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Related Party Transactions
 12 Months Ended
Dec. 31, 2023
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
In the normal course of business, we conduct transactions with HSBC and its subsidiaries. HSBC policy requires that these transactions occur at prevailing market rates and terms and, where applicable, these transactions are compliant with United States banking regulations. All extensions of credit by (and certain credit exposures of) HSBC Bank USA to other HSBC affiliates (other than FDIC insured banks) are legally required to be secured by eligible collateral. The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions:
At December 31,20232022
 (in millions)
Assets:
Cash and due from banks$133 $313 
Interest bearing deposits with banks90 21 
Securities purchased under agreements to resell(1)
406 756 
Trading assets57 20 
Loans2,618 3,557 
Other(2)
491 744 
Total assets$3,795 $5,411 
Liabilities:
Deposits$9,110 $11,357 
Trading liabilities321 110 
Short-term borrowings1,014 1,009 
Long-term debt6,511 6,011 
Other(2)
331 326 
Total liabilities$17,287 $18,813 
(1)Reflects purchases of securities under which other HSBC affiliates have agreed to repurchase.
(2)Other assets and other liabilities primarily consist of derivative balances associated with hedging activities and other miscellaneous account receivables and payables. Other assets also includes receivables from HSBC Bank plc associated with certain client share repurchase transactions.
Year Ended December 31,202320222021
 (in millions)
Income (Expense):
Interest income$223 $116 $26 
Interest expense(501)(298)(237)
Net interest expense(278)(182)(211)
Trading revenue (expense)(3,287)1,753 (3,182)
Servicing and other fees from HSBC affiliates:
HSBC Bank plc180 190 176 
HSBC Markets (USA) Inc. ("HMUS")81 76 91 
Other HSBC affiliates66 77 54 
Total servicing and other fees from HSBC affiliates327 343 321 
Gain (loss) on instruments designated at fair value and related derivatives936 (1,256)1,128 
Support services from HSBC affiliates:
HTSU(952)(1,018)(1,061)
HMUS(230)(191)(118)
Other HSBC affiliates(489)(553)(441)
Total support services from HSBC affiliates(1,671)(1,762)(1,620)
Rental income from HSBC affiliates(1)
33 39 42 
Stock based compensation expense(2)
(19)(15)(15)
(1)We receive rental income from our affiliates for certain office space, which is recorded as a component of occupancy expense, net in our consolidated statement of income.
(2)Employees may participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in salaries and employee benefits in our consolidated statement of income. Certain employees are also eligible to participate in a defined benefit pension plan and other postretirement plans sponsored by HSBC North America which are discussed in Note 22, "Pension and Other Postretirement Benefits."
Funding Arrangements with HSBC Affiliates:
We use HSBC affiliates to fund a portion of our borrowing and liquidity needs. At December 31, 2023 and 2022, long-term debt with affiliates reflected $6.5 billion and $6.0 billion, respectively, of borrowings from HSBC North America. The outstanding balances include:
•$2.0 billion of fixed-rate senior debt which matures in June 2025;
•$2.0 billion of fixed-rate senior debt which matures in September 2025;
•$0.5 billion of fixed-rate senior debt which matures in December 2027;
•$1.5 billion of fixed-rate senior debt which matures in June 2030; and
•$0.5 billion of fixed-rate senior debt which was issued during the fourth quarter of 2023 and matures in December 2028.
We have a $4.0 billion uncommitted line of credit with HSBC North America. The available borrowing capacity under this facility is fungible between HSBC USA, HSBC Securities (USA) Inc. ("HSI") and HSBC North America, but total borrowings cannot collectively exceed $4.0 billion at any time. We had no outstanding borrowing under this credit facility at either December 31, 2023 or 2022.
We also incur short-term borrowings with certain affiliates. In addition, certain affiliates have placed deposits with us.
Lending and Derivative Related Arrangements Extended to HSBC Affiliates:
At December 31, 2023 and 2022, we had the following loan balances outstanding with HSBC affiliates:
At December 31,20232022
 (in millions)
HMUS and subsidiaries$1,318 $2,243 
HSBC North America
1,300 1,250 
Other short-term affiliate lending— 64 
Total loans$2,618 $3,557 
HMUS and subsidiaries We have extended loans and lines of credit, some of them uncommitted, to HMUS and its subsidiaries in the amount of $13.3 billion and $12.8 billion at December 31, 2023 and 2022, respectively, of which $1.3 billion and $2.2 billion, respectively, was outstanding. The maturities of the outstanding balances range from overnight to one month. Each borrowing is re-evaluated prior to its maturity date and either extended or allowed to mature.
