Guarantee Arrangements, Pledged Assets and Repurchase Agreements (Tables)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Carrying Value and Contractual Amounts of our Sell Protection Credit Derivatives and Major Off-Balance Sheet Guarantee Arrangements

The following table presents total carrying value and contractual amounts of our sell protection credit derivatives and major off-balance sheet guarantee arrangements at December 31, 2018 and 2017. Following the table is a description of the various arrangements.

	December 31, 2018					December 31, 2017
	Carrying Value			Notional / Maximum Exposure to Loss		Carrying Value		Notional / Maximum Exposure to Loss
	(in millions)
Credit derivatives(1)(2)	$	(562	)	$	45,384	$	303	$	42,328
Financial standby letters of credit, net of participations(3)(4)	—			5,302		—		5,128
Performance standby letters of credit, net of participations(3)(4)	—			3,670		—		3,580
Total	$	(562	)	$	54,356	$	303	$	51,036

⁽¹⁾  Includes $25,734 million and $25,639 million of notional issued for the benefit of HSBC affiliates at December 31, 2018 and 2017, respectively.

⁽²⁾  For credit derivatives, the maximum loss is represented by the notional amounts without consideration of mitigating effects from collateral or recourse arrangements.

⁽³⁾  Includes $1,321 million and $1,264 million of both financial and performance standby letters of credit issued for the benefit of HSBC affiliates at December 31, 2018 and 2017, respectively.

⁽⁴⁾  For standby letters of credit, maximum loss represents losses to be recognized assuming the letters of credit have been fully drawn and the obligors have defaulted with zero recovery.

Net Credit Derivative Positions

The following table summarizes our net credit derivative positions at December 31, 2018 and 2017:

	December 31, 2018					December 31, 2017
	Carrying / Fair Value			Notional		Carrying / Fair Value			Notional
	(in millions)
Sell-protection credit derivative positions	$	(562	)	$	45,384	$	303		$	42,328
Buy-protection credit derivative positions	601			51,914		(188		)	47,962
Net position(1)	$	39		$	6,530	$	115		$	5,634

⁽¹⁾  Positions are presented net in the table above to provide a complete analysis of our risk exposure and depict the way we manage our credit derivative portfolio. The offset of the sell-protection credit derivatives against the buy-protection credit derivatives may not be legally binding in the absence of master netting agreements with the same counterparty. Furthermore, the credit loss triggering events for individual sell protection credit derivatives may not be the same or occur in the same period as those of the buy protection credit derivatives thereby not providing an exact offset.

Summary of Credit Ratings of Credit Risk Related Guarantees

The following table summarizes the credit ratings related to guarantees including the ratings of counterparties against which we sold credit protection and financial standby letters of credit at December 31, 2018 as an indicative proxy of payment risk:

	Average Life (in years)	Credit Ratings of the Obligors
Notional/Contractual Amounts		Investment Grade		Non-Investment Grade		Total
		(dollars are in millions)
Sell-protection Credit Derivatives(1)
Single name credit default swaps ("CDS")	3.2	$	25,051	$	8,773	$	33,824
Index credit derivatives	4.5	3,998		6,025		10,023
Total return swaps	2.4	1,283		254		1,537
Subtotal		30,332		15,052		45,384
Standby Letters of Credit(2)	1.2	7,558		1,414		8,972
Total		$	37,890	$	16,466	$	54,356

⁽¹⁾  The credit ratings in the table represent external credit ratings for classification as investment grade and non-investment grade.

⁽²⁾  External ratings for most of the obligors are not available. Presented above are the internal credit ratings which are developed using similar methodologies and rating scale equivalent to external credit ratings for purposes of classification as investment grade and non-investment grade.

