Retained Earnings and Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2019

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.

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, 2019 and 2018, HSBC Bank USA was required to maintain $2,475 million and $2,205 million, respectively, of reserve balances with the Federal Reserve Bank which are reported within interest bearing deposits with banks on the consolidated balance sheet.

We are subject to regulatory capital rules issued by U.S. banking regulators including Basel III (the "Basel III rule"). A bank or bank holding company's failure to meet minimum capital requirements can result in certain mandatory actions and possibly additional discretionary actions by its regulators. The following table summarizes the capital amounts and ratios of HSBC USA and HSBC Bank USA, calculated in accordance with the Basel III rule at December 31, 2019 and 2018:

	December 31, 2019							December 31, 2018
	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	$	15,876	4.5	%	(2)	13.1	%	$	17,459	4.5	%	(2)	13.6	%
HSBC Bank USA	18,043		6.5			15.2		19,456		6.5			15.7
Tier 1 capital ratio:
HSBC USA	17,141		6.0			14.1		18,724		6.0			14.6
HSBC Bank USA	20,543		8.0			17.3		21,956		8.0			17.7
Total capital ratio:
HSBC USA	19,743		10.0			16.3		21,972		10.0			17.2
HSBC Bank USA	22,724		10.0			19.2		25,293		10.0			20.4
Tier 1 leverage ratio:
HSBC USA	17,141		4.0		(2)	9.9		18,724		4.0		(2)	11.0
HSBC Bank USA	20,543		5.0			12.0		21,956		5.0			13.1
Supplementary leverage ratio ("SLR"):
HSBC USA	17,141		3.0		(3)	6.9		18,724		3.0		(3)	7.6
HSBC Bank USA	20,543		3.0		(3)	8.4		21,956		3.0		(3)	9.1
Risk-weighted assets:(4)
HSBC USA	121,407							127,917
HSBC Bank USA	118,618							124,112
Adjusted quarterly average assets:(5)
HSBC USA	173,270							170,565
HSBC Bank USA	170,722							168,154
Total leverage exposure:(6)
HSBC USA	247,590							245,796
HSBC Bank USA	244,008							242,264

⁽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 minimums.

⁽³⁾  There is no SLR component in the definition of a well-capitalized banking institution. The ratios shown are the regulatory minimum ratios.

⁽⁴⁾  Calculated using the generally-applicable Standardized Approach.

⁽⁵⁾  Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.

⁽⁶⁾  Represents the SLR denominator which includes adjusted quarterly average assets plus certain off-balance sheet exposures.

During the first quarter of 2019, HSBC USA received a common stock return of capital of $2.4 billion from its subsidiary, HSBC Bank USA, and paid a distribution on its common stock of $2.4 billion from surplus capital to its parent, HSBC North America.

During 2019 and 2018, 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.