(67	)	$	—		$	(33	)
Balances at end of period:
Customer loans (Receivables)	$	22,492		$	(735	)	$	(28	)	$	21,729
Assets	32,428			(1,510		)	—			30,918

⁽¹⁾  Group Reporting Basis Adjustments consist of accounting differences between U.S. GAAP and the Group Reporting Basis which have been described in Note 18, "Business Segments," in the 2015 Form 10-K.

⁽²⁾  Represents differences in balance sheet and income statement presentation between U.S. GAAP and the Group Reporting Basis.

Included in loan impairment charges for the three months ended March 31, 2016 is a loan impairment adjustment of approximately $100 million representing the cumulative impact of the correction of an error under the Group Reporting Basis of accounting and reporting policies (a non-U.S. GAAP financial measure). During the first quarter of 2016, management identified a calculation error in the loan impairment allowance model for the segment collectively evaluated for impairment. The cumulative impact of this item was an understatement of the loan impairment allowance of approximately $100 million at March 31, 2016. Loan impairment allowances under U.S. GAAP were unaffected.

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Variable Interest Entities

3 Months Ended

Mar. 31, 2016

Disclosure Variable Interest Entities Summary Of Assets And Liabilities Of Consolidated Secured Financing V I Es [Abstract]

Variable Interest Entities

Variable Interest Entities

We consolidate variable interest entities (“VIEs”) in which we are deemed to be the primary beneficiary through our holding of a variable interest which is determined as a controlling financial interest. The controlling financial interest is evidenced by the power to direct the activities of the VIEs that most significantly impact their economic performance and obligations to absorb losses of, or the right to receive benefits from, the VIEs that could be potentially significant to the VIEs. We take into account all of our involvements in VIEs in identifying (explicit or implicit) variable interests that individually or in the aggregate could be significant enough to warrant our designation as the primary beneficiary and hence require us to consolidate the VIEs or otherwise require us to make appropriate disclosures. We consider our involvement to be significant where we, among other things, (i) provide liquidity facilities to support the VIE's debt issuances, (ii) enter into derivative contracts to absorb the risks and benefits from the VIEs or from the assets held by the VIEs, (iii) provide a financial guarantee that covers assets held or liabilities issued, (iv) design, organize and structure the transaction and (v) retain a financial or servicing interest in the VIEs.

We are required to evaluate whether to consolidate a VIE when we first become involved and on an ongoing basis. In almost all cases, a qualitative analysis of our involvement in the entity provides sufficient evidence to determine whether we are the primary beneficiary. In rare cases, a more detailed analysis to quantify the extent of variability to be absorbed by each variable interest holder is required to determine the primary beneficiary.

Consolidated VIEs  Historically, we have organized special purpose entities (“SPEs”) primarily to meet our funding needs through collateralized funding transactions. As part of these transactions, we transferred certain receivables to these trusts which in turn issued debt instruments collateralized by the transferred receivables. The entities used in these transactions are VIEs. As we are the servicer of the assets of these trusts and have retained the benefits and risks, we determined that we are the primary beneficiary of these trusts. Accordingly, we consolidate these entities and report the debt securities issued by them as secured financings in long-term debt. As a result, all receivables transferred in these secured financings remain and continue to remain on our balance sheet and the debt securities issued by them have remained and continue to be included in long-term debt. As all of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans, we no longer use collateralized funding transactions to meet our funding needs.

The assets and liabilities of the consolidated secured financing VIE consisted of the following as of March 31, 2016 and December 31, 2015:

	March 31, 2016						December 31, 2015
	Consolidated Assets			Consolidated Liabilities			Consolidated Assets			Consolidated Liabilities
	(in millions)
Real estate collateralized funding vehicles:
Receivables, net:
Real estate secured receivables	$	1,305		$	—		$	1,654		$	—
Accrued interest income and other	56			—			76			—
Credit loss reserves	(71		)	—			(94		)	—
Receivables, net	1,290			—			1,636			—
Other liabilities	—			(22		)	—			(22		)
Long-term debt	—			694			—			879
Total	$	1,290		$	672		$	1,636		$	857

The assets of the consolidated VIE serve as collateral for the obligations of the VIE. The holders of the debt securities issued by these vehicles have no recourse to our general assets.

Unconsolidated VIEs We do not have any unconsolidated VIEs.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting principles related to fair value measurements provide a framework for measuring fair value and focus on an exit price that would be received to sell an asset or paid to transfer a liability in the principal market (or in the absence of the principal market, the most advantageous market) accessible in an orderly transaction between willing market participants (the “Fair Value Framework”). Where required by the applicable accounting standards, assets and liabilities are measured at fair value using the “highest and best use” valuation premise. Fair value measurement guidance clarifies that financial instruments do not have alternative use and, as such, the fair value of financial instruments should be determined using an “in-exchange” valuation premise. Although the fair value measurement literature provides a valuation exception and permits an entity to measure the fair value of a group of financial assets and financial liabilities with offsetting credit risk and/or market risks based on the exit price it would receive or pay to transfer the net risk exposure of a group of assets or liabilities if certain conditions are met, we have not elected to make fair value adjustments to a group of derivative instruments with offsetting credit and market risks.

Fair Value Adjustments  The best evidence of fair value is quoted market price in an actively traded market, where available. In the event listed price or market quotes are not available, valuation techniques that incorporate relevant transaction data and market parameters reflecting the attributes of the asset or liability under consideration are applied. Where applicable, fair value adjustments are made to ensure the financial instruments are appropriately recorded at fair value. The fair value adjustments reflect the risks associated with the products, contractual terms of the transactions, and the liquidity of the markets in which the transactions occur.

Credit risk adjustment - The credit risk adjustment is an adjustment to a group of financial assets or financial liabilities to reflect the credit quality of the parties to the transaction in arriving at fair value. A credit valuation adjustment to a financial asset is required to reflect the default risk of the counterparty. Where applicable, we take into consideration the credit risk mitigating arrangements including collateral agreements and master netting arrangements in estimating the credit risk adjustments.

Valuation Control Framework  A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for long-term debt for which we have elected fair value option are measured by a third-party valuation source (pricing service) by reference to external quotations on the identical or similar instruments. Once fair values have been obtained from the third-party valuation source, an independent price validation process is performed and reviewed by the HSBC U.S. Valuation Committee. For price validation purposes, we obtain quotations from at least one other independent pricing source for each financial instrument, where possible. We consider the following factors in determining fair values:

Ÿ similarities between the asset or the liability under consideration and the asset or liability for which quotation is received;

Ÿ collaboration of pricing by reference to other independent market data such as market transactions and relevant benchmark indices;

Ÿ whether the security is traded in an active or inactive market;

Ÿ consistency among different pricing sources;

Ÿ the valuation approach and the methodologies used by the independent pricing sources in determining fair value;

Ÿ the elapsed time between the date to which the market data relates and the measurement date; and

Ÿ the manner in which the fair value information is sourced.

Greater weight is given to quotations of instruments with recent market transactions, pricing quotes from dealers who stand ready to transact, quotations provided by market-makers who originally underwrote such instruments, and market consensus pricing based on inputs from a large number of participants. Any significant discrepancies among the external quotations are reviewed by management and adjustments to fair values are recorded where appropriate.

Fair values for derivatives are determined by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Markets Independent Model Review Team of an HSBC affiliate. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indexes and therefore demonstrate a similar response to market factors.

We have various controls over our valuation process and procedures for receivables held for sale. As these fair values are generally determined using value estimates from third party and affiliate valuation specialists, the controls may include analytical reviews of quarterly value trends, corroboration of inputs by observable market data, direct discussion with potential investors and results of actual sales of such receivable, all of which are submitted to the HSBC U.S. Valuation Committee for review.

Fair Value of Financial Instruments  The fair value estimates, methods and assumptions set forth below for our financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this Form 10-Q. The following table summarizes the carrying values and estimated fair value of our financial instruments at March 31, 2016 and December 31, 2015.

	March 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	106	$	106	$	106	$	—	$	—
Securities purchased under agreements to resell	779		779		—		779		—
Real estate secured receivables(1):
First lien	6,781		6,691		—		—		6,691
Second lien	1,652		1,126		—		—		1,126
Total real estate secured receivables	8,433		7,817		—		—		7,817
Real estate secured receivables held for sale	8,185		8,710		—		1,475		7,235
Due from affiliates	201		201		—		201		—
Financial liabilities:
Due to affiliates carried at fair value	495		495		—		495		—
Due to affiliates not carried at fair value	5,279		5,513		—		5,513		—
Long-term debt carried at fair value	1,447		1,447		—		1,447		—
Long-term debt not carried at fair value	6,055		6,453		—		6,453		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	124	$	124	$	124	$	—	$	—
Securities purchased under agreements to resell	2,724		2,724		—		2,724		—
Real estate secured receivables(1):
First lien	7,237		7,174		—		—		7,174
Second lien	1,750		1,156		—		—		1,156
Total real estate secured receivables	8,987		8,330		—		—		8,330
Real estate secured receivables held for sale	8,265		8,668		—		—		8,668
Due from affiliates	128		128		—		128		—
Financial liabilities:
Due to affiliates carried at fair value	496		496		—		496		—
Due to affiliates not carried at fair value	5,429		5,693		—		5,693		—
Long-term debt carried at fair value	3,257		3,257		—		3,257		—
Long-term debt not carried at fair value	6,253		6,664		—		6,664		—

⁽¹⁾  The receivable held for investment carrying value included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. The receivable held for investment carrying value included in this table also includes accrued finance charges and is net of credit loss reserves. However, the basis adjustments on the loans, accrued finance charges and credit loss reserves are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivables held for investment account balances.

Receivable values presented in the table above were determined using the Fair Value Framework for measuring fair value, which is based on our best estimate of the amount within a range of values we believe would be received in a sale as of the balance sheet date (i.e. exit price). The secondary market demand and estimated value for our receivables may be heavily influenced by economic conditions, including house price depreciation, elevated unemployment, changes in consumer behavior, changes in discount rates and the lack of financing options available to support the purchase of receivables. For certain consumer receivables, investors incorporate numerous assumptions in predicting cash flows, such as future interest rates, higher charge-off levels, slower voluntary prepayment speeds, different default and loss curves and estimated collateral values than we, as the servicer of these receivables, believe will ultimately be the case. The investor's valuation process reflects this difference in overall cost of capital assumptions as well as the potential volatility in the underlying cash flow assumptions, the combination of which may yield a significant pricing discount from our intrinsic value. The estimated fair values at March 31, 2016 and December 31, 2015 reflect these market conditions. The estimated fair value of total real estate secured receivables held for investment as a percentage of carrying value at March 31, 2016 was essentially flat as compared with December 31, 2015 reflecting stable conditions in the housing industry during the first quarter of 2016. The fair value of receivables held for sale in total at March 31, 2016 continues to exceed the carrying value of these receivables as they are carried at the lower of amortized cost or fair value.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis  The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting(1)			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
March 31, 2016:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		144			—		—			144
Derivative netting	—		—			—		(168		)	(168		)
Total derivative financial assets	—		168			—		(168		)	—
Total assets	$	—	$	168		$	—	$	(168	)	$	—
Due to affiliates carried at fair value	$	—	$	(495	)	$	—	$	—		$	(495	)
Long-term debt carried at fair value	—		(1,447		)	—		—			(1,447		)
Derivative related liabilities:
Interest rate swaps	—		(399		)	—		—			(399		)
Currency swaps	—		(292		)	—		—			(292		)
Derivative netting	—		—			—		691			691
Total derivative related liabilities	—		(691		)	—		691			—
Total liabilities	$	—	$	(2,633	)	$	—	$	691		$	(1,942	)
December 31, 2015:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		111			—		—			111
Derivative netting	—		—			—		(135		)	(135		)
Total derivative financial assets	—		135			—		(135		)	—
Total assets	$	—	$	135		$	—	$	(135	)	$	—
Due to affiliates carried at fair value	$	—	$	(496	)	$	—	$	—		$	(496	)
Long-term debt carried at fair value	—		(3,257		)	—		—			(3,257		)
Derivative related liabilities:
Interest rate swaps	—		(304		)	—		—			(304		)
Currency swaps	—		(379		)	—		—			(379		)
Derivative netting	—		—			—		626			626
Total derivative related liabilities	—		(683		)	—		626			(57		)
Total liabilities	$	—	$	(4,436	)	$	—	$	626		$	(3,810	)

⁽¹⁾  Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a recurring basis during the three months ended March 31, 2016 or 2015.

Information on Level 3 Assets and Liabilities There were no assets or liabilities recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2016 or 2015.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2016 and 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of March 31, 2016 or 2015 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2015 Form 10-K for discussion of our policy in measuring fair value.

	Non-Recurring Fair Value Measurements  as of March 31, 2016								Total Gains (Losses) for the Three Months Ended March 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	1,299	$	6,886	$	8,185	$	(68	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		274		—		274		(26		)
Real estate owned(2)	—		80		—		80		(5		)
Total assets at fair value on a non-recurring basis	$	—	$	1,653	$	6,886	$	8,539	$	(99	)

	Non-Recurring Fair Value Measurements  as of March 31, 2015								Total Gains (Losses) for the Three Months Ended March 31, 2015
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	333	$	764	$	1,097	$	(17	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		529		—		529		(72		)
Real estate owned(2)	—		186		—		186		(4		)
Total assets at fair value on a non-recurring basis	$	—	$	1,048	$	764	$	1,812	$	(93	)

⁽¹⁾  Total gains (losses) for the three months ended March 31, 2016 and 2015 include amounts recorded on receivables that were subsequently transferred to held for sale.