Schedule of Future Minimum Lease Commitments

Future net minimum lease commitments under noncancellable operating lease arrangements were as follows:

Year Ending December 31,	Minimum Lease Payments		Minimum Sublease Income			Net
	(in millions)
2019	$	136	$	(58	)	$	78
2020	125		(2		)	123
2021	115		(1		)	114
2022	103		—			103
2023	91		—			91
Thereafter	182		(1		)	181
Net minimum lease commitments	$	752	$	(62	)	$	690

Summary of Change in Estimated Repurchase Liability for Loans Sold to GSEs and Other Third Parties

The following table summarizes the change in our estimated repurchase liability during 2018, 2017 and 2016 for obligations arising from the breach of representations and warranties associated with mortgage loans sold:

Year Ended December 31,	2018			2017			2016
	(in millions)
Balance at beginning of period	$	10		$	12		$	17
Decrease in liability recorded through earnings	(1		)	(1		)	(3		)
Realized losses	(1		)	(1		)	(2		)
Balance at end of period	$	8		$	10		$	12

Summary of Pledged Assets Included in Consolidated Balance Sheet

Pledged assets included in the consolidated balance sheet consisted of the following:

	December 31, 2018		December 31, 2017
	(in millions)
Interest bearing deposits with banks	$	3,225	$	2,952
Trading assets(1)	2,465		3,185
Securities available-for-sale(2)	7,440		7,210
Securities held-to-maturity(2)	1,747		2,131
Loans(3)	18,189		17,404
Other assets(4)	2,289		2,253
Total	$	35,355	$	35,135

⁽¹⁾  Trading assets are primarily pledged against liabilities associated with repurchase agreements.

⁽²⁾  Securities are primarily pledged against derivatives, public fund deposits, trust deposits and various short-term and long term borrowings, as well as providing capacity for potential secured borrowings from the FHLB and the Federal Reserve Bank of New York.

⁽³⁾  Loans are primarily residential mortgage loans pledged against current and potential borrowings from the FHLB and the Federal Reserve Bank of New York.

⁽⁴⁾  Other assets represent cash on deposit with non-banks related to derivative collateral support agreements.

Offsetting Assets and Liabilities

The following table provides information about resale and repurchase agreements that are subject to offset at December 31, 2018 and 2017:

							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet		Financial Instruments(2)		Cash Collateral Received / Pledged		Net Amount(3)
	(in millions)
At December 31, 2018
Assets:
Securities purchased under resale agreements	$	12,035	$	1,867	$	10,168	$	10,165	$	—	$	3
Liabilities:
Securities sold under repurchase agreements	$	3,333	$	1,867	$	1,466	$	1,458	$	—	$	8
At December 31, 2017
Assets:
Securities purchased under resale agreements	$	33,974	$	1,356	$	32,618	$	32,616	$	—	$	2
Liabilities:
Securities sold under repurchase agreements	$	4,721	$	1,356	$	3,365	$	3,364	$	—	$	1

⁽¹⁾  Represents recognized amount of resale and repurchase agreements with counterparties subject to legally enforceable netting agreements that meet the applicable netting criteria as permitted by generally accepted accounting principles.

⁽²⁾  Represents securities received or pledged to cover financing transaction exposures.

⁽³⁾  Represents the amount of our exposure that is not collateralized / covered by pledged collateral.

Class of Collateral Pledged and Remaining Contractual Maturity of Repurchase Agreements Accounted for as Secured Borrowings

The following table provides the class of collateral pledged and remaining contractual maturity of repurchase agreements accounted for as secured borrowings at December 31, 2018 and 2017:

	Overnight and Continuous		Up to 30 Days		31 to 90 Days		91 Days to One Year		Greater Than One Year		Total
	(in millions)
At December 31, 2018
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	1,773	$	369	$	—	$	191	$	1,000	$	3,333
At December 31, 2017
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	1,166	$	838	$	888	$	284	$	1,464	$	4,640
Foreign debt securities	—		81		—		—		—		81
Total repurchase agreements accounted for as secured borrowings	$	1,166	$	919	$	888	$	284	$	1,464	$	4,721