Retained Earnings and Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Retained Earnings and Regulatory Capital Requirements

Retained Earnings and Regulatory Capital Requirements

Bank dividends are one of the sources of funds used for payment of shareholder dividends and other HSBC USA cash needs. Any non-contractual 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.

HSBC Bank USA is also required to maintain reserve balances either in the form of vault cash or on deposit with the Federal Reserve Bank, based on a percentage of deposits. At September 30, 2017 and December 31, 2016, HSBC Bank USA was required to maintain $3,033 million and $3,139 million, respectively, of reserve balances with the Federal Reserve Bank.

The following table summarizes the capital amounts and ratios of HSBC USA and HSBC Bank USA, calculated in accordance with banking regulations in effect at September 30, 2017 and December 31, 2016:

	September 30, 2017							December 31, 2016
	Capital Amount		Well-Capitalized  Ratio(1)			Actual Ratio		Capital Amount		Well-Capitalized Ratio(1)			Actual Ratio
	(dollars are in millions)
Common equity Tier 1 ratio:
HSBC USA	$	18,258	4.5	%	(2)	15.3	%	$	17,544	4.5	%	(2)	13.7	%
HSBC Bank USA	20,082		6.5			17.1		19,577		6.5			15.7
Tier 1 capital ratio:
HSBC USA	19,512		6.0			16.3		18,640		6.0			14.5
HSBC Bank USA	22,561		8.0			19.2		21,971		8.0			17.6
Total capital ratio:
HSBC USA	23,628		10.0			19.8		23,549		10.0			18.3
HSBC Bank USA	26,432		10.0			22.5		26,325		10.0			21.1
Tier 1 leverage ratio:
HSBC USA	19,512		4.0		(2)	9.9		18,640		4.0		(2)	9.2
HSBC Bank USA	22,561		5.0			11.5		21,971		5.0			11.1
Risk-weighted assets:
HSBC USA	119,598							128,482
HSBC Bank USA	117,458							124,666
Adjusted quarterly average assets:(3)
HSBC USA	198,043							203,000
HSBC Bank USA	195,544							197,944

⁽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.

⁽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 are the regulatory minimum ratios.

⁽³⁾  Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital for the three months ended September 30, 2017 and December 31, 2016, respectively.

In 2013, U.S. banking regulators issued a final rule implementing the Basel III capital framework in the U.S. ("the Basel III final rule") which, for banking organizations such as HSBC North America and HSBC Bank USA, became effective in 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, risk-weighted assets in the table above are calculated using the Basel III Standardized Approach.