Guarantee Arrangements, Pledged Assets and Repurchase Agreements (Tables)

3 Months Ended

Mar. 31, 2024

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 March 31, 2024 and December 31, 2023. Following the table is a description of the various arrangements.

	March 31, 2024				December 31, 2023
	Carrying Value		Notional / Maximum Exposure to Loss		Carrying Value		Notional / Maximum Exposure to Loss
	(in millions)
Credit derivatives(1)(2)	$	86	$	3,900	$	54	$	2,992
Financial standby letters of credit, net of participations(3)(4)	—		5,482		—		5,785
Performance standby letters of credit, net of participations(3)(4)	—		3,045		—		3,320
Total	$	86	$	12,427	$	54	$	12,097

(1)Includes $2,194 million and $1,483 million of notional issued for the benefit of HSBC affiliates at March 31, 2024 and December 31, 2023, 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 $1,660 million and $2,080 million of both financial and performance standby letters of credit issued for the benefit of HSBC affiliates at March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023:

	March 31, 2024				December 31, 2023
	Carrying / Fair Value		Notional		Carrying / Fair Value		Notional
	(in millions)
Sell-protection credit derivative positions	$	86	$	3,900	$	54	$	2,992
Buy-protection credit derivative positions	(161)		12,037		(196)		13,718
Net position(1)	$	(75)	$	8,137	$	(142)	$	10,726

(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 March 31, 2024 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	1.2	$	873	$	488	$	1,361
Index credit derivatives	4.5	1,824		715		2,539
Subtotal		2,697		1,203		3,900
Standby Letters of Credit(2)	0.9	6,402		2,125		8,527
Total		$	9,099	$	3,328	$	12,427

(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.

Summary of Pledged Assets Included in Consolidated Balance Sheet

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

	March 31, 2024		December 31, 2023
	(in millions)
Interest bearing deposits with banks(1)	$	407	$	998
Trading assets(2)	2,472		3,046
Securities available-for-sale(3)	9,829		9,773
Securities held-to-maturity(3)	5,197		5,387
Loans(4)	20,778		18,810
Other assets(5)	908		934
Total	$	39,591	$	38,948

(1)Represents gross amount of cash on deposit with banks primarily related to derivative collateral-support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

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

(3)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.

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

(5)Represents gross amount of cash on deposit with non-banks primarily related to derivative collateral support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

Offsetting Assets and Liabilities

The following table provides information about resale and repurchase agreements that are subject to offset at March 31, 2024 and December 31, 2023:

							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 March 31, 2024
Assets:
Securities purchased under resale agreements	$	12,557	$	4,251	$	8,306	$	8,281	$	16	$	9
Liabilities:
Securities sold under repurchase agreements	$	4,631	$	4,251	$	380	$	380	$	—	$	—
At December 31, 2023
Assets:
Securities purchased under resale agreements	$	19,382	$	5,504	$	13,878	$	13,677	$	7	$	194
Liabilities:
Securities sold under repurchase agreements	$	5,771	$	5,504	$	267	$	266	$	—	$	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 March 31, 2024 and December 31, 2023:

	Overnight and Continuous		Up to 30 Days		31 to 90 Days		91 Days to One Year		Greater Than One Year		Total
	(in millions)
At March 31, 2024
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	1,563	$	822	$	1,136	$	1,110	$	—	$	4,631
At December 31, 2023
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	3,107	$	288	$	918	$	1,458	$	—	$	5,771