HSBC North America Under the $4.0 billion uncommitted fungible line of credit with HSBC North America as discussed above, there was $1.3 billion outstanding at both December 31, 2023 and 2022. The outstanding balance includes $1.0 billion that matures in May 2024 and $300 million that matures in July 2024.
We have extended lines of credit to various other HSBC affiliates totaling $3.9 billion which did not have any outstanding balances at either December 31, 2023 or 2022.
Other short-term affiliate lending In addition to loans and lines extended to affiliates discussed above, from time to time we may extend loans to affiliates which are generally short term in nature. At December 31, 2023 and 2022, there were nil and $64 million, respectively, of these loans outstanding.
Derivative contracts As part of a global HSBC strategy to offset interest rate or other market risks associated with certain securities, debt issues and derivative contracts with unaffiliated third parties, we routinely enter into derivative transactions with HSBC Bank plc and other HSBC affiliates. The notional value of derivative contracts related to these transactions was approximately $719.6 billion and $789.2 billion at December 31, 2023 and 2022, respectively. The net credit exposure (defined as the net fair value of derivative assets and liabilities, including any collateral received) related to the contracts was approximately $29 million and $24 million at December 31, 2023 and 2022, respectively. We account for these transactions on a mark to market basis, with the change in value of contracts with HSBC affiliates substantially offset by the change in value of related contracts entered into with unaffiliated third parties.
In September 2023, our Markets and Securities Services business segment entered into an agreement to refer transactions related to all future precious metals trading and financing activities associated with our Global Banking clients to HSBC Bank plc. We continue to provide sales and trading services to HSBC Bank plc in support of these activities, which allows us to record sales commissions and performance fees for such activities while holding fewer assets on our balance sheet. As the transfer was between affiliates under common control, the consideration received in excess of our carrying value resulted in an increase to additional paid-in-capital of $8 million, net of tax. Income before tax of these activities was not material. In conjunction with the agreement, during the third quarter of 2023, we also transferred a portion of our precious metals trading assets inventory with a fair value of approximately $0.9 billion to HSBC Bank plc.
Services Provided Between HSBC Affiliates:
Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. The following summarizes these activities:
•HSBC North America's technology and support services, including risk management, compliance, operations, finance, tax, legal, human resources, corporate affairs and other shared services, are centralized within HTSU. HTSU also provides certain item processing and statement processing activities to us. The fees we pay HTSU for the centralized support services and processing activities are included in support services from HSBC affiliates. We also receive fees from HTSU for providing certain administrative services to them. The fees we receive from HTSU are included in servicing and other fees from HSBC affiliates. In certain cases, for facilities used by HTSU, we may guarantee their performance under the lease agreements.
•We use other subsidiaries of HSBC, including HSBC Global Services Limited an HSBC subsidiary located outside of the United States, to provide various support services to our operations, including among other areas, information technology, software development, customer service, collection, risk management and accounting. The expenses related to these services are included in support services from HSBC affiliates.
•We utilize HSI, a subsidiary of HMUS, for broker dealer, debt underwriting, customer referrals, loan syndication and other treasury and traded markets related services, pursuant to service level agreements. Debt underwriting fees charged by HSI are deferred as a reduction of long-term debt and amortized to interest expense over the life of the related debt. Fees charged by HSI for the other services are included in support services from HSBC affiliates. We also receive fees from HSI for providing certain wealth management services to them. The fees we receive from HSI are included in servicing and other fees from HSBC affiliates.
•We receive fees from other subsidiaries of HSBC, including HSBC Bank plc, for providing them with banking, trading and other miscellaneous services as well as support for certain administrative and global business activities. These fees are reported in servicing and other fees from HSBC affiliates.
Other Transactions with HSBC Affiliates:
At both December 31, 2023 and 2022, we had $265 million of non-cumulative preferred stock issued and outstanding to HSBC North America. See Note 19, "Preferred Stock," for additional details.
During 2023, we paid dividends on our common stock of $1.5 billion from retained earnings to HSBC North America. See Note 26, "Retained Earnings and Regulatory Capital Requirements," for additional details.