Regulatory Capital

9 Months Ended

Sep. 30, 2011

Regulatory Capital [Abstract]

Regulatory Capital

16.  Regulatory Capital

Capital amounts and ratios of HSBC USA Inc. and HSBC Bank USA, calculated in accordance with current banking regulations, are summarized in the following table.

	September 30, 2011								December 31, 2010
	Capital		Well-Capitalized			Actual			Capital		Well-Capitalized			Actual
	Amount		Minimum Ratio(1)			Ratio			Amount		Minimum Ratio(1)			Ratio
	(dollars are in millions)
Total capital ratio:
HSBC USA Inc.	$	21,577		10.00	%		18.03	%	$	22,070		10.00	%		18.14	%
HSBC Bank USA		21,957		10.00			18.48			22,177		10.00			18.41
Tier 1 capital ratio:
HSBC USA Inc.		14,837		6.00			12.40			14,355		6.00			11.80
HSBC Bank USA		15,550		6.00			13.09			14,970		6.00			12.43
Tier 1 leverage ratio:
HSBC USA Inc.		14,837		3.00	(2)		7.40			14,355		3.00	(2)		7.87
HSBC Bank USA		15,550		5.00			7.92			14,970		5.00			8.28
Risk weighted assets:
HSBC USA Inc.		119,663								121,645
HSBC Bank USA		118,816								120,473

(1)	HSBC USA Inc 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 minimum 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 is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. The ratio shown is the minimum required ratio.

We did not receive any cash capital contributions from our immediate parent, HNAI, during the first nine months of 2011.

As part of the regulatory approvals with respect to the aforementioned receivable purchases completed in January 2009, HSBC Bank USA and HSBC made certain additional capital commitments to ensure that HSBC Bank USA holds sufficient capital with respect to the purchased receivables that are or may become “low-quality assets,” as defined by the Federal Reserve Act. These capital requirements, which require a risk-based capital charge of 100 percent for each “low-quality asset” transferred or arising in the purchased portfolios rather than the eight percent capital charge applied to similar assets that are not part of the transferred portfolios, are applied both for purposes of satisfying the terms of the commitments and for purposes of measuring and reporting HSBC Bank USA’s risk-based capital and related ratios. This treatment applies as long as the low-quality assets are owned by an insured bank. During 2010, HSBC Bank USA sold low-quality auto finance loans with a net book value of approximately $178 million to a non-bank subsidiary of HSBC USA Inc. to reduce the capital requirement associated with these assets. These assets were subsequently sold to Santander Consumer USA in August 2010. During the third quarter of 2011, HSBC Bank USA sold low-quality credit card receivables with a net book value of approximately $230 million to a non-bank subsidiary of HSBC USA Inc. to reduce the capital requirement associated with these assets. Capital ratios and amounts at September 30, 2011 and December 31, 2010 in the table above reflect this reporting. At September 30, 2011, the remaining purchased receivables subject to this requirement totaled $1.7 billion of which $3 million held by HSBC Bank USA are considered to be low-quality assets. These receivables will be sold to Capital One as part of the previously discussed sale which is expected to close in the first half of 2012.

Regulatory guidelines impose certain restrictions that may limit the inclusion of deferred tax assets in the computation of regulatory capital. We closely monitor the deferred tax assets for potential limitations or exclusions. At December 31, 2010, deferred tax assets of $360 million, were excluded in the computation of regulatory capital. At September 30, 2011 $483 million was excluded in the computation of regulatory capital.