⁽²⁾  Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a non-recurring basis during the three months ended March 31, 2016 or 2015.

Significant Transfers Between Level 2 and Level 3 During the three months ended March 31, 2016 and 2015 we transferred real estate secured receivables held for sale totaling $1,299 million and $333 million, respectively, from Level 3 to Level 2 prior to the sale of these receivables.

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of March 31, 2016 and December 31, 2015:

	Fair Value						Range of Inputs
Financial Instrument Type	Mar. 31, 2016		Dec. 31,  2015		Valuation Technique	Significant Unobservable Inputs	March 31, 2016				December 31, 2015
	(in millions)
Receivables held for sale carried at the lower of amortized cost or fair value:
Real estate secured	$	6,886	$	8,265	Third party appraisal valuation based on	Collateral loss severity rates(1)	0	%	-	100%	0	%	-	100%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10%
					market discount rate	Market discount rate	4	%	-	14%	4	%	-	14%

⁽¹⁾  As discussed below, as a result of our decision in 2015 to expand our receivable sales program, we added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio. At March 31, 2016 and December 31, 2015, the weighted average collateral loss severity rate was 43 percent and 42 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values.

Valuation Techniques  The following summarizes the valuation methodologies used for assets and liabilities recorded at fair value on both a recurring and non-recurring basis and for estimating fair value for financial instruments not recorded at fair value but for which fair value disclosures are required.

Cash:  Carrying amount approximates fair value due to the liquid nature of cash.

Securities purchased under agreements to resell:  The fair value of securities purchased under agreements to resell approximates carrying amount due to the short-term maturity of the agreements.

Receivables and receivables held for sale:  The estimated fair value of our receivables and receivables held for sale is determined by developing an approximate range of value from a mix of various sources appropriate for the respective pools of assets aggregated by similar risk characteristics. These sources include recently observed over-the-counter transactions where available and fair value estimates obtained from an HSBC affiliate and, for receivables held for sale, a third party valuation specialist for distinct pools of receivables. These fair value estimates are based on discounted cash flow models using assumptions we believe are consistent with those that would be used by market participants in valuing such receivables and trading inputs from other market participants which includes observed primary and secondary trades. As a result of our decision during the second quarter of 2015 to expand our receivable sales program, we have added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio.

Valuation inputs include estimates of future interest rates, prepayment speeds, default and loss curves, estimated collateral values (including expenses to be incurred to maintain the collateral) and market discount rates reflecting management's estimate of the rate of return that would be required by investors in the current market given the specific characteristics and inherent credit risk of the receivables and receivables held for sale. Some of these inputs are influenced by collateral value changes and unemployment rates. We perform analytical reviews of fair value changes on a quarterly basis and periodically validate our valuation methodologies and assumptions based on the results of actual sales of such receivables. We also may hold discussions on value directly with potential investors. Since some receivables pools may have features which are unique, the fair value measurement processes use significant unobservable inputs which are specific to the performance characteristics of the various receivable portfolios.

Real estate owned:  Fair value is determined based on third party valuations obtained at the time we take title to the property and, if less than the carrying amount of the receivable, the carrying amount of the receivable is adjusted to the fair value less estimated cost to sell. The carrying amount of the property is further reduced, if necessary, at least every 45 days to reflect observable local market data, including local area sales data.

Due from affiliates:  Carrying amount approximates fair value because the interest rates on these receivables adjust with changing market interest rates.

Long-term debt and Due to affiliates:  Fair value is primarily determined by a third party valuation source. The pricing services source fair value from quoted market prices and, if not available, expected cash flows are discounted using the appropriate interest rate for the applicable duration of the instrument adjusted for our own credit risk (spread). The credit spreads applied to these instruments are derived from the spreads recognized in the secondary market for similar debt as of the measurement date. Where available, relevant trade data is also considered as part of our validation process.

Derivative financial assets and liabilities:  Derivative values are defined as the amount we would receive or pay to extinguish the contract using a market participant as of the reporting date. The values are determined by management using a pricing system maintained by HSBC Bank USA. In determining these values, HSBC Bank USA uses quoted market prices, when available. For non-exchange traded contracts, such as interest rate swaps, fair value is determined using discounted cash flow modeling techniques. Valuation models calculate the present value of expected future cash flows based on models that utilize independently-sourced market parameters, including interest rate yield curves, option volatilities, and currency rates. Valuations may be adjusted in order to ensure that those values represent appropriate estimates of fair value. These adjustments are generally required to reflect factors such as market liquidity and counterparty credit risk that can affect prices in arms-length transactions with unrelated third parties. Finally, other transaction specific factors such as the variety of valuation models available, the range of unobservable model inputs and other model assumptions can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded for a particular position.

Counterparty credit risk is considered in determining the fair value of a financial asset. The Fair Value Framework specifies that the fair value of a liability should reflect the entity's non-performance risk and accordingly, the effect of our own credit risk (spread) has been factored into the determination of the fair value of our financial liabilities, including derivative instruments. In estimating the credit risk adjustment to the derivative assets and liabilities, we take into account the impact of netting and/or collateral arrangements that are designed to mitigate counterparty credit risk.

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Litigation and Regulatory Matters

3 Months Ended

Mar. 31, 2016

Loss Contingency [Abstract]

Litigation and Regulatory Matters

Litigation and Regulatory Matters

The following supplements, and should be read together with, the disclosure in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K. Only matters with significant updates and new matters since our disclosure in our 2015 Form 10-K are reported herein.

In addition to the matters described below and in our 2015 Form 10-K, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities.

In view of the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of such matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation, governmental and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. Once established, reserves are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters.

For the legal matters disclosed below, including litigation, governmental and regulatory matters, as well as for the legal matters disclosed in Note 22, "Litigation and Regulatory Matters," in our 2015 Form 10-K as to which a loss in excess of accrued liability is reasonably possible in future periods and for which there is sufficient currently available information on the basis of which we believe we can make a reliable estimate, we believe a reasonable estimate could be as much as $3.1 billion for HSBC Finance Corporation. The legal matters underlying this estimate of possible loss will change from time to time and actual results may differ significantly from this current estimate.

Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in any particular quarterly or annual period.

Litigation - Continuing Operations

Securities Litigation Jaffe v. Household International, Inc., et al. (N.D. Ill. No. 02 C5893) The pretrial schedule including the trial date of June 6, 2016, remains in place and has not been modified by the Court.

Mortgage Securitization Activity

We have received notice of several claims from investors and from trustees of residential mortgage-backed securities (“RMBS”) related to our activities as a sponsor and the activities of our subsidiaries as originators in connection with RMBS transactions closed between 2005 and 2007 as well as the following lawsuits: (i) Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp.; and (ii) Deutsche Bank, as Trustee of HASCO 2007-HE2 v. Decision One, HSBC Finance Corp. and HSBC Bank USA. The trial in Deutsche Bank, as Trustee of MSAC 2007-HE6 v. Decision One and HSBC Finance Corp. has been rescheduled to September 2016.

We expect these types of claims may continue. As a result, we may be subject to additional claims, litigation and governmental and regulatory scrutiny related to our participation as a sponsor or originator in the U.S. mortgage securitization market. The range of reasonably possible losses in excess of our accrued liability for all of our mortgage securitization activities has been included in the reasonably possible losses discussed above.

Litigation - Discontinued Operations

Salveson v. JPMorgan Chase et al. (N.D.Cal. No. 13-CV-5816) On February 24. 2016, the court denied plaintiffs' motion for reconsideration of the motion to dismiss and granted defendants' motion for reconsideration, dismissing the state law claim on substantive grounds. Plaintiffs have appealed that decision.

Telephone Consumer Protection Act Litigation In April 2016, a putative class action entitled Monteleone v. HSBC Finance Corporation, et al. was filed in the United States District Court for the Northern District of Illinois against HSBC Finance Corporation, HSBC Mortgage Corporation, HSBC Mortgage Services Inc., HSBC Bank USA and HTSU. The action alleges that the HSBC defendants contacted plaintiff, or the members of the class he seeks to represent, on their cellular telephones using an automatic telephone dialing system or an artificial or prerecorded voice, without prior express consent, in violation of the Telephone Consumer Protection Act, 47 U.S.C. §227 et seq. Plaintiff seeks statutory damages of at least $500 for each violation. This action is at a very early stage.

Governmental and Regulatory Matters - Discontinued Operations

Credit Monitoring Product On April 13, 2016, the Office of the Comptroller of the Currency ("OCC") issued a consent order and an order for a civil money penalty (the "Orders") requiring restitution be made to certain customers who purchased a certain credit monitoring product and assessing a $35 million civil money penalty. Similar to previous actions taken against other credit card issuers, the OCC's findings relate to past billing practices with respect to these types of credit card enhancement services products. While these Orders were issued against our affiliate, HSBC Bank USA, the credit monitoring product was marketed and administered by our discontinued Cards and Retail Services business and primarily purchased by the credit card customers of our former credit card bank, HSBC Bank Nevada, N.A. Consequently, the entire civil money penalty and substantially all restitution will be paid by HSBC Finance Corporation. A small portion of the ordered restitution will be paid by HSBC Bank USA with respect to those HSBC Bank USA customers who purchased the product. Payment of the civil money penalty and customer refunds is not expected to result in any additional material charges to income beyond what has been recorded in prior years. Although we have settled this matter with the OCC, other regulators may continue their on-going reviews regarding enhancement services products and may order us to pay additional restitution to customers and/or impose civil money penalties or other relief arising from our prior offering and administration of such products. We ceased the marketing, distribution and servicing of these products by May 2012.

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New Accounting Pronouncements

3 Months Ended

Mar. 31, 2016

Text Block [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

The following new accounting pronouncement was adopted effective January 1, 2016:

Ÿ Amendments to the Consolidation Analysis In February 2015, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") which rescinds the deferral of VIE consolidation guidance for reporting entities with interests in certain investment funds and provides a new scope exception to registered money market funds and similar unregistered money market funds. The ASU makes several other amendments including a) the elimination of certain criteria previously used for determining whether fees paid to a decision maker represent a variable interest; b) revising the consolidation model for limited partnerships and similar entities which could be variable interest entities or voting interest entities; c) excluding certain fees paid to a decision maker from the risk and benefit test in the primary beneficiary determination if certain conditions are met; and d) reduces the application of the related party guidance for VIEs. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have any impact on our financial position or results of operations.

The following are accounting pronouncements which will be adopted in future periods:

• Financial Instruments - Classification and Measurement In January 2016, the FASB issued an ASU which changes aspects of its guidance on classification and measurement of financial instruments. The ASU requires equity investments (except those accounted for under the equity method or those that result in consolidation) to be measured at fair value with changes in fair value recognized in net income. Under a practicability exception, entities may measure equity investments that do not have readily determinable fair values at cost adjusted for changes in observable prices minus impairment. Under this exception, a qualitative assessment for impairment will be required and, if impairment exists, the carrying amount of the investments must be adjusted to their fair value and an impairment loss recognized in net income. For financial liabilities measured under the fair value option, the ASU requires recognizing the change in fair value attributable to our own credit in other comprehensive income. Additionally, the ASU requires new disclosure related to equity investments and modifies certain disclosure requirements related to the fair value of financial instruments. The ASU is effective for all annual and interim periods beginning January 1, 2018 and the guidance should be applied by recording a cumulative effect adjustment to the balance sheet or, as it relates to equity investments without readily determinable fair values, prospectively. Early adoption of the amendment related to financial liabilities measured under the fair value option is permitted. We are currently evaluating the impact of adopting this ASU.

• Leases In February 2016, the FASB issued an ASU which requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. The ASU does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, the ASU makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. The ASU is effective for all annual and interim periods beginning January 1, 2019 and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. We are currently evaluating the impact of adopting this ASU.

• Compensation - Stock Compensation In March 2016, the FASB issued an ASU that requires all excess tax benefits and tax deficiencies for share-based payment awards to be recorded as income tax benefit or expense in the income statement and for excess tax benefits to be classified as an operating activity in the statement of cash flows. Under the ASU, entities elect whether to account for forfeitures of awards by either recognizing forfeitures as they occur or by estimating the number of awards expected to be forfeited. Additionally, the ASU allows entities to withhold up to the maximum individual statutory tax rate to cover income taxes on awards and classify the entire awards as equity. Cash paid to satisfy the statutory income tax withholding obligation must be classified as a financing activity in the statement of cash flows. The ASU is effective for all annual and interim periods beginning January 1, 2017, with early adoption permitted. The amendments in the ASU have various transition requirements with certain amendments required to be applied retrospectively. We are currently evaluating the impact of adopting this ASU.

There have been no additional accounting pronouncements issued during the first three months of 2016 that are expected to have a significant impact on our financial position or results of operations.

