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Retained Earnings and Regulatory Capital Requirements
 12 Months Ended
Dec. 31, 2021
Retained Earnings Note Disclosure [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.
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, 2021 and 2020:
December 31, 2021December 31, 2020
  
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:(4)
HSBC USA$15,341 4.5 %
(2)
15.1 %$15,891 4.5 %
(2)
14.5 %
HSBC Bank USA17,665 6.5 17.6 18,180 6.5 16.4 
Tier 1 capital ratio:(4)
HSBC USA16,606 6.0 16.3 17,156 6.0 15.6 
HSBC Bank USA20,165 8.0 20.1 20,680 8.0 18.7 
Total capital ratio:(4)
HSBC USA18,821 10.0 18.5 20,680 10.0 18.8 
HSBC Bank USA22,157 10.0 22.1 23,303 10.0 21.1 
Tier 1 leverage ratio:
HSBC USA16,606 4.0 
(2)
8.5 17,156 4.0 
(2)
8.6 
HSBC Bank USA20,165 5.0 10.5 20,680 5.0 10.3 
Supplementary leverage ratio ("SLR"):
HSBC USA16,606 3.0 
(3)
6.6 17,156 3.0 
(3)
7.8 
HSBC Bank USA20,165 3.0 
(3)
8.1 20,680 3.0 
(3)
9.3 
Risk-weighted assets:(4)(5)
HSBC USA101,827 109,809 
HSBC Bank USA100,363 110,682 
Adjusted quarterly average assets:(6)
HSBC USA194,469 198,698 
HSBC Bank USA192,521 200,026 
Total leverage exposure:(7)
HSBC USA251,531 221,216 
HSBC Bank USA248,584 221,334 
(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 maintain capital equal to or in excess of 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 minimums.
(4)During the first quarter of 2021, it was determined that certain collateral did not qualify for risk-weighted asset reduction purposes under U.S. capital rules. As a result, reported risk-weighted assets were understated and reported Common equity Tier 1 capital, Tier 1 capital and Total capital ratios were
overstated at HSBC USA and HSBC Bank USA at December 31, 2020. We have revised December 31, 2020 amounts to conform to the current period presentation. The following table summarizes the impact of this change on reported risk-weighted assets and capital ratios as of December 31, 2020:
December 31, 2020
As Previously ReportedAs Revised
HSBC USAHSBC Bank USAHSBC USAHSBC Bank USA
(in millions)
Common equity Tier 1 ratio14.7 %17.2 %14.5 %16.4 %
Tier 1 capital ratio15.9 %19.6 %15.6 %18.7 %
Total capital ratio19.2 %22.0 %18.8 %21.1 %
Risk-weighted assets$107,808 $105,681 $109,809 $110,682 
(5)Calculated using the generally-applicable Standardized Approach.
(6)Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.
(7)Represents the SLR denominator which includes adjusted quarterly average assets plus certain off-balance sheet exposures.
In response to the COVID-19 pandemic, the federal banking agencies issued a final rule that provides the option to transition in the regulatory capital impacts of the new current expected credit loss accounting standard over a five-year period. In 2020, HSBC North America and HSBC Bank USA elected the five-year transition option and, as a result, our capital ratios are being reported in accordance with the transition rules in the final rule. Accordingly, during 2020 and 2021, we excluded from regulatory capital the change in retained earnings resulting from adoption of the new accounting standard on January 1, 2020 as well as 25 percent of the change in the allowance for credit losses recognized between January 1, 2020 and December 31, 2021. Beginning January 1, 2022, the excluded impacts will be phased into regulatory capital over a three-year transition period and will be fully reflected at January 1, 2025.
Also in response to the COVID-19 pandemic, the FRB issued final rules that permitted intermediate holding companies, such as HSBC North America, and depository institutions, such as HSBC Bank USA, to temporarily exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the denominator of their SLR. The rules were designed to allow banking institutions to expand their balance sheets to accommodate increased customer deposits while continuing to provide credit to companies and households. These changes took effect in 2020 and expired on April 1, 2021.
During 2021 and 2020, 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.
During the fourth quarter of 2021, HSBC USA received a common stock return of capital of $1.0 billion from its subsidiary, HSBC Bank USA, and paid a distribution on its common stock of $1.0 billion from surplus capital to its parent, HSBC North America.