Retained Earnings and Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2018

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. Approval from the Office of the Comptroller of the Currency ("OCC") is required if the total of all dividends HSBC Bank USA declares in any year exceeds the cumulative net income for that year, combined with the net income for the two preceding years reduced by dividends attributable to those years. OCC approval also is required for a reduction of permanent capital of HSBC Bank USA. 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. In February 2019, HSBC Bank USA's Board of Directors approved a common stock return of capital of $2.4 billion to be paid to HSBC USA during the first quarter of 2019.

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 December 31, 2018 and 2017, HSBC Bank USA was required to maintain $2,205 million and $2,929 million, respectively, of reserve balances with the Federal Reserve Bank which are reported within interest bearing deposits with banks on the consolidated balance sheet.

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 December 31, 2018 and 2017:

	December 31, 2018							December 31, 2017
	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	$	17,459	4.5	%	(2)	13.6	%	$	17,428	4.5	%	(2)	14.2	%
HSBC Bank USA	19,456		6.5			15.7		19,294		6.5			16.7
Tier 1 capital ratio:
HSBC USA	18,724		6.0			14.6		18,696		6.0			15.3
HSBC Bank USA	21,956		8.0			17.7		21,786		8.0			18.8
Total capital ratio:
HSBC USA	21,972		10.0			17.2		22,565		10.0			18.4
HSBC Bank USA	25,293		10.0			20.4		25,522		10.0			22.1
Tier 1 leverage ratio:
HSBC USA	18,724		4.0		(2)	11.0		18,696		4.0		(2)	9.9
HSBC Bank USA	21,956		5.0			13.1		21,786		5.0			11.7
Supplementary leverage ratio ("SLR"):
HSBC USA	18,724		3.0		(3)	7.6							N/A
HSBC Bank USA	21,956		3.0		(3)	9.1							N/A
Risk-weighted assets:
HSBC USA	127,917							122,584
HSBC Bank USA	124,112							115,667
Adjusted quarterly average assets:(4)
HSBC USA	170,565							188,774
HSBC Bank USA	168,154							186,551
Total leverage exposure:(5)
HSBC USA	245,796							N/A
HSBC Bank USA	242,264							N/A

⁽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⁾  Beginning January 1, 2018, HSBC USA and HSBC Bank USA are required to maintain the regulatory minimum SLR of 3 percent. There is no SLR component in the definition of a well-capitalized banking institution.

⁽⁴⁾  Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.

⁽⁵⁾  Represents the SLR denominator which includes adjusted quarterly average assets plus certain off-balance sheet exposures.

N/A Not Applicable

We are subject to regulatory capital rules issued by U.S. banking regulators including Basel III (the "Basel III 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 fully phased-in Basel III rule for December 31, 2018 and in accordance with the transition rules within the Basel III rule for December 31, 2017. In addition, risk-weighted assets in the table above are calculated using the generally-applicable Standardized Approach.

During 2018 and 2017, HSBC USA did not receive any cash capital contributions from its parent, HSBC North America, and did not make any capital contributions to its subsidiary, HSBC Bank USA.