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Organization and Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Impact of Reclassification of Preferred Dividends

The following table reflects the impact of this reclassification for the prior year quarter below:

	March 31, 2015
Additional Paid-in-Capital:
As previously reported	$	23,986
After reclassification	23,348
Accumulated Deficit:
As previously reported	$	(18,411	)
After reclassification	(17,773		)
Cumulative dividends reclassified	$	638

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2016

Commercial Business [Member]

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Operating Results Of Discontinued Operations

The following table summarizes the operating results of our discontinued Commercial business for the periods presented:

Three Months Ended March 31,	2016		2015
	(in millions)
Net interest income and other revenues	$	4	$	7
Income from discontinued operations before income tax	2		4

Card and Retail Services [Member]

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Operating Results Of Discontinued Operations

The following table summarizes the operating results of our discontinued Card and Retail Services business for the periods presented:

Three Months Ended March 31,	2016			2015
	(in millions)
Net interest income and other revenues	$	—		$	—
Loss from discontinued operations before income tax(1)	(9		)	(4		)

⁽¹⁾  The three months ended March 31, 2016 includes incremental expenses of $7 million for legal matters. For the three months ended March 31, 2015, the amount includes expenses related to activities to complete the separation of the credit card operational infrastructure between us and Capital One.

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Receivables, net (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Receivables

Receivables consisted of the following:

	March 31, 2016			December 31, 2015
	(in millions)
Real estate secured:
First lien	$	6,807		$	7,302
Second lien	1,766			1,854
Total real estate secured receivables	8,573			9,156
Accrued interest income and other	132			142
Credit loss reserve for receivables	(272		)	(311		)
Total receivables, net	$	8,433		$	8,987

Aging Analysis of Past Due Loans

The following tables summarize the past due status of our receivables (excluding receivables held for sale) at March 31, 2016 and December 31, 2015. The aging of past due amounts is determined based on the contractual delinquency status of payments made under the terms of the receivable. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status is affected by customer account management policies and practices such as re-aging.

	Past Due				Total Past Due				Total Receivables(2)
March 31, 2016	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	141	$	168	$	309	$	6,498	$	6,807
Second lien	78		48		126		1,640		1,766
Total real estate secured receivables	$	219	$	216	$	435	$	8,138	$	8,573

	Past Due				Total Past Due				Total Receivables(2)
December 31, 2015	30 – 89 days		90+ days				Current(1)
	(in millions)
Real estate secured:
First lien	$	179	$	219	$	398	$	6,904	$	7,302
Second lien	98		62		160		1,694		1,854
Total real estate secured receivables	$	277	$	281	$	558	$	8,598	$	9,156

⁽¹⁾  Receivables less than 30 days past due are presented as current.

⁽²⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and include certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

Nonaccrual Receivables

Nonaccrual receivables and nonaccrual receivables held for sale consisted of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Nonaccrual receivable portfolios(1):
Real estate secured(2)	$	222	$	283
Receivables held for sale	444		386
Total nonaccrual receivables(3)	$	666	$	669

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonaccrual real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  Nonaccrual receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

Additional Information on Nonaccrual Receivables

The following table provides additional information on our total nonaccrual receivables:

Three Months Ended March 31,	2016		2015
	(in millions)
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$	18	$	39
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual receivables during the period	2		5

Receivables Classified as Trouble Debt Restructuring Loans

The following table presents information about receivables held for investment and receivables held for sale which as a result of any account management action taken during the three months ended March 31, 2016 and 2015 became classified as TDR Loans as well as a summary of the type of account management action taken.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured receivables classified as TDR Loans during the period:
First lien held for investment	$	18	$	125
Second lien held for investment	23		16
Real estate secured receivables held for sale	71		10
Total	$	112	$	151
Types of account management actions taken during the period:
Modifications, primarily interest rate modifications	$	56	$	60
Re-age of past due account	56		91
Total	$	112	$	151

TDR Loans

	March 31, 2016				December 31, 2015
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(in millions)
TDR Loans:(1)
Real estate secured:
First lien(2)	$	722	$	834	$	870	$	1,003
Second lien(2)	641		712		652		732
Real estate secured receivables held for sale(3)	6,105		7,381		6,044		7,317
Total real estate secured TDR Loans	$	7,468	$	8,927	$	7,566	$	9,052
Credit loss reserves for TDR Loans:(4)
Real estate secured:
First lien	$	72			$	95
Second lien	133				135
Total credit loss reserves for real estate secured TDR Loans(3)	$	205			$	230

⁽¹⁾  At March 31, 2016 and December 31, 2015, the unpaid principal balance reflected above includes $757 million and $740 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action.

⁽²⁾  At March 31, 2016 and December 31, 2015, the carrying value of TDR Loans held for investment totaling $211 million and $250 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.

⁽⁴⁾  Included in credit loss reserves.

Additional Information Relating To Trouble Debt Restructuring Loans

The following table provides additional information about the average balance and interest income recognized on TDR Loans and TDR Loans held for sale.

Three Months Ended March 31,	2016		2015
	(in millions)
Average balance of TDR Loans:
Real estate secured:
First lien	$	6,775	$	10,207
Second lien	750		900
Total average balance of TDR Loans	$	7,525	$	11,107
Interest income recognized on TDR Loans:
Real estate secured:
First lien	$	137	$	180
Second lien	20		22
Total interest income recognized on TDR Loans	$	157	$	202

Receivables Classified as Trouble Debt Restructuring Loan

The following table discloses receivables and receivables held for sale which were classified as TDR Loans during the previous 12 months which subsequently became sixty days or greater contractually delinquent during the three months ended March 31, 2016 and 2015.

Three Months Ended March 31,	2016		2015
	(in millions)
Real estate secured:
First lien	$	4	$	55
Second lien	4		9
Real estate secured receivables held for sale	20		2
Total	$	28	$	66

Summary of Contractual Delinquency and Delinquency Ratio

The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total receivables and receivables held for sale (“delinquency ratio”) for our receivable portfolio.

	March 31, 2016				December 31, 2015
	Dollars of Delinquency		Delinquency Ratio		Dollars of Delinquency		Delinquency Ratio
	(dollars are in millions)
Real estate secured receivables(1):
First lien	$	209	3.07	%	$	272	3.73	%
Second lien	72		4.08		94		5.07
Real estate secured receivables held for sale	596		7.28		569		6.88
Total real estate secured receivables(2)	$	877	5.23	%	$	935	5.37	%

⁽¹⁾  The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, total real estate secured receivables include $382 million and $363 million, respectively, that are in the process of foreclosure.

Nonperforming Consumer Receivable Portfolio

The following table summarizes the status of receivables and receivables held for sale.

	Accruing Loans		Nonaccrual Loans(4)		Total
	(in millions)
At March 31, 2016(1)
Real estate secured(2)(3)	$	8,351	$	222	$	8,573
Real estate secured receivables held for sale	7,741		444		8,185
Total	$	16,092	$	666	$	16,758
At December 31, 2015(1)
Real estate secured(2)(3)	$	8,873	$	283	$	9,156
Real estate secured receivables held for sale	7,879		386		8,265
Total	$	16,752	$	669	$	17,421

⁽¹⁾  The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

⁽²⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

⁽³⁾  At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $139 million and $178 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell.

⁽⁴⁾  Nonperforming receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

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Credit Loss Reserves (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Summarizes Changes in Credit Loss Reserves by Product/Class and Related Receivable Balance by Product

The following table summarizes the changes in credit loss reserves for real estate secured receivables by product and the related receivable balance by product during the three months ended March 31, 2016 and 2015:

	First Lien			Second Lien			Total
	(in millions)
Three Months Ended March 31, 2016:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	137		$	174		$	311
Provision for credit losses(1)	23			14			37
Net charge-offs:
Charge-offs(1)(2)	(53		)	(26		)	(79		)
Recoveries	2			1			3
Total net charge-offs	(51		)	(25		)	(76		)
Credit loss reserve balance at end of period	$	109		$	163		$	272
Reserve components:
Collectively evaluated for impairment	$	36		$	30		$	66
Individually evaluated for impairment(3)	63			133			196
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	10			—			10
Total credit loss reserves	$	109		$	163		$	272
Receivables:
Collectively evaluated for impairment	$	6,028		$	1,119		$	7,147
Individually evaluated for impairment(3)	532			620			1,152
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	247			27			274
Total receivables	$	6,807		$	1,766		$	8,573
Three Months Ended March 31, 2015:
Credit loss reserve rollforward:
Credit loss reserve balance at beginning of period	$	1,898		$	319		$	2,217
Provision for credit losses(1)	37			(10		)	27
Net charge-offs:
Charge-offs(2)	(108		)	(39		)	(147		)
Recoveries	12			1			13
Total net charge-offs	(96		)	(38		)	(134		)
Credit loss reserve balance at end of period	$	1,839		$	271		$	2,110
Reserve components:
Collectively evaluated for impairment	$	155		$	53		$	208
Individually evaluated for impairment(3)	1,657			218			1,875
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	27			—			27
Total credit loss reserves	$	1,839		$	271		$	2,110
Receivables:
Collectively evaluated for impairment	$	9,872		$	1,526		$	11,398
Individually evaluated for impairment(3)	8,936			866			9,802
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	500			29			529
Total receivables	$	19,308		$	2,421		$	21,729

⁽¹⁾  The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

⁽²⁾  For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three months ended March 31, 2016 and 2015 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $20 million during the three months ended March 31, 2016 compared with $15 million during the three months ended March 31, 2015.

⁽³⁾  These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $211 million and $399 million at March 31, 2016 and 2015, respectively. The reserve component above excludes credit loss reserves totaling $9 million and $22 million at March 31, 2016 and 2015, respectively, for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell. These receivables and credit loss reserves are reflected within receivables and credit loss reserves carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

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Receivables Held for Sale (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Summary of Real Estate Secured Receivables Held for Sale

Real estate secured receivables held for sale which are carried at the lower of amortized cost or fair value are comprised of the following:

	March 31, 2016		December 31, 2015
	(in millions)
Real estate secured receivables held for sale:
First lien	$	8,026	$	8,110
Second lien	159		155
Total real estate secured receivables held for sale	$	8,185	$	8,265

Summary of Activity in Receivables Held for Sale

The following table summarizes the activity in receivables held for sale during the three months ended March 31, 2016 and 2015:

	Receivables Held for Sale
	(in millions)
Three Months Ended March 31, 2016:
Real estate secured receivables held for sale at beginning of period	$	8,265
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	230
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(51		)
Carrying value of real estate secured receivables held for sale transferred to REO	(14		)
Carrying value of real estate secured receivables held for sale settled through short sale	(8		)
Change in real estate secured receivable balance, including collections	(237		)
Real estate secured receivables held for sale at end of period(3)	$	8,185
Three Months Ended March 31, 2015:
Real estate secured receivables held for sale at beginning of period	$	860
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2)	296
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale	(17		)
Carrying value of real estate secured receivables held for sale transferred to REO	(24		)
Carrying value of real estate secured receivables held for sale settled through short sale	(11		)
Change in real estate secured receivable balance, including collections	(7		)
Real estate secured receivables held for sale at end of period(3)	$	1,097

⁽¹⁾  The initial lower of amortized cost or fair value adjustment on receivables transferred into held for sale during the three months ended March 31, 2016 totaled $17 million. During the three months ended March 31, 2015, there was no initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale.

⁽²⁾  Amount includes any accrued interest associated with the receivable.

⁽³⁾  Real estate secured receivables held for sale in the table above are presented net of the valuation allowance.

Allowance for Credit Losses on Financing Receivables

The following table provides a rollforward of our valuation allowance for the three months ended March 31, 2016 and 2015. See Note 13, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.

Three Months Ended March 31,	2016		2015
	(in millions)
Balance at beginning of period	$	13	$	—
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period	4		—
Increase in valuation allowance resulting from changes in fair value	68		—
Change in valuation allowance for collections, charged-off, transferred to REO or short sale	1		—
Balance at end of period	$	86	$	—

Summary of Components of Cumulative Lower of Amortized Cost or Fair Value Adjustment

The following table summarizes the components of the lower of amortized cost or fair value adjustment during the three months ended March 31, 2016 and 2015:

	Lower of Amortized Cost or Fair Value Adjustments Associated With
	Fair Value		Settlements (Including Short Sales)			Total
	(in millions)
(Income)/Expense:
Three Months Ended March 31, 2016:
Lower of amortized cost or fair value adjustments recorded as a component of:
Provision for credit losses(1)	$	13	$	—		$	13
Other revenues:
Initial lower of amortized cost or fair value adjustment(2)	4		—			4
Subsequent to initial transfer to held for sale	68		(17		)	51
Lower of amortized cost or fair value adjustment recorded through other revenues	72		(17		)	55
Lower of amortized cost or fair value adjustment	$	85	$	(17	)	$	68
Three Months Ended March 31, 2015:
Lower of amortized cost or fair value adjustments recorded as a component of other revenues:
Subsequent to initial transfer to held for sale	$	—	$	17		$	17
Lower of amortized cost or fair value adjustment recorded through other revenues(3)	$	—	$	17		$	17

⁽¹⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which was recorded as provision for credit losses in the consolidated statement of income (loss) as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.

⁽²⁾  Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which was recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates.

⁽³⁾  During the three months ended March 31, 2015, no lower of amortized cost or fair value adjustment was recorded as a provision for credit losses.

