Retained Earnings and Regulatory Capital Requirements

3 Months Ended

Mar. 31, 2015

Banking and Thrift [Abstract]

Retained Earnings and Regulatory Capital Requirements

Retained Earnings and Regulatory Capital Requirements

Bank dividends are a major source of funds used 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. 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, 2015 and December 31, 2014:

	March 31, 2015							December 31, 2014
	Capital Amount		Well-Capitalized  Ratio(1)			Actual Ratio		Capital Amount		Well-Capitalized Ratio(1)			Actual Ratio
	(dollars are in millions)
Total capital ratio:(3)
HSBC USA	$	24,732	10.00	%		16.34	%	$	21,017	10.00	%		15.78	%
HSBC Bank USA	26,916		10.00			18.55		22,760		10.00			17.86
Tier 1 capital ratio:(3)
HSBC USA	19,089		6.00			12.61		15,205		6.00			11.41
HSBC Bank USA	22,246		8.00			15.33		17,215		8.00			13.51
Common equity Tier 1 ratio:(3)
HSBC USA	17,830		4.50		(2)	11.78		13,754		4.50		(2)	10.33
HSBC Bank USA	19,863		6.50			13.69		17,215		6.50			13.51
Tier 1 leverage ratio:
HSBC USA	19,089		4.00		(2)	9.91		15,205		4.00		(2)	8.54
HSBC Bank USA	22,246		5.00			12.02		17,215		5.00			10.06
Risk weighted assets:(3)
HSBC USA	151,347							133,211
HSBC Bank USA	145,121							127,456

⁽¹⁾  HSBC USA and HSBC Bank USA are categorized as "well-capitalized," as defined by their principal regulators. To be categorized as well-capitalized under regulatory guidelines, a banking institution must have the 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. The regulatory ratios for an institution to be well-capitalized under Basel III became effective beginning January 1, 2015 and the new ratios are shown for both periods.

⁽²⁾  There are no common equity Tier 1 or Tier 1 leverage ratio components in the definition of a well-capitalized bank holding company. The ratios shown in both periods are the required regulatory minimum ratios beginning in 2015.

⁽³⁾  At March 31, 2015, risk weighted assets are calculated under the Basel III Standardized Approach, which replaced the Basel I risk-based guidance for determining risk weighted assets beginning January 1, 2015.

In 2013, U.S. banking 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, the capital ratios in the table above are reported in accordance with the Basel III transition rules within the final rule. In addition, the Basel III final rule introduced the Standardized Approach for risk weighted assets, which replaced the Basel I risk-based guidance for determining risk weighted assets beginning January 1, 2015.

During the first quarter of 2015, HSBC USA repaid $4,000 million of senior long-term debt previously issued to HSBC North America and HSBC Bank USA repaid $900 million of subordinated long-term debt previously issued to HSBC USA. In conjunction with these repayments, HSBC USA received a capital contribution of $4,000 million from its immediate parent, HNAI, in exchange for one share of common stock and HSBC USA made capital contributions to its subsidiary, HSBC Bank USA, of $2,400 million in exchange for two shares of common stock and $2,500 million in exchange for 250 shares of non-cumulative preferred stock. These capital actions were taken to support our growth strategy and to strengthen the Basel III regulatory capital positions of both HSBC USA and HSBC Bank USA.