Retained Earnings and Regulatory Capital Requirements

3 Months Ended

Mar. 31, 2014

Banking and Thrift [Abstract]

Retained Earnings and Regulatory Capital Requirements

Retained Earnings and Regulatory Capital Requirements

Bank dividends are a major source of funds for payment by us of shareholder dividends, and along with interest earned on investments, cover our operating expenses which consist primarily of interest on outstanding debt. Any significant dividend from HSBC Bank USA would require the approval of the Office of the Comptroller of the Currency (the "OCC"). Approval is also required if the total of all dividends HSBC Bank USA declares in any year exceeds the cumulative net profits for that year, combined with the profits for the two preceding years reduced by dividends attributable to those years. Under a separate restriction, payment of dividends is prohibited in amounts greater than undivided profits then on hand, after deducting actual losses and bad debts. Bad debts are debts due and unpaid for a period of six months unless well secured, as defined, and in the process of collection.

The following table summarizes the capital amounts and ratios of HSBC USA and HSBC Bank USA, calculated in accordance with banking regulations in effect as of March 31, 2014 and December 31, 2013.

	March 31, 2014						December 31, 2013
	Capital Amount		Well-Capitalized Minimum Ratio(1)		Actual Ratio		Capital Amount		Well-Capitalized Minimum Ratio			Actual Ratio(2)
	(dollars are in millions)
Total capital ratio:
HSBC USA Inc.	$	20,639			16.05	%	$	20,242	10.00	%		16.36	%
HSBC Bank USA	22,267		10.00	%	18.18		21,324		10.00			18.03
Tier 1 capital ratio:
HSBC USA Inc.	14,964				11.63		14,409		6.00			11.65
HSBC Bank USA	16,732		8.00		13.66		15,763		6.00			13.33
Common equity Tier 1 ratio(3):
HSBC USA Inc.	13,486				10.48		12,301		5.00		(4)	9.94
HSBC Bank USA	16,732		6.50		13.66		15,763		5.00			13.33
Tier 1 leverage ratio:
HSBC USA Inc.	14,964				8.16		14,409		3.00		(5)	7.90
HSBC Bank USA	16,732		5.00		9.49		15,763		5.00			9.06
Risk weighted assets:
HSBC USA Inc.	128,633						123,737
HSBC Bank USA	122,505						118,285

⁽¹⁾  HSBC Bank USA is categorized as "well-capitalized," as defined by its principal regulators. To be categorized as well-capitalized under regulatory guidelines, a banking institution must have the minimum ratios reflected in the above table, and must not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. As previously discussed, the minimum regulatory ratios for a depository institution to be well-capitalized will increase in 2015 under Basel III, and the new ratios are shown above. There is no definition of a well-capitalized bank holding company under Basel III.

⁽²⁾  At December 31, 2013, capital ratios were reported according to Basel I rules and reflect the impact of the U.S. market risk final rule (known in the industry as Basel 2.5).

⁽³⁾  Basel III introduces the common equity Tier 1 ratio. For December 31, 2013, the ratios presented are the Tier 1 common ratio calculated under Basel I.

⁽⁴⁾  There was no Tier 1 common ratio component in the definition of a well-capitalized bank holding company under Basel I. The ratio shown is the required minimum Tier 1 common ratio, calculated under Basel I, as included in the Federal Reserve Board's final rule regarding capital plans for U.S. bank holding companies with total consolidated assets of $50 billion or more.

⁽⁵⁾  There was no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company under Basel I. The ratio shown is the minimum required ratio.

In 2013, U.S. regulators issued a final rule implementing the Basel III capital framework in the U.S. which, for banking organizations such as HSBC North America and HSBC Bank USA, took effect January 1, 2014 with certain provisions being phased in over time through the beginning of 2019. As a result, beginning in 2014, capital ratios are reported in accordance with the Basel III transition rules within the final rule.

We did not receive any cash capital contributions from our immediate parent, HNAI during the first three months of 2014. We did not make any capital contributions to our subsidiary, HSBC Bank USA, during the three months ended March 31, 2014.