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Fair Value Option (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis

The following table summarizes fixed rate debt issuances accounted for under FVO:

	March 31, 2016		December 31, 2015
	(in millions)
Fixed rate debt accounted for under FVO reported in:
Long-term debt	$	1,447	$	3,257
Due to affiliates	495		496
Total fixed rate debt accounted for under FVO	$	1,942	$	3,753
Unpaid principal balance of fixed rate debt accounted for under FVO(1)	$	1,804	$	3,598
Fixed rate long-term debt not accounted for under FVO	$	4,061	$	4,074

⁽¹⁾  Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which decreased the debt balance by $217 million at March 31, 2016 and decreased the debt balance by $283 million at December 31, 2015.

Components of Gain (Loss) on Debt Designated at Fair Value and Related Derivatives

The following table summarizes the components of the gain on debt designated at fair value and related derivatives for the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,	2016			2015
	(in millions)
Mark-to-market on debt designated at fair value(1):
Interest rate component	$	6		$	49
Credit risk component	11			26
Total mark-to-market on debt designated at fair value	17			75
Mark-to-market on the related derivatives(1)(2)	(9		)	(77		)
Net realized gains on the related derivatives(1)	16			61
Gain on debt designated at fair value and related derivatives	$	24		$	59

⁽¹⁾  The derivatives associated with debt designated at fair value are economic hedges but do not qualify for hedge accounting. See Note 7, "Derivative Financial Instruments," for additional discussion of these non-qualifying hedges.

⁽²⁾  Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related expense associated with debt designated at fair value was a loss of $66 million and a gain of $291 million for the three months ended March 31, 2016 and 2015, respectively. Offsetting gains (losses) recorded in derivative related expense associated with the related derivatives was a gain of $66 million and a loss of $291 million for the three months ended March 31, 2016 and 2015, respectively.

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.

	March 31, 2016						December 31, 2015
	Derivative Financial Assets			Derivative Financial Liabilities			Derivative Financial Assets			Derivative Financial Liabilities
	(in millions)
Derivatives(1)
Derivatives accounted for as cash flow hedges associated with debt:
Interest rate swaps	$	—		$	(7	)	$	—		$	(18	)
Currency swaps	119			(140		)	97			(178		)
Cash flow hedges	119			(147		)	97			(196		)
Non-qualifying hedge activities:
Derivatives not designated as hedging instruments:
Interest rate swaps	24			(392		)	20			(286		)
Derivatives not designated as hedging instruments	24			(392		)	20			(286		)
Derivatives associated with debt carried at fair value:
Interest rate swaps	—			—			4			—
Currency swaps	25			(152		)	14			(201		)
Derivatives associated with debt carried at fair value	25			(152		)	18			(201		)
Total derivatives	168			(691		)	135			(683		)
Less: Gross amounts offset in the balance sheet(2)	(168		)	691			(135		)	626
Net amounts of derivative financial assets and liabilities presented in the balance sheet(3)	$	—		$	—		$	—		$	(57	)

⁽¹⁾  All of our derivatives are bilateral over-the-counter derivatives.

⁽²⁾  Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes cash collateral paid of $537 million at March 31, 2016 and $491 million at December 31, 2015. At March 31, 2016 and December 31, 2015, we did not have any financial instrument collateral received/posted.

⁽³⁾  At March 31, 2016 and December 31, 2015, we had not received any cash not subject to an enforceable master netting agreement.

Gain or Loss Recorded on Our Cash Flow Hedging Relationships

The following table provides the gain or loss recorded on our cash flow hedging relationships.

	Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassed From AOCI into Income (Effective Portion)						Location of Gain (Loss) Recognized in Income on the Derivative(Ineffective Portion)	Gain (Loss) Recognized In Income on Derivative (Ineffective Portion)
	2016		2015			2016			2015				2016		2015
	(in millions)
Three Months Ended March 31,
Interest rate swaps	$	11	$	9	Interest expense	$	—		$	—		Derivative related expense	$	—	$	—
Currency swaps	—		5		Interest expense	(3		)	(3		)	Derivative related expense	4		(2		)
Total	$	11	$	14		$	(3	)	$	(3	)		$	4	$	(2	)

Gain or Loss Recorded on Our Non Qualifying Hedges

The following table provides detail of the realized and unrealized gain or loss recorded on our non-qualifying hedges:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016			2015
		(in millions)
Interest rate contracts	Derivative related expense	$	(119	)	$	(95	)
Total		$	(119	)	$	(95	)

Gain or Loss Recorded on Derivatives Related to Fair Value Option Debt Primarily Due to Changes in Interest Rates

The following table provides the gain or loss recorded on the derivatives related to fair value option debt. See Note 6, “Fair Value Option,” for further discussion.

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Derivative Related Expense
		Three Months Ended March 31,
		2016		2015
		(in millions)
Interest rate contracts	Gain (loss) on debt designated at fair value and related derivatives	$	—	$	2
Currency contracts	Gain (loss) on debt designated at fair value and related derivatives	7		(18		)
Total		$	7	$	(16	)

Notional Values of Derivative Contracts

The following table provides the notional amounts of derivative contracts.

	March 31, 2016		December 31, 2015
	(in millions)
Derivatives designated as hedging instruments:
Interest rate swaps	$	1,300	$	1,300
Currency swaps	1,588		1,588
	2,888		2,888
Non-qualifying hedges:
Derivatives not designated as hedging instruments:
Interest rate swaps	2,624		2,624
	2,624		2,624
Derivatives associated with debt carried at fair value:
Interest rate swaps	—		1,859
Currency swaps	1,562		1,562
	1,562		3,421
Total	$	7,074	$	8,933

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss

The following table presents changes in accumulated other comprehensive loss balances.

Three Months Ended March 31,	2016			2015
	(in millions)
Unrealized gains (losses) on cash flow hedging instruments:
Balance at beginning of period	$	(15	)	$	(52	)
Other comprehensive income for period:
Net gains arising during period, net of tax of $4 million and $5 million, respectively	7			9
Reclassification adjustment for losses realized in net income, net of tax of $2 million and $1 million, respectively(1)	1			2
Total other comprehensive income for period	8			11
Balance at end of period	(7		)	(41		)
Pension and postretirement benefit plan liability:
Balance at beginning of period	29			(13		)
Other comprehensive income for period:
Reclassification adjustment for (gains) losses realized in net income, net of tax of $(1) million and $- million, respectively	(1		)	—
Total other comprehensive loss for period	(1		)	—
Balance at end of period	28			(13		)
Total accumulated other comprehensive gain (loss) at end of period	$	21		$	(54	)

⁽¹⁾  The amounts reclassified during the three months ended March 31, 2016 and 2015 relate to interest rate and currency swaps and are included as a component of interest expense in our consolidated statement of income.

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Pension and Other Postretirement Benefits (Tables)

3 Months Ended

Mar. 31, 2016

Pension Plan, Defined Benefit [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Components of Pension Expense for Defined Benefit Pension Plan

Three Months Ended March 31,	2016			2015
	(in millions)
Service cost – benefits earned during the period	$	1		$	1
Interest cost on projected benefit obligation	12			12
Expected return on assets	(14		)	(16		)
Amortization of net actuarial loss	7			7
Pension expense	$	6		$	4

Other Postretirement Benefit Plan, Defined Benefit [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Components of Pension Expense for Defined Benefit Pension Plan

Three Months Ended March 31,	2016			2015
	(in millions)
Interest cost	$	1		$	1
Amortization of reduction in liability resulting from plan amendment	(2		)	—
Net periodic postretirement benefit cost	$	(1	)	$	1

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Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

Due to affiliates consists of the following:

	March 31, 2016		December 31, 2015
	(in millions)
HSBC Private Banking Holdings (Suisse) S.A. and subsidiaries	$	350	$	500
HSBC USA Inc.	3,012		3,012
HSBC Holdings plc (includes $495 million and $496 million at March 31, 2016 and December 31, 2015 carried at fair value, respectively)	812		813
HSBC North America Holdings Inc.	1,600		1,600
Due to affiliates	$	5,774	$	5,925

The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:

	March 31, 2016		December 31, 2015
	(in millions)
Assets:
Cash	$	106	$	124
Securities purchased under agreements to resell(1)	779		2,724
Other assets	201		128
Total assets	$	1,086	$	2,976
Liabilities:
Due to affiliates(2)	$	5,774	$	5,925
Other liabilities	33		62
Total liabilities	$	5,807	$	5,987

⁽¹⁾  Securities under an agreement to resell are purchased from HSBC Securities (USA) Inc. and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below.

⁽²⁾  Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock.

Three Months Ended March 31,	2016			2015
	(in millions)
Income/(Expense):
Interest income from HSBC affiliates	$	1		$	2
Interest expense paid to HSBC affiliates(1)	(75		)	(77		)
Net interest income (expense)	$	(74	)	$	(75	)
Servicing and other fees from HSBC affiliates	$	4		$	6
Support services from HSBC affiliates	(42		)	(54		)
Stock based compensation income (expense) with HSBC(2)	1			(1		)

⁽¹⁾  Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt.

⁽²⁾  Certain employees participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salary and employee benefits in our consolidated statement of income (loss). Certain employees also participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 9, “Pension and Other Postretirement Benefits.”

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Business Segments (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Reconciliation of Group Reporting Basis Segment Results

The following table reconciles our segment results on the Group Reporting Basis to the U.S. GAAP consolidated totals:

	Group Reporting Basis Consumer Segment Totals			Group Reporting Basis Adjustments(1)			Group  Reporting Basis Reclassifications(2)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2016:
Net interest income	$	220		$	(25	)	$	(13	)	$	182
Other operating income (Total other revenues)	(91		)	(55		)	13			(133		)
Total operating income (loss)	129			(80		)	—			49
Loan impairment charges (Provision for credit losses)	95			(58		)	—			37
Net interest income and other operating income less loan impairment charges	34			(22		)	—			12
Operating expenses	135			3			—			138
Profit (loss) before tax	$	(101	)	$	(25	)	$	—		$	(126	)
Balances at end of period:
Customer loans (Receivables)	$	12,981		$	(4,386	)	$	(22	)	$	8,573
Assets	23,063			(1,399		)	—			21,664
Three Months Ended March 31, 2015
Net interest income	$	281		$	(40	)	$	(57	)	$	184
Other operating income (Total other revenues)	(78		)	(21		)	57			(42		)
Total operating income (loss)	203			(61		)	—			142
Loan impairment charges (Provision for credit losses)	21			6			—			27
Net interest income and other operating income less loan impairment charges	182			(67		)	—			115
Operating expenses	148			—			—			148
Profit (loss) before tax	$	34		$	(67	)	$	—		$	(33	)
Balances at end of period:
Customer loans (Receivables)	$	22,492		$	(735	)	$	(28	)	$	21,729
Assets	32,428			(1,510		)	—			30,918

⁽¹⁾  Group Reporting Basis Adjustments consist of accounting differences between U.S. GAAP and the Group Reporting Basis which have been described in Note 18, "Business Segments," in the 2015 Form 10-K.

⁽²⁾  Represents differences in balance sheet and income statement presentation between U.S. GAAP and the Group Reporting Basis.

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure Variable Interest Entities Summary Of Assets And Liabilities Of Consolidated Secured Financing V I Es [Abstract]

Summary of Assets and Liabilities of Consolidated Secured Financing VIEs

The assets and liabilities of the consolidated secured financing VIE consisted of the following as of March 31, 2016 and December 31, 2015:

	March 31, 2016						December 31, 2015
	Consolidated Assets			Consolidated Liabilities			Consolidated Assets			Consolidated Liabilities
	(in millions)
Real estate collateralized funding vehicles:
Receivables, net:
Real estate secured receivables	$	1,305		$	—		$	1,654		$	—
Accrued interest income and other	56			—			76			—
Credit loss reserves	(71		)	—			(94		)	—
Receivables, net	1,290			—			1,636			—
Other liabilities	—			(22		)	—			(22		)
Long-term debt	—			694			—			879
Total	$	1,290		$	672		$	1,636		$	857

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Carrying and Estimated Fair Value

The following table summarizes the carrying values and estimated fair value of our financial instruments at March 31, 2016 and December 31, 2015.

	March 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	106	$	106	$	106	$	—	$	—
Securities purchased under agreements to resell	779		779		—		779		—
Real estate secured receivables(1):
First lien	6,781		6,691		—		—		6,691
Second lien	1,652		1,126		—		—		1,126
Total real estate secured receivables	8,433		7,817		—		—		7,817
Real estate secured receivables held for sale	8,185		8,710		—		1,475		7,235
Due from affiliates	201		201		—		201		—
Financial liabilities:
Due to affiliates carried at fair value	495		495		—		495		—
Due to affiliates not carried at fair value	5,279		5,513		—		5,513		—
Long-term debt carried at fair value	1,447		1,447		—		1,447		—
Long-term debt not carried at fair value	6,055		6,453		—		6,453		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Cash	$	124	$	124	$	124	$	—	$	—
Securities purchased under agreements to resell	2,724		2,724		—		2,724		—
Real estate secured receivables(1):
First lien	7,237		7,174		—		—		7,174
Second lien	1,750		1,156		—		—		1,156
Total real estate secured receivables	8,987		8,330		—		—		8,330
Real estate secured receivables held for sale	8,265		8,668		—		—		8,668
Due from affiliates	128		128		—		128		—
Financial liabilities:
Due to affiliates carried at fair value	496		496		—		496		—
Due to affiliates not carried at fair value	5,429		5,693		—		5,693		—
Long-term debt carried at fair value	3,257		3,257		—		3,257		—
Long-term debt not carried at fair value	6,253		6,664		—		6,664		—

⁽¹⁾  The receivable held for investment carrying value included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. The receivable held for investment carrying value included in this table also includes accrued finance charges and is net of credit loss reserves. However, the basis adjustments on the loans, accrued finance charges and credit loss reserves are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivables held for investment account balances.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting(1)			Total of Assets (Liabilities) Measured at Fair Value
	(in millions)
March 31, 2016:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		144			—		—			144
Derivative netting	—		—			—		(168		)	(168		)
Total derivative financial assets	—		168			—		(168		)	—
Total assets	$	—	$	168		$	—	$	(168	)	$	—
Due to affiliates carried at fair value	$	—	$	(495	)	$	—	$	—		$	(495	)
Long-term debt carried at fair value	—		(1,447		)	—		—			(1,447		)
Derivative related liabilities:
Interest rate swaps	—		(399		)	—		—			(399		)
Currency swaps	—		(292		)	—		—			(292		)
Derivative netting	—		—			—		691			691
Total derivative related liabilities	—		(691		)	—		691			—
Total liabilities	$	—	$	(2,633	)	$	—	$	691		$	(1,942	)
December 31, 2015:
Derivative financial assets:
Interest rate swaps	$	—	$	24		$	—	$	—		$	24
Currency swaps	—		111			—		—			111
Derivative netting	—		—			—		(135		)	(135		)
Total derivative financial assets	—		135			—		(135		)	—
Total assets	$	—	$	135		$	—	$	(135	)	$	—
Due to affiliates carried at fair value	$	—	$	(496	)	$	—	$	—		$	(496	)
Long-term debt carried at fair value	—		(3,257		)	—		—			(3,257		)
Derivative related liabilities:
Interest rate swaps	—		(304		)	—		—			(304		)
Currency swaps	—		(379		)	—		—			(379		)
Derivative netting	—		—			—		626			626
Total derivative related liabilities	—		(683		)	—		626			(57		)
Total liabilities	$	—	$	(4,436	)	$	—	$	626		$	(3,810	)

⁽¹⁾  Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2016 and 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of March 31, 2016 or 2015 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2015 Form 10-K for discussion of our policy in measuring fair value.

	Non-Recurring Fair Value Measurements  as of March 31, 2016								Total Gains (Losses) for the Three Months Ended March 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	1,299	$	6,886	$	8,185	$	(68	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		274		—		274		(26		)
Real estate owned(2)	—		80		—		80		(5		)
Total assets at fair value on a non-recurring basis	$	—	$	1,653	$	6,886	$	8,539	$	(99	)

	Non-Recurring Fair Value Measurements  as of March 31, 2015								Total Gains (Losses) for the Three Months Ended March 31, 2015
	Level 1		Level 2		Level 3		Total
	(in millions)
Real estate secured receivables held for sale	$	—	$	333	$	764	$	1,097	$	(17	)
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(1)	—		529		—		529		(72		)
Real estate owned(2)	—		186		—		186		(4		)
Total assets at fair value on a non-recurring basis	$	—	$	1,048	$	764	$	1,812	$	(93	)

⁽¹⁾  Total gains (losses) for the three months ended March 31, 2016 and 2015 include amounts recorded on receivables that were subsequently transferred to held for sale.

⁽²⁾  Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

Fair Value Inputs, Assets, Quantitative Information

The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy as of March 31, 2016 and December 31, 2015:

	Fair Value						Range of Inputs
Financial Instrument Type	Mar. 31, 2016		Dec. 31,  2015		Valuation Technique	Significant Unobservable Inputs	March 31, 2016				December 31, 2015
	(in millions)
Receivables held for sale carried at the lower of amortized cost or fair value:
Real estate secured	$	6,886	$	8,265	Third party appraisal valuation based on	Collateral loss severity rates(1)	0	%	-	100%	0	%	-	100%
					estimated loss severities, including collateral values, cash flows and	Expenses incurred through collateral disposition	5	%	-	10%	5	%	-	10%
					market discount rate	Market discount rate	4	%	-	14%	4	%	-	14%

⁽¹⁾  As discussed below, as a result of our decision in 2015 to expand our receivable sales program, we added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio. At March 31, 2016 and December 31, 2015, the weighted average collateral loss severity rate was 43 percent and 42 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values.

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Organization and Basis of Presentation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Income tax benefit	$ (56)	$ (28)
Additional paid-in capital		23,348
Accumulated deficit	(18,273)	(17,773)	$ (18,199)
Cumulative dividends reclassified		638
Out of period adjustment [Member]
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Income tax benefit	$ 15
As previously reported [Member]
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Additional paid-in capital		23,986
Accumulated deficit		$ (18,411)

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Discontinued Operations - Additional Information (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets of discontinued operations	$ 16,000,000	$ 13,000,000
Liabilities of discontinued operations	113,000,000	102,000,000
Commercial Business [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets of discontinued operations	4,000,000	5,000,000
Liabilities of discontinued operations	0	0
Card and Retail Services [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets of discontinued operations	12,000,000	8,000,000
Liabilities of discontinued operations	$ 113,000,000	$ 102,000,000

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Discontinued Operations - Operating Results of Discontinued Operations (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income (loss) from discontinued operations before income tax		$ (7)	$ 0
Commercial Business [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net interest income and other revenues		4	7
Income (loss) from discontinued operations before income tax		2	4
Card and Retail Services [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net interest income and other revenues		0	0
Income (loss) from discontinued operations before income tax	[1]	(9)	$ (4)
Incremental expenses for legal matters		$ 7

[1] The three months ended March 31, 2016 includes incremental expenses of $7 million for legal matters. For the three months ended March 31, 2015, the amount includes expenses related to activities to complete the separation of the credit card operational infrastructure between us and Capital One

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Receivables, net - Receivables (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Real estate secured:
Total receivables	$ 8,573	$ 9,156	$ 21,729
Accrued interest income and other	132	142
Credit loss reserve for receivables	(272)	(311)
Total receivables, net	8,433	8,987
First lien [Member]
Real estate secured:
Total receivables	6,807	7,302	19,308
Second lien [Member]
Real estate secured:
Total receivables	$ 1,766	$ 1,854	$ 2,421

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Receivables, net - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Deferred origination fees	$ 68	$ 71
Net unamortized premium on our receivables	31	35
Secured financing	694	879
Receivables, collateralizing long-term debt	$ 1,305	$ 1,654

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Receivables, net - Aging Analysis of Past Due Loans (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total receivables		$ 8,573	$ 9,156	$ 21,729
Threshold period for current receivable		30 days
Real estate secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		$ 435	558
Current	[1]	8,138	8,598
Total receivables	[2]	8,573	9,156
First lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		309	398
Current	[1]	6,498	6,904
Total receivables	[2]	6,807	7,302
Second lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		126	160
Current	[1]	1,640	1,694
Total receivables	[2]	1,766	1,854
Past Due, 30 - 89 days [Member] | Real estate secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		219	277
Past Due, 30 - 89 days [Member] | First lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		141	179
Past Due, 30 - 89 days [Member] | Second lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		78	98
Past Due, 90 plus days [Member] | Real estate secured [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		216	281
Past Due, 90 plus days [Member] | First lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		168	219
Past Due, 90 plus days [Member] | Second lien [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due receivables		$ 48	$ 62

[1] Receivables less than 30 days past due are presented as current.

[2] The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and include certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. However, these basis adjustments on the loans are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivable account balances.

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Receivables, net - Nonaccrual Receivables (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Dec. 31, 2015
Nonaccrual receivables:
Criteria for nonaccrual status (Minimum days contractually delinquent)		90 days
Total nonaccrual receivables	[1]	$ 666	$ 669
Nonaccrual loans carried at lower of amortized cost of fair value less cost to sell but less than 90 days delinquent		541	501
Real Estate Secured [Member]
Nonaccrual receivables:
Nonaccrual real estate secured receivables carried at lower amortized cost or fair value		149	187
Real estate secured [Member]
Nonaccrual receivables:
Total nonaccrual receivables	[2],[3]	222	283
Nonaccrual receivables held for sale [Member]
Nonaccrual receivables:
Total nonaccrual receivables	[3]	$ 444	$ 386

[1] Nonaccrual receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

[2] At March 31, 2016 and December 31, 2015, nonaccrual real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

[3] The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

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Receivables, net - Additional Information on Nonaccrual Receivables (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Receivables [Abstract]
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period	$ 18	$ 39
Interest income that was recorded on nonaccrual receivables included in interest income on nonaccrual receivables during the period	$ 2	$ 5

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Receivables, net - Receivables and Receivables held for Sale (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Modifications, primarily interest rate modifications	$ 56	$ 60
Re-age of past due account	56	91
Total	112	151
First lien [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	18	125
Second lien [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	23	16
Real Estate Secured Receivables Held for Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	71	10
Real estate secured [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 112	$ 151

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Receivables, net - TDR Loans (Detail) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Unpaid principal balance subject to reduction		$ 757	$ 740
TDR Loans held for investment, recorded at the lower of amortized cost or FV less cost to sell		211	250
First lien [Member]
Financing Receivable, Modifications [Line Items]
Carrying value of TDR Loans	[1],[2]	722	870
Unpaid balance of TDR loans	[1],[2]	834	1,003
Credit loss reserves for TDR loans	[3]	72	95
Second lien [Member]
Financing Receivable, Modifications [Line Items]
Carrying value of TDR Loans	[1],[2]	641	652
Unpaid balance of TDR loans	[1],[2]	712	732
Credit loss reserves for TDR loans	[3]	133	135
Receivables Held For Sale [Member] | Real Estate Secured [Member]
Financing Receivable, Modifications [Line Items]
Carrying value of TDR Loans	[2],[4]	6,105	6,044
Unpaid balance of TDR loans	[2],[4]	7,381	7,317
Real estate secured [Member]
Financing Receivable, Modifications [Line Items]
Carrying value of TDR Loans	[2]	7,468	7,566
Unpaid balance of TDR loans	[2]	8,927	9,052
Credit loss reserves for TDR loans	[3],[4]	$ 205	$ 230

[1] At March 31, 2016 and December 31, 2015, the carrying value of TDR Loans held for investment totaling $211 million and $250 million, respectively, are recorded at the lower of amortized cost or fair value of the collateral less cost to sell.

[2] At March 31, 2016 and December 31, 2015, the unpaid principal balance reflected above includes $757 million and $740 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action.

[3] Included in credit loss reserves.

[4] There are no credit loss reserves associated with receivables classified as held for sale as they are carried at the lower of amortized cost or fair value.

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Receivables, net - Additional Information Relating to Trouble Debt Restructuring Loan (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Average balance of TDR Loans:
Total average balance of TDR Loans	$ 7,525	$ 11,107
Interest income recognized on TDR Loans:
Total interest income recognized on TDR Loans	157	202
First lien [Member]
Average balance of TDR Loans:
Total average balance of TDR Loans	6,775	10,207
Interest income recognized on TDR Loans:
Total interest income recognized on TDR Loans	137	180
Second lien [Member]
Average balance of TDR Loans:
Total average balance of TDR Loans	750	900
Interest income recognized on TDR Loans:
Total interest income recognized on TDR Loans	$ 20	$ 22

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Receivables, net - Receivables Classified as Troubled Debt Restructuring Loan (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Receivables classified as Trouble Debt Restructuring Loans
TDR loans that became delinquent during the period	$ 28	$ 66
Receivables Held For Sale [Member] | Real Estate Secured [Member]
Receivables classified as Trouble Debt Restructuring Loans
TDR loans that became delinquent during the period	20	2
First lien [Member]
Receivables classified as Trouble Debt Restructuring Loans
TDR loans that became delinquent during the period	4	55
Second lien [Member]
Receivables classified as Trouble Debt Restructuring Loans
TDR loans that became delinquent during the period	$ 4	$ 9

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Receivables, net - Summary of Contractual Delinquency and Delinquency Ratio (Detail) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Mortgage Loans in Process of Foreclosure , Amount		$ 382	$ 363
Receivables Held For Sale [Member] | Real Estate Secured [Member]
Financing Receivable, Modifications [Line Items]
Dollars of Delinquency	[1]	$ 596	$ 569
Delinquency Ratio	[1]	7.28%	6.88%
First lien [Member]
Financing Receivable, Modifications [Line Items]
Dollars of Delinquency	[1]	$ 209	$ 272
Delinquency Ratio	[1]	3.07%	3.73%
Second lien [Member]
Financing Receivable, Modifications [Line Items]
Dollars of Delinquency	[1]	$ 72	$ 94
Delinquency Ratio	[1]	4.08%	5.07%
Real estate secured [Member]
Financing Receivable, Modifications [Line Items]
Dollars of Delinquency	[1],[2]	$ 877	$ 935
Delinquency Ratio	[1],[2]	5.23%	5.37%

[1] The receivable balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

[2] At March 31, 2016 and December 31, 2015, total real estate secured receivables include $382 million and $363 million, respectively, that are in the process of foreclosure.

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Receivables, net - Nonperforming Consumer Receivable Portfolio (Detail) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Real estate secured	[1],[2],[3]	$ 8,573	$ 9,156
Receivables held for sale	[3]	8,185	8,265
Total	[3]	16,758	17,421
Nonaccrual loans carried at lower of amortized cost of fair value less cost to sell but less than 90 days delinquent		541	501
Accruing Loans [Member]
Financing Receivable, Impaired [Line Items]
Real estate secured	[1],[2],[3]	8,351	8,873
Receivables held for sale	[3]	7,741	7,879
Total	[3]	16,092	16,752
Nonaccrual Loans [Member]
Financing Receivable, Impaired [Line Items]
Real estate secured	[1],[2],[3],[4]	222	283
Receivables held for sale	[3],[4]	444	386
Total	[3],[4]	666	669
Nonperforming receivables held for investment (TDR)		139	178
Nonaccrual Loans [Member] | Real Estate Secured [Member]
Financing Receivable, Impaired [Line Items]
Nonperforming receivables held for investment		$ 149	$ 187

[1] At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $139 million and $178 million, respectively, of TDR Loans, some of which may also be carried at fair value of the collateral less cost to sell

[2] At March 31, 2016 and December 31, 2015, nonperforming real estate secured receivables held for investment include $149 million and $187 million, respectively, of receivables that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

[3] The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

[4] Nonperforming receivables do not include receivables totaling $541 million and $501 million at March 31, 2016 and December 31, 2015, respectively, which are less than 90 days contractually delinquent and not accruing interest.

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Credit Loss Reserves - Summarizes Changes in Credit Loss Reserves by Product/Class and Related Receivable Balance by Product (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016		Mar. 31, 2015	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Allowance for Loan and Lease Losses [Roll Forward]
Credit loss reserves at beginning of period		$ 311		$ 2,217
Provision for credit losses	[1]	37		27
Charge-offs	[2]	(79)	[1]	(147)
Recoveries		3		13
Total net charge-offs		(76)		(134)
Credit loss reserves at end of period		272		2,110
Reserve components:
Collectively evaluated for impairment					$ 66		$ 208
Individually evaluated for impairment	[3]				196		1,875
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					10		27
Total credit loss reserves		311		2,217	272	$ 311	2,110
Receivables:
Collectively evaluated for impairment					7,147		11,398
Individually evaluated for impairment	[3]				1,152		9,802
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					274		529
Total receivables					8,573	9,156	21,729
First lien [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Credit loss reserves at beginning of period		137		1,898
Provision for credit losses	[1]	23		37
Charge-offs	[2]	(53)	[1]	(108)
Recoveries		2		12
Total net charge-offs		(51)		(96)
Credit loss reserves at end of period		109		1,839
Reserve components:
Collectively evaluated for impairment					36		155
Individually evaluated for impairment	[3]				63		1,657
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					10		27
Total credit loss reserves		137		1,898	109	137	1,839
Receivables:
Collectively evaluated for impairment					6,028		9,872
Individually evaluated for impairment	[3]				532		8,936
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					247		500
Total receivables					6,807	7,302	19,308
Second lien [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Credit loss reserves at beginning of period		174		319
Provision for credit losses	[1]	14		(10)
Charge-offs	[2]	(26)	[1]	(39)
Recoveries		1		1
Total net charge-offs		(25)		(38)
Credit loss reserves at end of period		163		271
Reserve components:
Collectively evaluated for impairment					30		53
Individually evaluated for impairment	[3]				133		218
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					0		0
Total credit loss reserves		$ 174		$ 319	163	174	271
Receivables:
Collectively evaluated for impairment					1,119		1,526
Individually evaluated for impairment	[3]				620		866
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell					27		29
Total receivables					$ 1,766	$ 1,854	$ 2,421

[1] The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

[2] For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three months ended March 31, 2016 and 2015 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $20 million during the three months ended March 31, 2016 compared with $15 million during the three months ended March 31, 2015.

[3] These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $211 million and $399 million at March 31, 2016 and 2015, respectively. The reserve component above excludes credit loss reserves totaling $9 million and $22 million at March 31, 2016 and 2015, respectively, for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell. These receivables and credit loss reserves are reflected within receivables and credit loss reserves carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.

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Credit Loss Reserves - Summarizes Changes in Credit Loss Reserves by Product/Class and Related Receivable Balance by Product - Additional Information (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016		Mar. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Initial lower of amortized cost or fair value adjustment(2)		$ 17		$ 0
Write-offs	[1]	79	[2]	147
Excludes Credit loss reserves for TDR Loans that are carried at the lower of amortized cost or fair value		9		22
TDR [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Excludes TDR loans that are carried at the lower of amortized cost or fair value		211		399
Real Estate Secured Receivable Portfolio [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Write-offs		20		15
Mortgage Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Release of provision associated with a correction to the reserve calculation for a segment of the portfolio				$ 19
First and Second Mortgage [Member] | Fair Value [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Initial lower of amortized cost or fair value adjustment(2)		$ 13

[1] For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three months ended March 31, 2016 and 2015 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $20 million during the three months ended March 31, 2016 compared with $15 million during the three months ended March 31, 2015.

[2] The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

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Receivables Held for Sale - Real Estate Secured Receivables (Details) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables held for sale	[1]	$ 8,185	$ 8,265
First lien [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables held for sale		8,026	8,110
Second lien [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables held for sale		$ 159	$ 155

[1] The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

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Receivables Held for Sale - Additional Information (Detail) - USD ($)		1 Months Ended	3 Months Ended
		Apr. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Mar. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Aggregate unpaid balance				$ 282,000,000	$ 431,000,000
Aggregate carrying value				267,000,000	311,000,000
Initial lower of amortized cost or fair value adjustment(2)				17,000,000	0
Provision for Credit Losses [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Initial lower of amortized cost or fair value adjustment(2)	[1]			13,000,000
Other Revenue [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Initial lower of amortized cost or fair value adjustment(2)	[2]			4,000,000
Subsequent to initial transfer to held for sale				51,000,000	17,000,000
Fair Value [Member] | Provision for Credit Losses [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Initial lower of amortized cost or fair value adjustment(2)	[1]			13,000,000
Fair Value [Member] | Other Revenue [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Initial lower of amortized cost or fair value adjustment(2)	[2]			4,000,000
Subsequent to initial transfer to held for sale				$ 68,000,000	$ 0
First Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Threshold, days past due to initiate sale activities for first lien real estate secured receivables				180 days
Real Estate Secured Receivables Held for Sale [Member] | Subsequent Event [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Aggregate unpaid balance prior to sale		$ 1,421,000,000
Aggregate carrying value prior to sale		1,273,000,000
Aggregate cash consideration received		$ 1,440,000,000
Scenario, Forecast [Member] | Real Estate Secured Receivables Held for Sale [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Gain on sale of real estate secured receivables			$ 155,000,000

[1] Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which was recorded as provision for credit losses in the consolidated statement of income (loss) as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.

[2] Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which was recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates.

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Receivables Held for Sale - Summary of Activity in Receivables Held for Sale (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Receivables Held for Sale, Activity [Roll Forward]
Receivables held for sale at beginning of period	[1]	$ 8,265
Receivables held for sale at end of period	[1]	8,185
Mortgage Loans on Real Estate [Member]
Receivables Held for Sale, Activity [Roll Forward]
Receivables held for sale at beginning of period		8,265	$ 860
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value	[2],[3]	230	296
Lower of amortized cost or fair value adjustment on receivables held for sale		(51)	(17)
Carrying value of real estate secured receivables held for sale transferred to REO		(14)	(24)
Carrying value of real estate secured receivables held for sale settled through short sale or transfer to REO		(8)	(11)
Change in real estate secured receivable balance, including collections		(237)	(7)
Receivables held for sale at end of period	[4]	$ 8,185	$ 1,097

[1] The balances included in this table reflect the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies but exclude any basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased receivables. Additionally, the balances in this table related to receivables which have been classified as held for sale have been reduced by the lower of amortized cost or fair value adjustment recorded as well as the credit loss reserves associated with these receivables prior to the transfer.

[2] Amount includes any accrued interest associated with the receivable.

[3] The initial lower of amortized cost or fair value adjustment on receivables transferred into held for sale during the three months ended March 31, 2016 totaled $17 million. During the three months ended March 31, 2015, there was no initial lower of amortized cost or fair value adjustment on receivables transferred to held for sale.

[4] Real estate secured receivables held for sale in the table above are presented net of the valuation allowance.

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Receivables Held For Sale - Allowance for Credit Losses Rollforward (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	$ 13	$ 0
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period	4	0
Increase in valuation allowance resulting from changes in fair value	68	0
Change in valuation allowance for collections, charged-off, transferred to REO or short sale	1	0
Balance at end of period	$ 86	$ 0

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Receivables Held for Sale - Summary of Components of Cumulative Lower of Amortized Cost or Fair Value Adjustment (Detail) - USD ($)		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)		$ 17,000,000	$ 0
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		68,000,000
Fair Value [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		85,000,000
Settlements, Including Short Sales [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		(17,000,000)
Provision for Credit Losses [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[1]	13,000,000
Provision for Credit Losses [Member] | Fair Value [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[1]	13,000,000
Provision for Credit Losses [Member] | Settlements, Including Short Sales [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[1]	0
Other Revenue [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[2]	4,000,000
Subsequent to initial transfer to held for sale		51,000,000	17,000,000
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		55,000,000	17,000,000	[3]
Other Revenue [Member] | Fair Value [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[2]	4,000,000
Subsequent to initial transfer to held for sale		68,000,000	0
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		72,000,000	0	[3]
Other Revenue [Member] | Settlements, Including Short Sales [Member]
Lower of amortized cost or fair value adjustment recorded as a component of:
Initial lower of amortized cost or fair value adjustment(2)	[2]	0
Subsequent to initial transfer to held for sale		(17,000,000)	17,000,000
Lower Of Amortized Cost Or Fair Value Adjustment On Loans Held For Sale		$ (17,000,000)	$ 17,000,000	[3]

[1] Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which was recorded as provision for credit losses in the consolidated statement of income (loss) as there was no objective, verifiable evidence to indicate non-credit factors were associated with the decline in fair value.

[2] Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which was recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates.

[3] During the three months ended March 31, 2015, no lower of amortized cost or fair value adjustment was recorded as a provision for credit losses.

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Fair Value Option - Fair Value Option on Liabilities (Details) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Long-term debt		$ 1,447	$ 3,257
Due to affiliates		495	496
Total fixed rate debt accounted for under FVO		1,942	3,753
Unpaid principal balance of fixed rate debt accounted for under FVO	[1]	1,804	3,598
Fixed rate long-term debt not accounted for under FVO		4,061	4,074
Change in debt balance from foreign currency translation adjustment		$ 217	$ 283

[1] Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which decreased the debt balance by $217 million at March 31, 2016 and decreased the debt balance by $283 million at December 31, 2015.

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Fair Value Option - Components of Gain (Loss) on Debt Designated at Fair Value and Related Derivatives (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Mark-to-market on debt designated at fair value :
Interest rate component	[1]	$ 6	$ 49
Credit risk component	[1]	11	26
Total mark-to-market on debt designated at fair value	[1]	17	75
Mark-to-market on the related derivatives	[1],[2]	(9)	(77)
Net realized gains on the related derivatives	[1]	16	61
Gain on debt designated at fair value and related derivatives		24	59
Foreign currency translation gains (losses) recorded in derivatives		(66)	291
Offsetting gains (losses) recorded in derivative related income (expense)		$ 66	$ (291)

[1] The derivatives associated with debt designated at fair value are economic hedges but do not qualify for hedge accounting. See Note 7, "Derivative Financial Instruments," for additional discussion of these non-qualifying hedges.

[2] Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related expense associated with debt designated at fair value was a loss of $66 million and a gain of $291 million for the three months ended March 31, 2016 and 2015, respectively. Offsetting gains (losses) recorded in derivative related expense associated with the related derivatives was a gain of $66 million and a loss of $291 million for the three months ended March 31, 2016 and 2015, respectively.

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Fair Value Option - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Cumulative increased value of debt through fair value option adjustments	$ 138	$ 155

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Derivative Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Notional values of derivative contracts	$ 7,074	$ 8,933
Fair value of collateral agreements with affiliate counterparties	537	491
Decrease in debt carrying value due to fair value hedge	15	15
Losses on current derivative instruments designated as cash flow hedges are reported in OCI net of tax and totaled a loss	7	15
Unrealized net losses on cash flow hedges	6
Unrealized net losses on cash flow hedges after tax	4
HSBC Bank USA [Member]
Derivative [Line Items]
Notional values of derivative contracts	7,100	8,900
Derivatives not designated as hedging instruments [Member]
Derivative [Line Items]
Notional values of derivative contracts	2,624	$ 2,624
Terminated notional amount	$ 720

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Derivative Financial Instruments - Schedule of Derivative Instruments (Details) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Derivative Asset [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	$ 119	$ 97
Non-qualifying hedge activities:	[1]	24	20
Total Derivative Financial Assets	[1]	168	135
Less: Gross amounts offset in the balance sheet	[1],[2]	(168)	(135)
Net amounts of derivative financial assets and liabilities presented in the balance sheet	[1],[3]	0	0
Derivative Liability [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	(147)	(196)
Non-qualifying hedge activities:	[1]	(392)	(286)
Total Derivative Financial Liabilities	[1]	(691)	(683)
Less: Gross amounts offset in the balance sheet	[1],[2]	691	626
Net amounts of derivative financial assets and liabilities presented in the balance sheet	[1],[3]	0	(57)
Debt [Member]
Derivative Asset [Abstract]
Non-qualifying hedge activities:	[1]	25	18
Derivative Liability [Abstract]
Non-qualifying hedge activities:	[1]	(152)	(201)
Interest rate swaps [Member]
Derivative Asset [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	0	0
Non-qualifying hedge activities:	[1]	24	20
Derivative Liability [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	(7)	(18)
Non-qualifying hedge activities:	[1]	(392)	(286)
Interest rate swaps [Member] | Debt [Member]
Derivative Asset [Abstract]
Non-qualifying hedge activities:	[1]	0	4
Derivative Liability [Abstract]
Non-qualifying hedge activities:	[1]	0	0
Currency swaps [Member]
Derivative Asset [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	119	97
Derivative Liability [Abstract]
Derivatives accounted for as cash flow hedges associated with debt:	[1]	(140)	(178)
Currency swaps [Member] | Debt [Member]
Derivative Asset [Abstract]
Non-qualifying hedge activities:	[1]	25	14
Derivative Liability [Abstract]
Non-qualifying hedge activities:	[1]	$ (152)	$ (201)

[1] All of our derivatives are bilateral over-the-counter derivatives.

[2] Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes cash collateral paid of $537 million at March 31, 2016 and $491 million at December 31, 2015. At March 31, 2016 and December 31, 2015, we did not have any financial instrument collateral received/posted.

[3] At March 31, 2016 and December 31, 2015, we had not received any cash not subject to an enforceable master netting agreement.

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Derivative Financial Instruments - Gain or Loss Recorded on Our Cash Flow Hedging Relationships (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)	$ 11	$ 14
Gain (Loss) Reclassed From AOCI into Income (Effective Portion)	(3)	(3)
Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), Interest Rate Swaps	11	9
Currency swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), Currency Swaps	0	5
Interest Expense [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Reclassed from AOCI into Income (Effective Portion), Interest Rate Swaps	0	0
Interest Expense [Member] | Currency swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Reclassed from AOCI into Income (Effective Portion), Currency swaps	(3)	(3)
Derivative related income (loss) [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized In Income on Derivative (Ineffective Portion)	4	(2)
Derivative related income (loss) [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized in Income on Derivative (Ineffective Portion), Interest Rate Swaps	0	0
Derivative related income (loss) [Member] | Currency swaps [Member]
Derivatives, Fair Value [Line Items]
Gain (Loss) Recognized in Income on Derivative (Ineffective Portion, Currency swaps)	$ 4	$ (2)

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Derivative Financial Instruments - Gain or Loss Recorded on Our Non-Qualifying Hedges (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Derivatives, Fair Value [Line Items]
Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)	$ (119)	$ (95)
Interest Rate Contracts [Member] | Derivative related income (expense) [Member]
Derivatives, Fair Value [Line Items]
Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)	$ (119)	$ (95)

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Derivative Financial Instruments - Gain or Loss Recorded on Derivatives Related to Fair Value Option Debt Primarily Due to Changes in Interest Rates (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Total Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)	$ 7	$ (16)
Interest rate component [Member] | Gain (loss) on debt designated at fair value and related derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest rate contracts, Gain (loss) on debt designated at fair value and related derivatives, Amount of Gain (loss) Recognized in Derivative Related Income (Expense)	0	2
Currency contracts [Member] | Gain (loss) on debt designated at fair value and related derivatives [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Currency contracts, Gain (loss) on debt designated at fair value and related derivatives, Amount of Gain (Loss) Recognized in Derivative Related Income (Expense)	$ 7	$ (18)

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Derivative Financial Instruments - Notional Values of Derivative Contracts (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Total	$ 7,074	$ 8,933
Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Total	0	1,859
Currency swaps [Member]
Derivatives, Fair Value [Line Items]
Total	1,562	1,562
Debt Option [Member]
Derivatives, Fair Value [Line Items]
Total	1,562	3,421
Derivatives designated as hedging instruments [Member]
Derivatives, Fair Value [Line Items]
Total	2,888	2,888
Derivatives designated as hedging instruments [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Total	1,300	1,300
Derivatives designated as hedging instruments [Member] | Currency swaps [Member]
Derivatives, Fair Value [Line Items]
Total	1,588	1,588
Derivatives not designated as hedging instruments [Member]
Derivatives, Fair Value [Line Items]
Total	2,624	2,624
Derivatives not designated as hedging instruments [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Total	$ 2,624	$ 2,624

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Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Unrealized gains (losses) on cash flow hedging instruments:
Balance at beginning of period		$ (15)	$ (52)
Net gains arising during period, net of tax		7	9
Reclassification adjustment for losses realized in net income, net of tax	[1]	1	2
Total other comprehensive income for period		8	11
Balance at end of period		(7)	(41)
Net gains arising during period, taxes		4	5
Reclassification adjustment for losses realized in net income, taxes		2	1
Pension and postretirement benefit plan liability:
Balance at beginning of period		29	(13)
Reclassification adjustment for losses realized in net income, net of tax		(1)	0
Pension and postretirement benefit plan adjustments		(1)	0
Balance at end of period		28	(13)
Reclassification adjustment for losses realized in net income, tax		(1)	0
Total accumulated other comprehensive gain (loss) at end of period		$ 21	$ (54)	$ 14

[1] The amounts reclassified during the three months ended March 31, 2016 and 2015 relate to interest rate and currency swaps and are included as a component of interest expense in our consolidated statement of income.

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Pension and Other Postretirement Benefits - Components of Pension Expense for Defined Benefit Pension Plan (Detail) - Pension Plan, Defined Benefit [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Service cost - benefits earned during the period	$ 1	$ 1
Interest cost on projected benefit obligation	12	12
Expected return on assets	(14)	(16)
Amortization of net actuarial loss	7	7
Net periodic postretirement benefit cost	$ 6	$ 4

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Pension and Other Postretirement Benefits-Post Retirement Benefit Cost (Details) - Other Postretirement Benefit Plan, Defined Benefit [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Interest Cost	$ 1	$ 1
Amortization of reduction in liability resulting from plan amendment	(2)	0
Net periodic postretirement benefit cost	$ (1)	$ 1

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Related Party Transactions - Related Party Balances and Income and (Expense) Generated by Related Party Transactions (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Assets:
Cash		$ 106		$ 124
Securities purchased under agreements to resell		779		2,724
Other assets		1,132		1,017
Total assets		21,680		24,145
Liabilities
Due to affiliates		5,774		5,925
Other liabilities		1,611		1,773
Total liabilities		15,142		17,510
Income/(Expense):
Servicing and other fees from HSBC affiliates		4	$ 6
Support services from HSBC affiliates		(42)	(54)
HSBC affiliates [Member]
Assets:
Cash		106		124
Securities purchased under agreements to resell	[1]	779		2,724
Other assets		201		128
Total assets		1,086		2,976
Liabilities
Due to affiliates	[2]	5,774		5,925
Other liabilities		33		62
Total liabilities		5,807		$ 5,987
Income/(Expense):
Interest income from HSBC affiliates		1	2
Interest expense paid to HSBC affiliates	[3]	(75)	(77)
Net interest income (loss)		(74)	(75)
Servicing and other fees from HSBC affiliates		4	6
Support services from HSBC affiliates		(42)	(54)
Stock based compensation expense with HSBC	[4]	$ 1	$ (1)

[1] Securities under an agreement to resell are purchased from HSBC Securities (USA) Inc. and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below.

[2] Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock.

[3] Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt.

[4] Certain employees participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salary and employee benefits in our consolidated statement of income (loss). Certain employees also participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 9, “Pension and Other Postretirement Benefits.”

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Related Party Transactions - Schedule of due to Affiliated entities (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Related Party Transaction [Line Items]
Due to affiliates	$ 5,774	$ 5,925
Due to affiliate, carried at fair value	495	496
HSBC Private Banking Holdings (Suisse) S.A and subsidiaries [Member]
Related Party Transaction [Line Items]
Due to affiliates	350	500
HSBC USA, Inc. [Member]
Related Party Transaction [Line Items]
Due to affiliates	3,012	3,012
HSBC Holdings plc [Member]
Related Party Transaction [Line Items]
Due to affiliates	812	813
HSBC North America [Member]
Related Party Transaction [Line Items]
Due to affiliates	$ 1,600	$ 1,600

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Related Party Transactions - Additional Information (Detail)			1 Months Ended	3 Months Ended			12 Months Ended
		Oct. 17, 2013 USD ($)	Nov. 30, 2013 USD ($)	Mar. 31, 2016 USD ($) borrowing	Mar. 31, 2015 USD ($)	Dec. 31, 2010 USD ($) shares	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Oct. 31, 2015 USD ($)
Related Party Transaction [Line Items]
General term of securities purchased under an agreement to resell				120 days
Due to affiliates				$ 5,774,000,000			$ 5,925,000,000
Long-term debt				7,502,000,000			9,510,000,000
Litigation judgment claims		$ 2,500,000,000
Notional values of derivative contracts				7,074,000,000			8,933,000,000
Fair value of our agreements with affiliate counterparties required the affiliate to provide collateral				537,000,000			491,000,000
HSBC USA, Inc. [Member]
Related Party Transaction [Line Items]
Due to affiliates				$ 3,012,000,000			3,012,000,000
HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Debt instrument, term				364 days
Maximum maturity period for borrowings				5 years
HSBC Holdings plc [Member]
Related Party Transaction [Line Items]
Due to affiliates				$ 812,000,000			813,000,000
HSBC North America [Member]
Related Party Transaction [Line Items]
Due to affiliates				1,600,000,000			1,600,000,000
Annual fee to guarantor					$ 2,000,000		0
HSBC North America [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Borrowing capacity of credit facility				$ 1,000,000,000			1,000,000,000			$ 1,000,000,000
Debt instrument, term				364 days
HSBC affiliates [Member]
Related Party Transaction [Line Items]
Due to affiliates	[1]			$ 5,774,000,000			5,925,000,000
Interest bearing deposits with banks					2,001,000,000
Interest income on deposits				0
HSBC Bank USA [Member]
Related Party Transaction [Line Items]
Notional values of derivative contracts				7,100,000,000			8,900,000,000
Receivables services to affiliates				666,000,000			696,000,000
Series C Preferred Stock [Member]
Related Party Transaction [Line Items]
Number of shares of stock issued (shares) | shares						1,000
Value of issued stock						$ 1,000,000,000
Dividend paid on preferred stock				22,000,000	$ 22,000,000		86,000,000	$ 86,000,000	$ 86,000,000
Amended Credit Agreement [Member] | HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Borrowing capacity of credit facility				5,000,000,000
Amended Credit Agreement Maturing September 2017 [Member] | HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Long-term debt due to affiliate				512,000,000
Amended Credit Agreement Maturing January 2018 [Member] | HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Due to affiliates				1,500,000,000
Amended Credit Agreement Maturing September 2018 [Member] | HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Due to affiliates				1,000,000,000
Maturing May 2017 [Member] | HSBC USA, Inc. [Member] | Revolving Credit Facility [Member]
Related Party Transaction [Line Items]
Borrowing capacity of credit facility				$ 1,000,000,000			1,000,000,000
Debt instrument, term				364 days
Amount of credit facility outstanding				$ 0			$ 0
Subordinated Debt [Member] | Public Subordinated Debt Issue Maturing 2021 [Member]
Related Party Transaction [Line Items]
Long-term debt				3,000,000,000
Delayed Draw Term Loan [Member] | HSBC North America [Member]
Related Party Transaction [Line Items]
Loan agreements with affiliates				$ 600,000,000
Number of draws allowed | borrowing				3
Amount per draw				$ 200,000,000
Delayed Draw Term Loan [Member] | Minimum [Member] | HSBC North America [Member]
Related Party Transaction [Line Items]
Maturity year of long term debt				2034
Delayed Draw Term Loan [Member] | Maximum [Member] | HSBC North America [Member]
Related Party Transaction [Line Items]
Maturity year of long term debt				2035
Securities Litigation [Member]
Related Party Transaction [Line Items]
Litigation judgment claims			$ 2,500,000,000

[1] Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock.

XML

Business Segments - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) segment
Segment Reporting Information [Line Items]
Number of reportable segments | segment	1
Group Reporting Basis Consolidated Totals [Member]
Segment Reporting Information [Line Items]
Cumulative impact of correction of an error | $	$ 100

XML

Business Segments - Reconciliation of Group Reporting Basis Segment Results (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Segment Reporting [Line Items]
US GAAP based Net interest income		$ 182	$ 184
US GAAP based Other operating income (Total other revenues)		(133)	(42)
US GAAP based Total operating income (loss)		49	142
US GAAP based Loan impairment charges (Provision for credit losses)	[1]	37	27
US GAAP Net interest income and other operating income less provision for credit losses		12	115
US GAAP based Operating expenses		138	148
Loss from continuing operations before income tax		(126)	(33)
US GAAP based Customer loans (Receivables)		8,573	21,729
US GAAP based Assets		21,664	30,918
Group Reporting Basis Consolidated Totals [Member]
Segment Reporting [Line Items]
Net Interest Income		220	281
Group Reporting Basis Other operating income (Total other revenues)		(91)	(78)
Group Reporting Basis Total operating income (loss)		129	203
Group Reporting Basis Loan impairment charges (Provision for credit losses)		95	21
Group Reporting Basis Net interest income and other operating income less loan impairment charges		34	182
Operating expenses		135	148
Profit (loss) before tax		(101)	34
Group Reporting Basis Customer loans (Receivables)		12,981	22,492
Total Assets		23,063	32,428
Group Reporting Basis Adjustments [Member]
Segment Reporting [Line Items]
Net Interest Income	[2]	(25)	(40)
Group Reporting Basis Other operating income (Total other revenues)	[2]	(55)	(21)
Group Reporting Basis Total operating income (loss)	[2]	(80)	(61)
Group Reporting Basis Loan impairment charges (Provision for credit losses)	[2]	(58)	6
Group Reporting Basis Net interest income and other operating income less loan impairment charges	[2]	(22)	(67)
Operating expenses	[2]	3	0
Profit (loss) before tax	[2]	(25)	(67)
Group Reporting Basis Customer loans (Receivables)	[2]	(4,386)	(735)
Total Assets	[2]	(1,399)	(1,510)
Group Reporting Basis Reclassifications [Member]
Segment Reporting [Line Items]
Net Interest Income	[3]	(13)	(57)
Group Reporting Basis Other operating income (Total other revenues)	[3]	13	57
Group Reporting Basis Total operating income (loss)	[3]	0	0
Group Reporting Basis Loan impairment charges (Provision for credit losses)	[3]	0	0
Group Reporting Basis Net interest income and other operating income less loan impairment charges	[3]	0	0
Operating expenses	[3]	0	0
Profit (loss) before tax	[3]	0	0
Group Reporting Basis Customer loans (Receivables)	[3]	(22)	(28)
Total Assets	[3]	$ 0	$ 0

[1] The provision for credit losses and charge-offs for real estate secured receivables during the three months ended March 31, 2016 include $13 million related to the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 5, "Receivables Held for Sale," for additional information. The provision for credit losses for real estate secured receivables during the three months ended March 31, 2015 was impacted by a release of approximately $19 million associated with a correction to our credit loss reserve calculation for a segment of our portfolio.

[2] Group Reporting Basis Adjustments consist of accounting differences between U.S. GAAP and the Group Reporting Basis which have been described in Note 18, "Business Segments," in the 2015 Form 10-K.

[3] Represents differences in balance sheet and income statement presentation between U.S. GAAP and the Group Reporting Basis.

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Variable Interest Entities - Summary of Assets and Liabilities of Consolidated Secured Financing VIEs (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Variable Interest Entity [Line Items]
Credit loss reserves	$ (272)	$ (311)	$ (2,110)	$ (2,217)
Total receivables, net	8,433	8,987
Long-term debt	7,502	9,510
Variable Interest Entity [Member]
Variable Interest Entity [Line Items]
Real estate secured receivables	1,305	1,654
Accrued interest income and other	56	76
Credit loss reserves	(71)	(94)
Total receivables, net	1,290	1,636
Total, Consolidated Assets	1,290	1,636
Other liabilities	(22)	(22)
Long-term debt	694	879
Total, Consolidated Liabilities	$ 672	$ 857

XML

Fair Value Measurements - Carrying and Estimated Fair Value (Detail) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Financial assets:
Cash		$ 106	$ 124
Securities purchased under agreements to resell		779	2,724
Financial liabilities:
Long-term debt		7,502	9,510
Level 1 [Member]
Financial assets:
Cash		106	124
Securities purchased under agreements to resell		0	0
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Real estate secured receivables held for sale		0	0
Due from affiliates		0	0
Financial liabilities:
Due to affiliates carried at fair value		0	0
Due to affiliates not carried at fair value		0	0
Level 1 [Member] | First lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Level 1 [Member] | Second lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Level 2 [Member]
Financial assets:
Cash		0	0
Securities purchased under agreements to resell		779	2,724
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Real estate secured receivables held for sale		1,475	0
Due from affiliates		201	128
Financial liabilities:
Due to affiliates carried at fair value		495	496
Due to affiliates not carried at fair value		5,513	5,693
Level 2 [Member] | First lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Level 2 [Member] | Second lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	0	0
Level 3 [Member]
Financial assets:
Cash		0	0
Securities purchased under agreements to resell		0	0
Real estate secured receivables:
Total real estate secured receivables	[1]	7,817	8,330
Real estate secured receivables held for sale		7,235	8,668
Due from affiliates		0	0
Financial liabilities:
Due to affiliates carried at fair value		0	0
Due to affiliates not carried at fair value		0	0
Level 3 [Member] | First lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	6,691	7,174
Level 3 [Member] | Second lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	1,126	1,156
Carrying Value [Member]
Financial assets:
Cash		106	124
Securities purchased under agreements to resell		779	2,724
Real estate secured receivables:
Total real estate secured receivables	[1]	8,433	8,987
Real estate secured receivables held for sale		8,185	8,265
Due from affiliates		201	128
Financial liabilities:
Due to affiliates carried at fair value		495	496
Due to affiliates not carried at fair value		5,279	5,429
Carrying Value [Member] | First lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	6,781	7,237
Carrying Value [Member] | Second lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	1,652	1,750
Estimated Fair Value [Member]
Financial assets:
Cash		106	124
Securities purchased under agreements to resell		779	2,724
Real estate secured receivables:
Total real estate secured receivables	[1]	7,817	8,330
Real estate secured receivables held for sale		8,710	8,668
Due from affiliates		201	128
Financial liabilities:
Due to affiliates carried at fair value		495	496
Due to affiliates not carried at fair value		5,513	5,693
Estimated Fair Value [Member] | First lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	6,691	7,174
Estimated Fair Value [Member] | Second lien [Member]
Real estate secured receivables:
Total real estate secured receivables	[1]	1,126	1,156
Long-term Debt Carried at Fair Value [Member] | Level 1 [Member]
Financial liabilities:
Long-term debt		0	0
Long-term Debt Carried at Fair Value [Member] | Level 2 [Member]
Financial liabilities:
Long-term debt		1,447	3,257
Long-term Debt Carried at Fair Value [Member] | Level 3 [Member]
Financial liabilities:
Long-term debt		0	0
Long-term Debt Carried at Fair Value [Member] | Carrying Value [Member]
Financial liabilities:
Long-term debt		1,447	3,257
Long-term Debt Carried at Fair Value [Member] | Estimated Fair Value [Member]
Financial liabilities:
Long-term debt		1,447	3,257
Long Term Debt Not Carried at Fair Value [Member] | Level 1 [Member]
Financial liabilities:
Long-term debt		0	0
Long Term Debt Not Carried at Fair Value [Member] | Level 2 [Member]
Financial liabilities:
Long-term debt		6,453	6,664
Long Term Debt Not Carried at Fair Value [Member] | Level 3 [Member]
Financial liabilities:
Long-term debt		0	0
Long Term Debt Not Carried at Fair Value [Member] | Carrying Value [Member]
Financial liabilities:
Long-term debt		6,055	6,253
Long Term Debt Not Carried at Fair Value [Member] | Estimated Fair Value [Member]
Financial liabilities:
Long-term debt		$ 6,453	$ 6,664

[1] The receivable held for investment carrying value included in this table reflects the principal amount outstanding on the loan net of any charge-off recorded in accordance with our existing charge-off policies and includes certain basis adjustments to the loan such as unearned income, unamortized deferred fees and costs on originated loans, purchase accounting fair value adjustments and premiums or discounts on purchased loans. The receivable held for investment carrying value included in this table also includes accrued finance charges and is net of credit loss reserves. However, the basis adjustments on the loans, accrued finance charges and credit loss reserves are excluded in other presentations of dollars of two-months-and-over contractual delinquency, nonaccrual receivable and nonperforming receivables held for investment account balances.

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Fair Value Measurements - Fair Value of Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Millions		Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative related liabilities		$ 0	$ (57)
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Due to affiliates carried at fair value		0	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Due to affiliates carried at fair value		(495)	(496)
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Due to affiliates carried at fair value		0	0
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Netting	[1]	(168)	(135)
Netting	[1]	691	626
Recurring [Member] | Derivative netting [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Netting	[1]	(168)	(135)
Netting	[1]	691	626
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Total assets		0	0
Due to affiliates carried at fair value		0	0
Derivative related liabilities before netting		0	0
Financial and Nonfinancial Liabilities, Fair Value Disclosure		0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Interest rate swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Currency swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Derivative netting [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		168	135
Total assets		168	135
Due to affiliates carried at fair value		(495)	(496)
Derivative related liabilities before netting		(691)	(683)
Financial and Nonfinancial Liabilities, Fair Value Disclosure		(2,633)	(4,436)
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Interest rate swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		24	24
Derivative related liabilities before netting		(399)	(304)
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Currency swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		144	111
Derivative related liabilities before netting		(292)	(379)
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Derivative netting [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Total assets		0	0
Due to affiliates carried at fair value		0	0
Derivative related liabilities before netting		0	0
Financial and Nonfinancial Liabilities, Fair Value Disclosure		0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Interest rate swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Currency swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Derivative netting [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets before netting		0	0
Derivative related liabilities before netting		0	0
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long term debt carried at fair value		0	0
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long term debt carried at fair value		(1,447)	(3,257)
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long term debt carried at fair value		0	0
Estimated Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Due to affiliates carried at fair value		(495)	(496)
Estimated Fair Value [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets		0	0
Total assets		0	0
Due to affiliates carried at fair value		(495)	(496)
Derivative related liabilities		0	(57)
Financial and Nonfinancial Liabilities, Fair Value Disclosure		(1,942)	(3,810)
Estimated Fair Value [Member] | Recurring [Member] | Interest rate swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets		24	24
Derivative related liabilities		(399)	(304)
Estimated Fair Value [Member] | Recurring [Member] | Currency swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets		144	111
Derivative related liabilities		(292)	(379)
Estimated Fair Value [Member] | Recurring [Member] | Derivative netting [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets		(168)	(135)
Derivative related liabilities		691	626
Estimated Fair Value [Member] | Long-term Debt Carried at Fair Value [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long term debt carried at fair value		$ (1,447)	$ (3,257)

[1] Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met.

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Fair Value Measurements - Assets and Liabilities Recorded at Fair Value on Non-recurring Basis (Detail) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Gains (Losses)		$ (99)	$ (93)
Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Gains (Losses)		(68)	(17)
Receivables Held-for-Investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Gains (Losses)	[1]	(26)	(72)
Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Gains (Losses)	[2]	(5)	(4)
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		0		$ 0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		1,475		0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		7,235		8,668
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value on a non-recurring basis		0	0
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		0	0
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Receivables Held-for-Investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Receivables held for investment	[1]	0	0
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	[2]	0	0
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value on a non-recurring basis		1,653	1,048
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		1,299	333
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Receivables Held-for-Investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Receivables held for investment	[1]	274	529
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	[2]	80	186
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value on a non-recurring basis		6,886	764
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		6,886	764	8,265
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Receivables Held-for-Investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Receivables held for investment	[1]	0	0
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	[2]	0	0
Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		8,710		$ 8,668
Total [Member] | Non-Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value on a non-recurring basis		8,539	1,812
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total receivables held for sale		8,185	1,097
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Receivables Held-for-Investment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Receivables held for investment	[1]	274	529
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	[2]	80	186
Real Estate Secured Receivables Held for Sale [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets transferred from Level 3 to Level 2		$ 1,299	$ 333

[1] Total gains (losses) for the three months ended March 31, 2016 and 2015 include amounts recorded on receivables that were subsequently transferred to held for sale.

[2] Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs.

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Fair Value Measurements - Quantitative Information for Non-Recurring Fair Value Measurements (Detail) - Level 3 [Member] - USD ($) $ in Millions		3 Months Ended	12 Months Ended
		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Receivables held for sale carried at the lower of amortized cost or fair value		$ 7,235	$ 8,668
Real Estate Secured Receivables Held for Sale [Member] | Third Party Appraisal Valuation [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral loss severity rates	[1]	0.00%	0.00%
Expenses incurred through collateral disposition		5.00%	5.00%
Market discount rate		4.00%	4.00%
Real Estate Secured Receivables Held for Sale [Member] | Third Party Appraisal Valuation [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Collateral loss severity rates	[1]	100.00%	100.00%
Expenses incurred through collateral disposition		10.00%	10.00%
Market discount rate		14.00%	14.00%
Real Estate Secured Receivables Held for Sale [Member] | Non-Recurring Fair Value Measurements [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Receivables held for sale carried at the lower of amortized cost or fair value		$ 6,886	$ 8,265	$ 764

[1] As discussed below, as a result of our decision in 2015 to expand our receivable sales program, we added additional pools to our fair value estimation process in line with the new risk characteristics that now exist in the expanded receivables held for sale portfolio. At March 31, 2016 and December 31, 2015, the weighted average collateral loss severity rate was 43 percent and 42 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values.

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Fair Value Measurements - Additional Information (Detail)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Weighted average collateral severity rate	43.00%	42.00%
Minimum period to update carrying values for real estate owned properties	45 days

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Litigation and Regulatory Matters - Additional Information (Detail) - USD ($)		1 Months Ended
	Apr. 13, 2016	Apr. 30, 2016	Mar. 31, 2016
Loss Contingencies [Line Items]
Estimate of possible loss for all litigation matters			$ 3,100,000,000
Subsequent Event [Member] | Telephone Consumer Protection Act Litigation [Member]
Loss Contingencies [Line Items]
Damages sought, each violation (at least)		$ 500
Subsequent Event [Member] | Credit Monitoring Product [Member]
Loss Contingencies [Line Items]
Civil penalty assessed	$ 35,000,000